MOZAMBICAN FINANCE MINISTER DENIES TAX EXEMPTION GIVEN TO FOREIGN COMPANIES IN GAS PROJECT

MAPUTO, Mozambican Finance Minister Adriano Maleiane has refuted reports that the government has offered 30-year tax exemptions to the American oil and gas company Anadarko, and Italian energy firm ENI, the two companies heading the consortium developing vast natural gas deposits in the Rovuma Basin, off the coast of the northern province of Cabo Delgado.

The tax exemption claim has circulated in some of the Mozambican media, and was picked up on Tuesday by the Confederation of Mozambican Business Associations (CTA), the body which claims to speak for Mozambican employers. Its Deputy Chairperson, Castigo Nhamane, told a media conference here Tuesday it was unjust for the government to squeeze taxes from small and medium enterprises (SMEs) while offering 30-year tax exemptions to Anadarko and ENI.

The tax exemption claim surfaced again on Wednesday in the country’s parliament, the Assembly of the Republic, when Ivan Mazanga, a deputy from the opposition Renamo party, claimed that these tax exemptions are the money we need to take the country out of penury.

In response, Maleiane flatly denied that there are any such exemptions.

The laws state categorically what happens,” he responded, in a gentle reminder to Mazanga that it is the Assembly which passes those laws, the most recent of which was a government Bill amending the taxation regime for mining and petroleum companies which the Assembly passed just a fortnight ago.

There were no exemptions for oil and gas companies on paying corporation tax or personal income tax on the wages of their employees. Indeed, the companies are already paying very large sums under these two taxes.

Where there is a genuine tax benefit is in the Petroleum Production Tax and Maleiane pointed out that this month’s amendments eliminated a provision which reduced the tax by 50 per cent when the end product is intended for use in Mozambican industry.

The new law guarantees fiscal stability to extractive companies for ten years, not for 30 years and only to those with a minimum investment of five million US dollars in the case of mining, and of 100 million USD, in the case of oil and gas. This is very different from the initial tax legislation of 2014, which granted fiscal stability for a ten-year period to any extractive company, regardless of the size of its investment.

As for capital gains tax paid on share transactions in the extractive industry, this has effectively been increased by closing loopholes. In mid-November, the government accepted an amendment to its Bill, proposed by the Assembly’s Legal Affairs Commission, under which capital gains tax is treated autonomously, meaning that the tax will be charged at the standard rate of 32 per cent, regardless of any other tax liabilities the company may have, and regardless of whether the transaction took place inside or outside Mozambique.

Maleiane said that from now on no company can evade capital gains tax by claiming, for example, that it made a loss over the financial year.

Source: NAM NEWS NETWORK