There is widespread concern in the business community in Mozambique that the tax system is a serious impediment to private investment and business expansion, particularly for companies that do not benefit from special fiscal incentives. Under the standard fiscal regime, Mozambique imposesa 32 percent tax on corporate profits plus a 32 percent tax on dividend income, creating an onerous combined tax of 53.8 percent on profits that are distributed to shareholders. 1 At the same time, investors who qualify for fiscal incentives face much lower effective tax rates, varying by sector and region (Kuegler 2008). By narrowing the tax base, these preferences necessitate higher tax rates on other activities. In addition, many local businesses find the income tax code too complex (Nathan Associates 2004a).
Over the past decade, the Government of Mozambique has implemented a comprehensive tax reform program covering income taxes, indirect taxes, and customs duties. Major changes have been introduced in both tax policy and tax administration. As a result, the IMF now regards Mozambique’s tax system as being “broadly in line with international best practices,” particularly in the areas of consumption and income taxation.
Excises Tax in Mozambique - Comments on Government Proposal to Increase Taxes
The purpose of this note is to provide CTA a critical analysis of proposals contained in a discussion paper by Mozambique's Ministry of Finance, from 28 April 2008, to amend Specific Consumption tax (ICE). The ICE, passed into law in 1998, is an excise tax levied on a relatively narrow band of imported and domestically produced goods. Recently, the second proposal was accepted by the Council of Ministers and is scheduled to be passed by parliament shortly.
Tax Reform and the Business Environment in Mozambique: A Review of Private-Sector Concerns (Bolnick, 2004)
The Mozambique government has been pursuing a comprehensive tax reform program to modernize and strengthen the tax system. Yet many business leaders express deep concern about adverse effects of the reforms on private sector development. This paper examines the tax system in light of these concerns, with a focus on the income tax and the value added tax.