7 December 2007
Maputo — The Mozambican parliament, the Assembly of the Republic, on Friday passed the second and final reading of three government bills approving new codes for corporation tax, personal income tax and value added tax (VAT).
The opposition Renamo-Electoral Union coalition only supported the changes to corporation tax, and abstained in the votes on the income tax and VAT codes.
The Renamo deputies' objection to the income tax bill is that some of their own money will be taxed. At the end of their terms of office, those deputies who do not yet qualify for a pension are entitled to a lump sum "reintegration subsidy".
Renamo wanted this subsidy given the same treatment as pensions which would make it tax-free. Jose Monteiro claimed the government bill amounted to "double taxation", since the deputies had already paid 13 per cent of their wages into a social security fund which was supposed to provide for their pensions and reintegration subsidies.
He also objected to the change that subjects interest on deposit accounts to income tax. Such deposits, Monteiro argued, should only attract tax when they were equivalent to more than 50 times the minimum wage.
For the majority Frelimo Party, Carolina Chemane said the tax changes were welcome because most individuals would be paying less, while at the same time the tax base was being broadened.
The demand to exempt deposit accounts, she warned, "would just leave the door wide open for tax evasion".
As for the new VAT code, Renamo objected to the government's refusal to alter the standard VAT rate of 17 per cent, and demanded that the rate fall to 14 per cent, the same as in South Africa.
Lutero Simango claimed that the 17 per cent rate encourages tax fraud, with shops and businesses still asking customers "do you want it with VAT or without VAT ?" He also claimed that with a VAT three percentage points higher than South Africa's, people will cross the border and do their shopping in South Africa.
Frelimo deputy Hermenegildo Gamito noted that Mozambique's rate is not the highest in the region (Angola can claim that distinction with a VAT rate of 30 per cent). Comparing Mozambican taxes with South African ones, he said, was "reductionist and myopic".
"We cannot consider a reduction of VAT to 14 per cent without a study on the impact this would have", said Gamito.
He praised the new code for maintaining the VAT exemptions for the sugar, vegetable oil and soap industries until 2010, while eliminating exemptions that no longer had any economic rationale.
In particular this means that rents paid on buildings used for industrial and commercial purposes will now become liable to VAT.
The income tax and VAT codes both passed their final reading with the 146 Frelimo deputies present voting in favour, while the 68 Renamo deputies abstained.
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