Mozambique Extractive Industry: Tax Authority CEO rules out immediate drop in tax on extractive industries

The president of the Mozambican Tax Authority (AT) Wednesday ruled out the possibility of reducing tax on the country’s extractive industries “in the short term,” but noted that there could be “exceptional and case-by-case,” reductions.

Commenting on a recent call to the Mozambican government by mining company Vale Moçambique to reduce the tax burden on the coal sector, which is facing constraints due to a drop in international prices, Rosário Fernandes said that “sustainability of the entire State Budget” does not allow for the “implications” of such a drop.

“Vale took the business decision to do it [request a tax reduction], which is fair, but the law is based on tax universality, equitability and justice. This means it is applicable to everybody,” said the president of the AT on the sidelines of a meeting in Maputo on extractive industries transparency.

Despite ruling out the possibility of a “drop or a rise” in the sector’s tax burden he said that, “on an exceptional and case.by-case basis” the Mozambican government may “analyse individual situations,” that may lead to a reduction of value-added tax (IVA) and income tax (IRPS and IRPC).

“In very specific situations there can be one-off reviews and this also happens with income taxes. For sugar companies, soap and oil companies that has been the case and [these areas] do not pay 32 percent [in IRPC corporate tax]. What the State does is to establish how long that exception will be applied, and that is normally for five years,” he said.

The sharp drop in the price of coal on the international market led to Vale Moçambique posting a loss of US$44 million in the first quarter of 2014, and the company’s director, Pedro Gutemberg called on the Mozambican government to “consider a tax reduction,” as a way of helping reduce the costs of the mining operation.