Chinedu Eze
Aviation industry stakeholder has raised the concern over the planned implementation of the proposed tax reform by the federal government that is targeting Free Trade Zones (FTZs). According to the stakeholder, Nigeria stands to lose private jet maintenance hub currently hosted by Execujet Aviation Nigeria FZE at the Murtala Muhammed International Airport, Lagos.
He added that should the federal government implement the proposed tax reform, Nigeria will also lose opportunity for technology transfer, as indigenous personnel are trained by expatriates at the facility.
He is also of the view that there will be over 1000 job losses, if the tax reform is implemented.
Chairman and Chief Executive Officer of Quits Aviation Services Limited, operators and hosts of ExecuJet facility in Nigeria, Sam Iwuajoku, who raised the concern, explained that the Maintenance, Repair and Overhaul (MRO) facility is located at the Free Trade Zone area of the airport, where private aircraft are brought from different parts of Africa for maintenance at the facility.
According to him, because the facility is located in the Free Trade Zone, it is exempted from taxation, which explains why aircraft maintenance in the facility is relatively cheaper and thus attracts aircraft from Africa and beyond for their maintenance. He warned that all the international organisations that hitherto bring their aircraft to be maintained in Nigeria would shun the facility once government introduces tax on Free Trade Zones.
According to the Nigeria Processing Zone Authority (NEPZA), there is Universal Tax Exemption for Free Zone Enterprises operating in a Free Trade Zone in Nigeria. These companies are exempted from federal, state and local government taxies and levies. So, Free Zone enterprises can manage their tax exposure by relying on Section 4 of the NEPZA Act.
There is also reduction of Foreign Exchange Risk because Free Zone Enterprises operating in a Free Trade Zone in Nigeria can issue invoice in dollars and collect payments for goods and services sold into customs territory in dollars or in other foreign currencies of choice. Free Zone Enterprises (FZE) can manage their foreign exchange exposures by leveraging section 11(1) of the NEPZA Act.
But if the federal government goes on with its planned tax reforms, taxing businesses in the free trade zones, Nigeria will lose investment worth over $100 billion in the aviation industry, indigenous skilled personnel will lose their jobs and aircraft owned by Nigerians will pay double of what they pay currently to maintain their aircraft overseas, according to experts’ views.
About 80 per cent of aircraft operating in Nigeria are maintained in the facility up to D-check and aircraft types maintained in the facility include the ones manufactured by Bombardier, Dassault Aviation, Embraer, Gulfstream Aerospace and Hawker Beechcraft.
Iwuajoku noted that government policy summersault has cost Nigeria so much in the area of foreign investment and establishment of businesses in the country, recalling that sometime ago ICAO did a swap analysis, which is an assessment, on where to build MRO in West Africa. According to him, ICAO considered aircraft acquisition by countries, as Nigeria has 270 aircraft, Ghana, 40 aircraft, Togo, 10 aircraft. He however said ICAO chose to build the facility in Lome, Togo, saying the country has the least government interference. This means that when the facility is completed, airlines would be taking their aircraft there for maintenance.
Iwuajoku said if the federal government introduces taxation in the Free Trade Zones, ExecuJet would have to retrench workers and that means that most of the aircraft maintenance would be done overseas and that will cost Nigeria a lot.
“If they go ahead and impose the taxes, we will have to retrench. You cut your cost. There is certain work you cannot do, it means we will have to fly our aircraft out. Right now, if you go to my warehouse, we have stock (spares) from all these manufacturers that they keep it here. In case there is AOG, aircraft on ground, they will service the aircraft, but this cannot be done if the company is forced out of Nigeria. Once an aircraft has a problem, the manufacturers ask us to release it to them.
“I remember when Dangote in this office (ExecuJet), Dangote and Bill Gates had a meeting here. Bill Gate’s aircraft had a problem. It was maintained in this facility. If it was not that ExecuJet was here, how would we have done it? We took things from what we had in store and that was how we did it. And today, when they called me they are very happy,” Iwuajoku said.
He also noted that once the federal government introduced taxes on the Free Trade Zones, the Free Trade Enterprises will go to other countries where they have Free Trade Zones and re-establish their business,” Iwuajoku said.
