The 56.6 percent reduction in Industrial Tax, provided for in the General State Budget (OGE-22), for companies providing oil and mining sector services, encourages technological and organizational development of national industries, economist Juliana Evangelista said.
The 2022 State Budget reduces the Industrial Tax rate, which is levied on incidental services, from 15 percent to 6.5 percent, and the Angolan government’s draft bill, sent to the National Assembly, was approved Monday 6 by the MPs.
Juliana Evangelista told Angop that the reduction of Industrial Tax for oil and mining industry workers, included in the State Budget for 2022, was part of a measure to encourage economic activity in these sectors that are driving the Angolan economy.
She recalled that this tax, in the past, the rate in force was 6.5 percent and was raised to 15 percent in 2017.
According to the specialist, the high taxes on the affected companies increase the cost of oil production, which is an inhibiting factor for attracting foreign investment.
Asked to what extent this measure of reduction from 15 to 6.5 percent satisfies the industrial oil and mining sector, Evangelista considers it an important step towards increasing the flow of investment, improving the business environment in the country, as well as financial robustness and liquidity for companies.
Juliana Evangelista stresses that changing the energy matrix is part of the agenda of the Sustainable Development Goals (SDGs) 2030, which provides for the introduction of clean energy.
Therefore, she indicates that it is a priority to exploit mineral resources (oil) to the maximum, otherwise they will be underused.
According to the specialist, most of the companies in this sector are small and medium-sized enterprises, which are responsible for a large part of the generation of wealth and jobs in economies.
In this sense, he stresses, the promotion and growth of these companies must be guaranteed, removing the barriers to their development, with regard to the significant reduction of taxes and/or fees in order to stimulate competitiveness and the creation of more jobs.
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For the economist, the immediate consequences of this government measure will be a greater capacity to attract foreign investment for companies in the sector, which will generate greater competitiveness for the companies.
“Taxes should be easy to understand and payment processes simplified, as taxation generates bureaucracy, leading to advisory obligations for companies, both in determining what is earned and produced,” she noted.
The oil sector, he noted, continued to be the lever of the national economy and accounted for around 90 percent of exports and around 75 percent of tax revenues, which is why reducing the industrial tax is of great importance.
For the chairman of the Industrial Association of Angola (AIA), José Severino, the reduction of the industrial tax is timely in a period when Angola has “timidly” expanded its industrial park.
“With the lower tax rate, products will become more competitive and will contribute to reducing the serious structural and internal problems of our companies. We are thus beginning to take steps towards a local content revolution,” Severino said.
From a tax collection point of view, the president of AIA said that the state would “sacrifice” some revenue, but, on the other hand, it would increase the supply of services and, consequently, it would win in the long term, because national companies would increase the volume of services, more tax revenues and more staff contributing to social security.
Over the last few years, he said, Angola has taken steps to boost industry, but in order to obtain better results in the short term it is necessary to create more attractive policies and tax incentives for investments, especially outside the capital, Luanda.
The country should take advantage of the good business environment, created during this legislature, and set up industries in border areas and in large raw material centres.
“It is necessary to give differentiated tax treatment to the border provinces, with exemptions of up to 20 years, and not the current five years, as that is the way for us to compete in the SADC market, allied to the power and communications network,” he noted.
Following this, the official said that the fact that the primary link with SADC is overland and cross-border, Angola should aim to make Moxico, Lunda Sul and Lunda Norte, Cunene and the northern part of Uige, true industrial free trade zones.