LCCI urges gradual enforcement of FTZ tax provisions

The Lagos Chamber of Commerce and Industry has called on the Federal Government to implement the proposed tax reforms for Free Trade Zones in phases to allow businesses time to adjust.

Director-General of LCCI, Dr Chinyere Almona, told The PUNCH that the proposed reforms, which have generated pushback from the private sector, do not reverse incentives but clarify the tax status of FTZ enterprises selling goods and services into the Nigerian market.

“The government should engage stakeholders to emphasise that these changes are not a reversal of incentives but a clarification of the law,” Almona said.

Concerns have been raised over the potential loss of $200bn in investments and 600,000 jobs due to the reforms.

The chairman of the Organised Private Sector of Nigeria, Dele Oye, had in a recent statement decried the proposed tax reforms affecting FTZs as announced by Presidential Committee on Fiscal Policy and Tax Reform, Taiwo Oyedele, warning that the country will disincentivise businesses operating in FTZs leading to a $200bn investments and 600,000 jobs loss due to capital flight.

However, the LCCI noted that while fiscal incentives attract businesses, other factors such as infrastructure, regulatory efficiency, and market access are equally critical.

“The current reforms do not eliminate FTZ benefits but ensure that goods and services sold into the customs territory are subject to taxation,” Almona explained. “This approach ensures a level playing field for businesses operating within and outside the FTZs.”

Almona observed that investors must understand that FTZ operations for export purposes remain tax-free, and only sales into the domestic market will be subject to taxation.

Speaking to the debate on the business sense of the reform, Almona urged a deeper examination of the issue, stating that it reveals the necessity for tax equity and the long-term benefits of aligning Nigeria’s FTZ policies with global best practices.

According to the LCCI, Nigeria’s FTZ policies remain competitive compared to other African economies.

Almona cited Ghana as an example of a country whose FTZ businesses can only sell 30 per cent of their products locally and must pay full taxes, whereas Nigeria allows 100 per cent domestic sales.

She further argued that the proposed reforms align with the Nigeria Export Processing Zones Act of 1992, which permits sales into the customs territory but does not grant tax exemptions for such transactions

“By explicitly stating that sales into the customs territory are subject to taxation (including Value Added Tax, import duties, and Company Income Tax), the reforms align with the original intent of the enabling laws,” Almona asserted. “This prevents revenue leakages and fosters fair competition between FTZ and non-FTZ businesses.”

Almona stressed the need for a smooth transition, urging the government to adopt strategies such as infrastructure support, ease of doing business reforms, and simplified taxation processes to maintain investor confidence.

“Gradual enforcement of the tax provisions will allow businesses time to adjust and explore alternative strategies, such as increasing exports,” LCCI’s DG added. “While tax-free domestic sales may no longer be an option, the government can introduce other non-fiscal incentives, such as infrastructure support, ease of doing business reforms, and access to international trade agreements.

“Simplifying the customs and taxation processes will reduce compliance burdens, making Nigeria an attractive investment hub even with the new tax provisions.”

The LCCI’s position aligns with the Manufacturers Association of Nigeria, which, in a statement on Tuesday, called for acceptance of the proposed reforms.

MAN’s DG, Segun Ajayi-Kadir, remarked that the proposed reforms would “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.”