Maputo — Mozambican Finance Minister Manuel Chang admitted on Friday that the international financial crisis could affect the level of tax collection in Mozambique.

This would happen, he said, if there was a decline in the flow of foreign investment, if donors felt obliged to reduce their aid, and these phenomena led to a decline in economic activity and in employment. The crisis in Europe and America might also lead to a decline in Mozambican export revenue.

Change was speaking at the opening of a national seminar on the implementation of tax and customs policy. Faced with this possible scenario, he said, the country should strive to maximize economic activities, and the Mozambican Tax Authority (AT) should maximize tax collection in order to compensate for any decline in foreign aid.

Chang added that there was no sign yet of significant reductions in investment or aid. However, the country's largest industry, the MOZAL aluminium smelter, has run into difficulties, with the price of aluminium on the world market tumbling by around 60 per cent in eight months. MOZAL made 80 of its workers redundant in February.

Chang stressed that the AT should try to maintain or increase the current levels of tax collection. But the AT should look "not just at the tax, but at the activities that generate revenue".

The Minister said Mozambique needed to look at the areas where it enjoys a comparative advantage, such as natural gas, agriculture and tourism. Such areas must be supported, he declared, to ensure that they did not cease functioning, thus ensuring that the country could survive the credit crunch.

Chang warned that current levels of tax collection at provincial and district level are far from satisfactory, and urged the AT to look into the reasons for poor performance.

This is not the first time that Chang has raised this concern. Almost exactly a year ago, during a seminar on public expenditure, he said that it was rare for tax collection targets set for provinces and districts to be met.

There are strong imbalances in tax collection. Chang pointed out that 83.8 per cent of all taxes collected come from the southern regions (Maputo city, and Maputo, Gaza and Inhambane provinces). The central zone (Sofala, Manica, Tete and Zambezia) provides 10.5 per cent of taxes, and the north (Nampula, Niassa and Cabo Delgado) only 5.6 per cent. This cannot be due simply to the fact that Maputo is richer than anywhere else in the country.

For Chang the only way forward was for the AT to broaden the tax base, and bring the tax administration ever closer to the taxpayers, by decentralizing tax collection.

But despite problems at district level, Chang could announce that the final figure for tax collection in 2008 was 39.1 billion meticais (almost 1.5 billion US dollars). This was 100.8 per cent of the target for the year of 38.8 billion meticais.