TAX REFORM BILL:
98 operators from Nigeria’s Export Free Zones has raised strong objections to certain provisions of the President Bola Tinubu-led Federal Government’s proposed Tax Reform Bill.
They cautioned against repealing sections of the laws that govern the Nigeria Export Free Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA), which currently grant tax exemptions to free zone enterprises.
In a communiqué issued after an emergency stakeholders’ meeting, the operators says , removing tax exemptions, along with protections from levies, duties, and foreign exchange restrictions, will significantly undermine the appeal of free zones to investors.
The group expressed worries over the amendments noting that it will trigger large-scale capital flight, massive job losses, and derail Nigeria’s aspirations for industrialization and export expansion.
Noting that, as of January 2024, over $300 billion had been invested in the free zones, generating more than N650 billion in revenue for the government over the past five years.
According to the stakeholders, the free zones have created over 100,000 direct jobs and more than 500,000 indirect jobs.
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.
They 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 also criticized the proposed repeal of Sections 8 and 18(1)a of the NEPZA and OGFZA Acts, which would drastically reduce the tax incentives for free zone enterprises.
The operators argued that claims justifying the amendments were based on a “false assertion” that only 25% of free zone goods could be sold into the Nigerian Customs Territory. They pointed to a 2002 Federal Government approval that allows up to 100% of goods from free zones to enter the Customs Territory upon payment of applicable duties.
In response, the stakeholders recommended that the Federal Government revise the proposed bill to safeguard the free zone scheme. They called for Sections 60, 198(2), and 198(3) to be removed and for free zone enterprises to be excluded from the application of Section 57. They further urged the government to delete the Second Schedule of the bill entirely.
The stakeholders also mandated the Nigeria Economic Zones Association (NEZA) to present this position to the National Assembly as well as the Hon. Minister of Industry.
