The Managing Director of the Nigeria Export Processing Zones Authority (NEPZA), Prof. Adesoji Adesugba has said that the new tax pact with the Federal Inland Revenue Service (FIRS) was aimed at enhancing better understanding of the Free Trade Zones Scheme’s tax-exempt index so as to end the long years of unbridled suspicion over its implementation.
Adesugba stated this in his address during the signing of the Memorandum of Understanding (MoU) on the new tax administration at the Headquarters of the FIRS in Abuja.
He said that all stakeholders require a deeper understanding of the importance of the Special Economic Zones scheme and its incentives, adding that such understanding would stimulate the needed competition and development of the scheme.
``With this pact there will be no more arbitrary freezing of bank accounts of any of our enterprises or uncontrolled entering of the zones to harass them without permission of the Authority and collaborative understanding of FIRS.
``The MoU is also to streamline grey areas and get the two agencies to complement each other’s statutory mandates.
``Before now, when we were supposed to speak with one voice towards the same goal, we would choose to sing discordance tunes,’’ Adesugba noted.
The NEPZA boss also explained that there was no gainsaying that the FIRS remained one of the key revenue drivers, but noted that NEPZA had the regulatory mandate to attract investment through the scheme with approved incentives as sweeteners.
``The idea is to simply encourage investors to those business enclaves for the purposes of creating backward linkages, employments, skills transfer and technology transfer among others without the usual bureaucratic bottleneck associated with doing business in the customs territory.
``This MoU is, however, not new, as there has been an existing tax schedule for the free trade zone. Today’s exercise only aims at unbundling and strengthening this schedule for compliance purposes in line with Section 19 of the NEPZA Act.
``The Section 19 of the NEPZA Act mandates free zones enterprises to file ``Returns’’, for statistical and data monitoring. Such information makes public the records of sales, purchases and other key operation of the enterprises as the Authority may require from time-to-time. This requirement is also contained in the Finance Act of 2022.
``It is important to state that Section 8 of the NEPZA Act approves those enterprises operating in zones to be exempt from all Federal, State, and Local Governments taxes, levies and rates. However, they are under obligations to pay all deferred taxes, including customs duties when they extend their businesses to the customs territory.
`` So, the widely held notion that enterprises in zones do not pay taxes at all remained misplaced. This new understanding is expected to correct this wrong notion. For instance, the personnel of the over 500 enterprises that operate in the 22 active zones across the country religiously comply with PAYE tax,’’ Adesugba said.
The managing director further said that the importance of the country’s zone scheme in growing the nation’s economy could not be overemphasized, noting that the Authority has through the management of the zones attracted a cumulative investment of 22 billion US dollars and generated over N40 billion as Gross Domestic Product (GDP) for the country.
According to him, the scheme comes with huge prospects and challenges, adding that, efforts were been put in to ignite robust performance of the scheme.
`` We are, therefore committed to ensuring that this new understanding with this very important sister agency is strictly respected and followed to the latter,’’ Adesugba said.
Mr Muhammad Nami, the Executive Chairman, FIRS said NEPZA’s mandate in attracting both the Foreign Direct Investment and Local Direct Investment placed it as an important agency to drive the country’s industrialization.
Nami, however said the public must appreciate the mandate of the FIRS that basically geared toward the collection of revenues to be used by government for the good of the citizens, adding that the collaboration is required to set the country’s tax records straight.
The executive chairman further said that the new pact would assist both agencies to always present statistical records of tax returns, and custom duties timeously to help in both budgetary and economic planning.
On her part, Deputy Comptroller-General of the Nigeria Customs Service in charge of the Free Trade Zone, Mrs Catherine Ekekezie, expressed delight in the pact struck by the two agencies.
Ekekezie explained that the perceived misunderstanding of the operations of the zone scheme stemmed from lack of in-depth knowledge of the laws and regulations that guided the scheme, adding that agencies of government could only work harmoniously when they took time to study sisters’ agencies’ Acts, rules and regulations.
``We have always collected duties on goods that are manufactured or assembled or stored in the free zones imported to the customs territory. However, we are happy to be given the opportunity to witness this collaboration between FIRS and NEPZA on tax matters.
``The free trade zones may be a fairly new thing here but we are all learning very fast and we believe if allowed to mature, will become the country’s cash cow,’’ Ekekesie said.
For the purpose of effecting the MoU, Adesugba announced the setting up of a Tax returns and compliance office at the NEPZA Lagos Zonal Office, 38 Kofo Abayomi Street, Victoria Island. The office is in collaboration with FIRS where they can attend to all tax matters as it affects all enterprises in the Free Trade Zones.