Maputo — Mozambican President Armando Guebuza has sent two tax laws passed last year by the country’s parliament, the Assembly of the Republic, to the Constitutional Council, Mozambique’s highest body on matters of constitutional and electoral law, since there are fears that in their present form they are unconstitutional.
The two laws alter the personal income tax (IRPS) and corporation tax (IRPC) codes. The Assembly passed them in December, and they should have taken effect on 1 January. But Guebuza declined to promulgate them, for fear that they are unconstitutional.
Instead they have gone to the Constitutional Council. The Council has not yet discussed them, but has asked the Assembly to give its reaction.
Speaking to reporters on Tuesday, Mateus Katupha, the spokesperson for the Assembly’s governing board, its Standing Commission, claimed that the problem had nothing to do with any of the tax changes envisaged in the laws, but with their time frame.
The tax bills were passed on 11 December, to take effect on 1 January, but giving the government 90 days to issue regulations on the application of the changes to the tax codes. If the law and its regulations are not published jointly, taxpayers can argue that the will not know exactly how much they should be paying for the first quarter of 2013.
“The date of application of 1 January would create problems”. Katupha admitted. He said that the Assembly’s own Constitutional and Legal Affairs Commission had analysed the bills in December, and could see nothing illegal or unconstitutional about them “but their application at the wrong time could cause problems of a constitutional nature”.
The Standing Commission was therefore not waiting for the Council to declare the two bills unconstitutional. Instead it is asking Guebuza to send the bills back to the Assembly to be reformulated.
A further problem, which a jurist contacted by AIM raised, is whether the tax bills can be regarded as retroactive. A general principle is that laws may only be retroactive if that benefits the people they apply to.
Under the amended income tax code, the vast majority of waged workers will pay no tax at all. The level of wage exempted from income tax is raised from 100,000 meticais (about 3,330 US dollars) to 225,000 meticais a year.
But the bill also treats wages separately from other forms of income. They can no longer be added together for purposes of calculating income tax, and Finance Minister Manuel Chang claimed this means that the rich will pay more tax. Lawyers might argue that the time frame in the law means that this provision is retroactive.
The main change in corporation tax rules is that the bill formalizes capital gains tax on transactions outside Mozambique which involve Mozambican assets (such as the deal earlier this year, when Cove Energy, one of the companies involved in exploring for natural gas, off the northern Mozambican coast, was acquired by Thailand’s PTT for 1.9 billion US dollars). Rather than being dealt with on a case by case basis, these acquisitions are now covered by the corporation tax code.