Oyedele justifies tax reforms for Free Trade Zones

Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reform Committee, has defended the proposed tax reforms for Nigeria’s Free Trade Zones (FTZs), stating that they are essential to ensuring fair competition between FTZ operators and manufacturers operating within the customs territory.

Speaking on Thursday during a public hearing on the tax reform bills at the House of Representatives, Oyedele addressed concerns raised by the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and other stakeholders, who argued that FTZs should remain tax-exempt.

The Nigeria Tax Bill 2024 seeks to introduce new tax obligations for FTZ operators by proposing a mandatory minimum tax rate and removing long-standing tax exemptions previously granted under the Nigeria Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA).

Oyedele explained that allowing FTZ entities to sell goods in the customs territory without taxation creates an unfair advantage over local manufacturers who are subject to tax regulations.

Read also: Nigeria’s current tax system stifles growth, deepens poverty – Oyedele

“If a free zone entity can sell to the Custom Territory, competing with people who are paying taxes and not paying taxes, that’s the best way to create economic distortion, and that is not the intention”, he said.

He further clarified that there is no existing law—whether the NEPZA Act, the Oil and Gas Free Zone Act, or any other statute—that permits FTZs to sell goods within the customs territory without taxation.

Citing legal provisions, Oyedele referenced Section 8 of the NEPZA Act and Section 8 of the Oil and Gas Free Zone Act, stating:

“Approved enterprises operating within a zone shall be exempt from all federal, state, and local government taxes, levies, and rates.”

“So the operating word is, within the zone”, he stressed.

Oyedele also highlighted how other African nations structure their FTZ tax policies. He said Ghana grants tax exemptions for only 10 years, even for exports, and pay up to 8% in taxes after the period.

He added that Benin Republic allows businesses to operate tax-free for 15 years, and after this grace period, they are required to pay up to 15% in taxes.