17 December 2008
Maputo — The Mozambican parliament, the Assembly of the Republic, on Wednesday approved unanimously a government bill amending the customs tariff list, so that it reflects both the SADC (Southern African Development Community) free trade area, and the Economic Partnership Agreement (EPA) negotiated with the European Union.
Under the SADC free trade area, which took effect on 1 January this year, most goods originating from other SADC member states can enter Mozambique duty free. There are exceptions: South African potatoes, beans and most fruit will continue to pay 15 per cent duty, in order to protect Mozambican producers, until 2010.
The exemptions for EU produce are sweeping. In exchange for duty and quota free access for Mozambican goods to the European market, pretty well anything from an EU member state can enter Mozambique duty free.
European goods in 2,125 categories in the customs list are now zero rated. Previously 497 paid 20 per cent duty, 679 paid 7.5 per cent, 507 paid five per cent, and 292 paid 2.5 per cent. Only 150 were already zero rated.
The duty free allowances for travelers have also been relaxed. Previously, in addition to the alcohol, tobacco and perfume allowance, travelers were only allowed to bring in duty free goods to the value of 50 US dollars. The new customs list raises this figure to 200 dollars.
The weight of customs duties in the Mozambican state budget has been falling for several years, as tariffs have been repeatedly cut or abolished. In 2002 taxes on foreign trade amounted to two per cent of Mozambique's Gross Domestic Product. With the latest changes, the figure is expected to fall to 1.3 per cent in 2009.
The government argues that, in reality, the state budget will not lose money, because imported goods will continue to pay Value Added Tax (VAT). So if the duty free regime encourages further imports from Europe and from the SADC region, VAT will more than compensate for the lost customs duties.
Calculations made by the Assembly's own Plan and Budget Commission are that there will be a decline of 209 million meticais (about 8.4 million US dollars) in customs duties collected in 2009, but an increase of 304 million meticais in the VAT collected on imports. The balance is an additional 95 million meticais for the exchequer.
Finance Minister Manuel Chang has also promised better customs inspection of goods to ensure that those importers who should pay really do pay. There will also be increased checks on the import of those luxury goods which are subject to a "specific consumption tax".
The Assembly also approved a new fiscal benefits code. This scraps or reduces many of the tax breaks that investors have enjoyed since the previous code was passed in 1993, and concentrates benefits on those areas of the country to which the government wishes to attract investment.
Chang told the Assembly that, with a stable macro-economic climate, the time had come "to redesign the strategies for managing fiscal benefits by rationalizing them so that they retain their role as an instrument to attract investment, but also contribute to expanding the tax base, and maximising the collection of revenue".
There will be no more "exceptional fiscal benefits" for mega-projects, though there is no suggestion that benefits already granted will be withdrawn. Indirect investment made via the Mozambican Stock Exchange will not be eligible for fiscal benefits, and most investment projects will no longer qualify for exemption from stamp tax or the tax on property transactions. Several other tax benefits are reduced in duration or in percentage terms.
But fiscal benefits remain in place for Industrial Free Zones, said Chang, "in order to make the country more competitive, as a preferential destination for investments that create jobs and produce goods intended essentially for export". There will also be benefits for investors in the country's "Special Economic Zones" and for "Zones of Rapid Development".
The government did not provide a definition of "Zones of Rapid Development" but accepted that provided by the Plan and Budget Commission. Such zones are "geographical areas of the national territory, characterized by great potential in natural resources, but lacking infrastructure, and with a low level of economic activity".
The new code will also extend exemption from customs duties to raw materials needed by manufacturing industry and to goods regarded as indispensable for tourist undertakings, while a new package of fiscal benefits is offered for aquaculture and for rural trade and industry.
Opposition deputies abstained in the vote on the new code, on the grounds that they had never received any information from the government on the results of previous fiscal benefits.
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