FIAS Tax Study 2006
FIAS Tax Study 2006
At the request of the Ministry of Industry and Commerce, FIAS was asked to carry out a study of the effective tax burden in five sectors. The appraisal was extended to include an analysis of tax and customs administration issues, as well as license fees, which affect the business environment. This study is part of a joint FIAS / Department for International Development (DFID) study of eight countries in Africa examining revenue authorities and the tax impact on business. The government, in particular the Ministry of Industry and Commerce, is keen to determine whether the current tax/incentive/license scheme regime in each of the sectors studied is conducive to growth goals and whether these sectors are competitive domestically and internationally.
This study aims to provide the government with information it seeks through use of marginal effective tax rate calculations carried out in each of the identified sectors and through qualitative analysis about the appropriateness of the tax /incentive scheme carried out by sector experts. Again, the lens through which the tax system is analyzed in this study is responsible growth, not revenue maximization. To this end, the final report will provide analysis and recommendations aimed at improving the effectiveness of the tax and license regime to responsibly promote growth in each sector and will also present cross-country analysis from which international competitiveness will be assessed.
An additional and important component built into this study has been a capacity building exercise, with the group of international consultants tasked to work closely with a counterpart group to transfer the knowledge and methodology underlying such an analysis. FIAS consultants held a workshop in Maputo on Thursday 27th July, which focused on the techniques used in the qualitative and quantitative analysis of the tax/incentive schemes on the five sectors chosen.
The mission worked liaised closely with Ministry of Industry and Commerce, Ministry of Finance (General Tax Directorate, DGI), and Ministry of Planning and Development over the period 14th-28th July and met with government officials, private investors (foreign and local), the Confederation of Business Associations in Mozambique (CTA), trade groups and associations, and the donor community. The mission wishes to express its gratitude to the Government of Mozambique for its close collaboration and cooperation in support of the mission and project.
This aide memoire is divided into three sections. The first section presents the key findings of the study. The second section provides a preliminary analysis of the effective tax burden on the overall tax system and on each of the five sectors studied and the small business regime. The final section outlines next steps. Following the text, the aide memoire includes annexes showing a summary of the contribution of taxes to the total tax take, and the METR results and simulations under different scenarios (vis-à-vis other countries in the region).