Yesterday, the Portuguese Parliament gave its general approval to reducing VAT from 17% to 16% on all kinds of goods, as well as exempting imports of agricultural equipment and electrification.

The measures are part of the economic acceleration package announced in August by the President of the Republic, Filipe Nyusi.

The Minister of Economy and Finance, Max Tonela, said in parliament that the changes made to the Value Added Tax Code (CIVA) will deprive the state of revenue worth around 80 million dollars a year, but that they are necessary because they "aim to boost the recovery of the country's economy, after successive unprecedented internal and external shocks".

"The package of reform measures aims to put the private sector at the center of economic transformation" and "promote the expansion and diversification of productive activity in Mozambique," argued Tonela.

The changes to VAT were approved with the votes in favor of the Mozambique Liberation Front (Frelimo), the ruling party with a parliamentary majority.

The Mozambican National Resistance (Renamo), the main opposition party, and the Democratic Movement of Mozambique (MDM), the third party, voted against, because they advocate more significant reductions.

In response to the opposition's demand, the Minister of Economy and Finance stressed that "a drastic reduction in the [VAT] rate would also result in a significant decrease in tax revenue, which would compromise the government's ability to carry out essential development programs aimed at promoting social welfare".

The government, continued Max Tonela, believes that it is prudent to reduce the tax to desirable levels gradually and responsibly, given the systematic budget deficits and the tax's high contribution to overall revenue.