The Manufacturers Association of Nigeria (MAN) has expressed support for the proposed reform of the operations of free trade zones (FTZs) in Nigeria, noting that it will ensure an equitable tax environment for all businesses.
Director General of MAN, Segun Ajayi-Kadir, said in a statement yesterday, that proposed changes would ensure fair tax treatment for both companies in the customs territory and those licensed to operate within FTZs.
Recall that during the 3rd Nigerian Economic Zones Association conference, Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policies and Tax Reforms, disclosed the plan to make significant amendments to the regulations governing investment in FTZs.
Ajayi-Kadir stated: “The proposed reform will ensure equitable tax treatment for companies operating in the customs territory and those licensed to operate within the free zones with respect to sales into the customs territory, thereby enabling fair competition while protecting the country’s tax base.
“Licensed entities will also enjoy similar incentives available to entities within the customs territory with respect to their sale of goods and services into the customs territory, a win-win outcome.”
The MAN DG noted that the historical context of export processing zones and free trade zones shows their primary goal was to promote manufacturing for exports.
He added that the reform is necessary to ensure a level playing field and enhance the competitiveness of all companies.
“The concern of my members and the contention here are obviously pertaining to tax incentives. In specific terms, Section 8 on exemption from taxes only applies to approved enterprises operating within a Zone. They are exempted from all Federal, State and Local Government taxes, levies and rates. Sales to the customs territory is neither an approved activity nor is it within the zone.
“However, section 18 permits the sale of goods and services to the customs territory, but this does not confer tax exemption on the sales, but rather a regulatory matter regarding what is permissible.
“Over time, the provisions of sections 8 and 18 have been misinterpreted as not only permitting the sale into the customs territory but also as tax exemption.
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“I believe that the tax reform bill before the National Assembly has actually come to the rescue. The bill seeks to bring clarity and equity by stating that sales to the customs territory are taxable, not just for import duties and VAT, but also CIT purposes. That is to say that all sellers in the customs territory should be subject to the same tax obligations,” he stated.
