Africa-Press – Mozambique. The Mozambican Minister of Industry and Trade, Silvino Moreno, on Thursday denied the repeated opposition claim that the government has slapped value added tax (VAT) on “basic goods”.
In the second day of a question and answer session between the government and parliamentarians, deputies from the main opposition party, Renamo, insisted that the government has increased the cost of living by imposing VAT on basic foodstuffs.
The grain of truth in this is that the government has lifted the exemption from VAT enjoyed for the past decade and a half by sugar, soap and vegetable oil. As from the start of this year, these goods must all pay VAT at the standard rate of 16 per cent.
Moreno pointed out that goods that can genuinely be described as basic foods remain exempt from VAT. Rice, maize, maize flour, bread, milk, potatoes and onions are all zero rated.
VAT has never been charged on these goods, and the government has no intention of changing that.
Moreno pointed out that sugar, soap and vegetable oil are all processed goods. Prior to 2007 they were all subject to VAT. But as from that date, at the request of the processing industries, the government exempted them from VAT.
This was a protectionist measure, intended to allow Mozambican industries to compete against foreign competitors.
But the exemption was never intended to be permanent. It was renewed, but after 15 years it lapsed, and sugar, oil and soap were then treated like any other processed goods.
It seems that the Mozambican industries did not use the time to build up their own processing capacity, and the Mozambican vegetable oil market remains dominated by imports.
Of the three products concerned, only in sugar is Mozambique now self-sufficient.
Last year, the government cut the standard rate of VAT from 17 to 16 per cent, which should have reduced household bills, although not by very much. This measure was not even mentioned by the opposition deputies obsessed by the removal of the VAT exemption for sugar, oil and soap.
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