By Godfrey AKON
A total of 98 Nigerian Export Free Zones operators have pushed back on sections of Federal Government’s proposed Tax Reform Bill, warning against repealing relevant sections of the laws establishing the Nigeria Export Free Zones Authority, NEPZA and Oil and Gas Free Zones Authority, OGFZA, which prescribed exemption from taxes for the zones.
In a joint communique issued after an emergency stakeholders meeting last week, the operators said by removing exemptions from taxes contained in the existing law, as well as protections against levies, duties and foreign exchange restrictions, the amendments will destroy the attractiveness of free zones.
The operators also expressed apprehension that removing exemption from taxes and other levies would result in massive capital flight and job losses, and stall the realization of Nigeria’s industrialization and export expansion ambitions.
They noted that as at January 2024, over $300 billion investment had been attracted to the free zones and that over N650 billion has been generated into government coffers through various agencies in the last 5 years.
According to the stakeholders, over 100,000 direct and more than 500,000 indirect jobs have been created through free zone activities.
“Stakeholders equally deliberated on the effect of the Nigeria Tax Bill, 2024 on Nigeria’s free zones, and: noted that while the intention of the Federal Government of Nigeria (FGN) to consolidate and modernize the tax framework in Nigeria via the Bill is salutary, some of the sections are a significant departure from the existing tax framework for the operation of Nigeria’s free zones and will have a grave impact on the survival of the free zone scheme.
“This is particularly evident in Sections 57, 60,198(2), and 198 (3) of the Bill and the Second Schedule to the Bill.
“Noted that by removing exemptions from taxes contained in the existing law, as well as protections against levies, duties and foreign exchange restrictions, the amendments will destroy the attractiveness of free zones, result in massive capital flight and job losses, and stall the realization of Nigeria’s industrialization and export expansion ambitions and the other above-mentioned objectives of free zone scheme in Nigeria,” the operators said.
They further noted that the “provisions of the Bill, which intend to repeal Sections 8 and 18(1)a of NEPZA and OGFZA Acts and significantly reduce the fax exemptions and incentives available to Free Zone Enterprises, would amount to using a sledgehammer to kill an ant while trying to streamline the free zone provisions.”
According to them, “these provisions were inserted based on a false assertion that the law allows for only the sale of 25% of goods into the Nigeria Customs Territory while ignoring the approval granted in 2002 by the FGN that up to 100% of the product from free zones may be sold into the Nigeria Custom Territory upon payment of appropriate Custom duties.”
The stakeholders therefore agreed and recommended that, given the potential negative impact of the Nigeria Tax Bill, 2024 on the Free Zone Scheme, the FGN should consider the position of Free Zone Stakeholders and expunge Sections 60, 198(2) and 198(3) of the Bill:
The also recommended that the government should exclude free zone enterprises from the scope of application of Section 57 of the Bill: and delete the current Second Schedule of the Bill in its entirety.
“Finally, the stakeholders mandated the Nigeria Economic Zones Association (NEZA) to present this position to the National Assembly as well as the Hon. Minister of Industry.
“Trade and Investment. The Stakeholders also mandated NEZA to write a memorandum of appeal, on behalf of free zone investors, to President Bola Ahmed Tinubu, GCFR to kindly: withdraw his approval of the prayers contained in the memorandum dated 20th October, 2024 and titled ‘Operations of Free Trade Export Processing Zones’ written by Dr Zacch Adedeji.
“This is because the prayers were premised on false and misleading claims by the author: and convene a high-level summit on Nigeria Free Zone Scheme where stakeholders, lawmakers and experts will be given the opportunity to examine all existing parameters and chart a bright pathway for the Scheme as a hub for sustainable economic development,” they said.
