19 March 2009
Maputo — The Mozambican parliament, the Assembly of the Republic, on Thursday passed the first reading of a government bill amending the rates of the Specific Consumption Tax (ICE).
This is a tax charged on goods damaging to health (such as tobacco and alcohol) and on luxury goods. It is charged in addition to the standard 17 per cent rate of Value Added Tax (VAT).
The government argues that the main purpose of such a tax is to discourage consumption of tobacco and alcoholic drinks. It also assists in redistribution by imposing a heavy tax on those who can afford luxury goods.
But there is no change in the ICE charged on the most popular and cheapest alcoholic drink, beer, which remains at 40 per cent. The government explains that this is because the Mozambican brewing company, Cervejas de Mocambique (CDM), is currently investing 60 million US dollars in the construction of a new brewery in the northern province of Nampula which should begin production in the second half of this year.
The government hopes to increase its revenue from beer taxes, not by increasing the rate, but by expanding the market in the north of the country.
Other drinks are much more heavily taxed. The ICE on wine rises from 40 to 55 per cent, and on spirits it is 65 per cent. But more significant is the decision to charge a minimum tax per litre. According to Finance Minister Manuel Chang, imported wines and spirits have been paying much less tax than they should, because the importers under-declare their value.
This is why there are places in Maputo where clients can buy a litre of wine for three or four dollars, and a bottle of whisky for less than ten dollars. With the new rules that will be more difficult. When this bill becomes law (on 1 January 2010), importers must pay 50 meticais (slightly less than two dollars) in ICE for each litre of wine. For run, gin and vodka, the minimum tax will be 100 meticais a litre, and for whisky and brandy 120 meticais a litre.
These tax changes, of course, only apply to drinks imported legally. Crates of wine or spirits slipping through holes in the border fence pay no tax at all. Currently, the customs service is trying to crack down on the contraband in alcohol, and has seized over 1,000 crates of illegally imported drinks in Maputo over the past three weeks.
As for tobacco, the ICE rate charged on cigars rises from 65 to 75 per cent. On cigarettes the tax varies - for the cheaper brands, the tax is charged at a flat rate of 120 meticais per thousand cigarettes. For more expensive brands, the rate is 260 or 300 meticais per thousand cigarettes.
When it comes to vehicles, the tax rates are changed to encourage people to buy smaller, more fuel efficient cars or motorbikes. Thus the ICE on cars with an engine capacity of 1,000 cubic centimeters or less, and on motorbikes with a capacity of 250 cc or less, falls from 15 per cent to zero.
On cars with a capacity of between 1,000 and 1,500 cc, the tax falls from 15 to five per cent. But on more powerful cars, the tax rises. A car with a capacity of between 1,500 and 3,000 cc will pay ICE of 35 rather than 30 per cent, and the tax rises from 30 to 40 per cent on cars with a capacity in excess of 3,000 cc.
Fishing and sports boats (apart from luxury yachts), which used to 40 per cent ICE are now zero rated. Similarly all toys and sport equipment will pay no ICE.
The bill was not controversial and passed its first reading unanimously.
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