A CRITICAL REVIEW OF THE FREE TRADE ZONES IN NIGERIA AND THE IMPLICATIONS TO THE NIGERIAN TAX SYSTEM

Abstract

Free trade zones (FTZs) present both opportunities and challenges for national development and enhanced globalised trade between foreign investors and local businesses. A Free Trade Zone is any area in a country where goods may be imported/exported without any barrier imposed by the host's customs authorities. It could also refer to a particularly chosen area within a country where regular trade barriers like quotas and tariffs are removed and the administrative restricted access is lessened in order to attract new businesses and foreign investments. At their best, the FTZs facilitate frictionless trade and manufacturing, creating jobs and economic growth for local communities. At their worst, they enable illicit trade and the laundering of criminal proceeds. In this paper, the author examines the legal framework of the free trade zones in Nigeria and the implications to the Nigerian Tax System. Over the years since the establishment of the FTZs in Nigeria, there have been lots of challenges and contentious issues with respect to the compliance of the Nigerian Tax laws and obligations by companies and individuals that claim to work within the FTZs. While the FTZ legislation has been in place for about two decades, the implementation and administration of the FTZs has left a lot to be desire on both the objectives of the zone and the revenue that should be accruable to the government. Finally, the paper examine how the tax administration and management of FTZs could be improved by implementing existing and emerging initiatives and highlight where new thinking is required to raise global standards to protect the country’s revenue capacity.