It is estimated that with these exemptions the state has lost about 9.4 billion meticais in tax revenue. However, the effect of these exemptions on the price of products for families – who are the final consumer – is not noticeable, according to the report of the Center for Public Integrity.
VAT is one of the main sources of revenue collection worldwide. In the case of Mozambique, even with the numerous exemptions, this tax contributes, on average, about 32%2 of tax revenue. The fiscal importance of VAT derives from the fact that it is a tax on consumption, therefore an indirect tax that affects economic agents in the same proportion.
The 17% rate charged is levied on the invoice value (the final value of the good or service provided), a fact that makes the cost more expensive for the final consumer. It makes the final price higher. Being a tax that must be paid by all economic agents, it is considered a regressive tax. Therefore, in some countries, such as Mozambique, in an attempt to make it progressive, certain exemptions are approved for consumer goods, which may have an impact on the most vulnerable groups and protect the national industry, as is the case of sugar.
As a way to reduce the final price of goods and services considered essential (as is the case of sugar, oil and soap), increase their access and ensure greater competitiveness, the Government of Mozambique introduced in 2007, with the approval of Law No. 32/2007 of 31 December, the exemption of VAT on these products.
After about 9 years of exemption of these products, consumers continue to resent high prices charged by producing companies and the government loses about 1.1 billion MT per year in revenue.
Read the full CIP report which, according to the organization, proposes to discuss the rationale for maintaining VAT exemptions in the sugar, cooking oil and soap sectors, given the high fiscal cost associated with the measure and the absence of satisfactory results from its implementation in price stabilization.
