Economist says new Mozambique gas contracts should be renegotiated

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Mozambican economist João Mosca said on Wednesday that contracts between the state and private operators having regard to Mozambique’s natural gas reserves should be renegotiated to increase revenues and benefit a larger proportion of the population.

“The effect of the exploitation of natural resources on society will take a long time, unless the state has a strong tax system capable of absorbing capital gains and other taxes and income and then moves to benefit a larger group of people. But those companies have very high tax benefits, and [hence] the volume of taxes is very low,” Mosca said.

In his speech as part of the ‘Lusophone Africa, a Prospective View’ conference promoted by Portugal’s AIP Foundation, said that “if the new contracts are not changed, society will not benefit much from this sector because the products are fully exported and there are few royalties [taxes from companies to the state] contractualised”.

Mosca, who painted a very pessimistic view on the state of the economy of the country, is of the opinion that “we must revise contracts because the tax benefits [to companies] are very high and Mozambique has a fiscal policy much lighter than Angola’s, for example, and although we have to remain competitive, there is room for change.”

The actions of the tax authorities in collecting taxes on the large multinationals investing in the country have been one of the economic issues in debate in recent days in Mozambique.

On Monday, the Mozambican Public Integrity Center (CIP) said that the calculation method the Mozambican tax authorities used to calculate the tax that Eni had to pay for the transaction with Exxon lacked transparency.

“In the public presentation of the value of the capital gains that will be imposed on Eni East Africa, the Tax Authority (TA) did not explain why it chose a formula different from the one used in previous transactions, meaning that there are no details on how did AT reach the decision that this was the best formula to use,” CIP economists wrote.

In a note released on Monday on the calculation of the tax that Eni East Africa is expected to pay for the sale of 25 percent of its stake in area 4 of the Rovuma Basin to the American multinational Exxon Mobil, entitled ‘There is no transparency in the calculation of the value of capital gains’, the CIP says the Tax Authority “states that in order to reach the value [of US$350 million in taxes] it resorted to available information and [information] provided by Eni, without specifying which”.

“Government dependence on company information is problematic, since there may be an intentional or unintentional omission in the declaration, affecting the process of tax assessment,” the economic watchdog says.

Source: Lusa

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