Mozambican Government Approves Regulation for Cashew Export Surtax

• Mozambican government approves regulation for new cashew law after three-year delay
• Industry figures estimate that much of export surtax on raw nuts is never collected due to under-invoicing and corruption
• Authorities estimate over MZN114m ($1.8m) in unpaid duty lost due to raw nut smuggling last season
• Under-invoicing has created a distortion in the market, allowing exporters to outbid legitimate processors for farmer crops
• Raw cashew exports earned $68.4m in first quarter of this year, while processed kernel exports earned only $2.9m

The under-invoicing of cashews has created a distortion in the market, allowing exporters to outbid legitimate processors for farmer crops.

After more than three years of delay, the Mozambican government has finally approved the regulation needed to enforce a new cashew law passed by parliament. The regulation aims to make the sector more competitive by covering the whole chain, from planting and drying to processing, import, and export. However, industry figures have raised concerns that the state may struggle to implement and enforce these rules, given the history of under-invoicing and tax evasion in the cashew export industry.

Industry sources estimate that much of the export surtax on raw nuts is never collected due to widespread under-invoicing and corruption. Exporters often pay officials along the chain or under-declare the value and quantity of cashews exported, rendering the tax rate negotiable at the port ineffective. This has resulted in significant losses for the state, with authorities estimating that over MZN114m ($1.8m) in unpaid duty was lost due to raw nuts smuggled from Cabo Delgado into Tanzania last season.

The under-invoicing of cashews has created a distortion in the market, allowing exporters to outbid legitimate processors for farmer crops. This has starved Mozambique's factories of raw materials, making it difficult for them to compete with exporters who can afford to pay higher prices due to their access to clean money and foreign exchange. The result is evident in the numbers: while raw cashew exports earned $68.4m in the first quarter of this year, processed kernel exports earned only $2.9m.

Lawyers advising clients in the cashew industry should be aware of the potential for under-invoicing and tax evasion, which could lead to significant financial losses and reputational damage. Compliance officers should monitor the implementation of the new regulation and ensure that their clients are taking steps to comply with the new rules.

Source: Original reporting via Zitamar News