8 August 2012

Mozambique: Fiscal Benefits for Megaprojects Being Phased Out

Maputo — The fiscal benefits for megaprojects, regarded by many as excessive, are reaching their end, according to Mozambique's Minister of Planning and Development, Aiuba Cuereneia.

It was the early megaprojects, such as the Mozal aluminium smlter on the outskirts of Maputo, or the natural gas treatment plant and pipeline operated by the South African petro-chemical giant Sasol, which received the most generous tax breaks.

At the time it was argued that Mozambique needed to attract the mega-projects in order to show that it was open to foreign investment. And without the generous fiscal benefits, investors might not have put their money into such an ambitious project as Mozal.

But speaking to reporters on Tuesday, after a meeting of the Council of Ministers (Cabinet), Cuereneia pointed out that these tax benefits were limited in time to ten years, and that since 2007 there has been a new law in force "which significantly reduces the benefits for mega-projects, particularly in mining".

As for the older mega-projects, such as Mozal and Sasol, "these are mostly in the terminal period of the tax benefits granted to them", said Cuereneia. "This means that some are already paying their taxes to the treasury, or will begin to do so in the near future".

The government has stressed that taxes are not the only benefit that should be expected from large scale foreign investment - it has pointed to the transfer of knowledge and technology, the promotion of exports (the aluminium ingots produced by Mozal are far and away the largest Mozambican export), the development of small and medium companies that provide goods and services to the mega-projects, and the creation of infrastructures such as new roads.

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