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CASP 2024: Private Sector Defends Need to Cut Tax Rates

CASP 2024: Private Sector Defends Need to Cut Tax Rates

Taxes have been the subject of debate in various spheres of society around the world, with businesspeople defending the need to maintain an attractive tax base, which necessarily involves lowering rates, as it allows the tax base to widen and new operators (mainly from the informal sector) to enter the tax system.

Last Thursday, 16 May, during the 19th Annual Private Sector Conference, in the panel on ‘Tax Policy and Business Competitiveness’, businesspeople defended the need for the government to lower tax rates in order to boost competitiveness, which will contribute to the dynamism of the national economy.

‘I have a hard time understanding the problem we have with lowering tax rates. The very simplistic analysis that lowering rates means a reduction in revenue is not quite true, at least in relation to the countries that have been analysed. Portugal carried out a study with a commission, working with countries from the Organisation for Economic Cooperation and Development (OECD), in which they found that lowering the tax rate meant an increase in tax revenue, contrary to what we advocate in Mozambique,’ Ismael Faquir, a tax expert, began by explaining, stressing: ’I personally have a different conclusion on the idea that lowering taxes will mean a reduction in revenue. On the contrary, broadening the tax base is achieved by simplifying procedures and reducing rates, because this is what will encourage people to become formalised.’

Ismael Faquir – Tax expert

The source continued: ‘Does it take courage to do it? Yes, it does. In the short term we may have negative impacts from the point of view of revenue collection, but the benefits in the medium and long term may offset the temporary losses we have.’

Another aspect that the tax expert highlighted was the rate of Corporation Tax (CIT) in force in the country, arguing that although officially the rate is 32 per cent, in practice it is higher and could be as high as 36 per cent. ‘There are other analyses that show that the CIT is higher than 40%. The average corporate tax rate in African countries is 27 per cent and when we look at developed countries, we see that it is lower. In other words, we can’t be competitive with a tax rate that is much higher than that of neighbouring countries,’ he defended, before going on to say: ’we continue to insist on a tax rate that is extremely high for the national reality. It’s therefore a disincentive to investing in Mozambique,’ he concluded.

For his part, Félix Machado, president of the Tax Policy, Customs and International Trade section of the Confederation of Economic Associations (CTA), said: ‘It’s not just us businesspeople who are in favour of low taxes, as we’ve seen that there are experts in the field who advocate the same. We know that no economy can develop with high taxes. We all realise that. And he asked: ‘now, are the members of the government really ours? Are we really Mozambicans?’

Félix Machado – businessman and president of the CTA’s Tax Policy, Customs and International Trade Department

‘There’s a concept I’ve noticed here: the government sets high taxes to cover expenses. It’s not like that. First, let’s study the revenues and then let’s decide what we’re going to do with what we have. We’re not going to build a bridge unless we have money.’

Félix Machado

The 19th edition of CASP, organised by the Confederation of Economic Associations (CTA), in partnership with the government, aimed to reflect ‘on the progress and challenges of the Package of Economic Acceleration Measures and to debate the conditions of the business environment, in order to make the country more competitive’. Projects valued at 75.8 billion meticals (1.7 billion dollars) were also discussed.

Taking place under the theme ‘Investments and Business in the Environment of Economic Acceleration Measures: Challenges and Opportunities’, the three-day event (15, 16 and 17 May) was attended by 80 foreign businesspeople, more than 4,000 in-person participants and 20,000 virtual participants.

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