New Free Zones Act expected to be ready by third quarter
A proposed timeline for an amendment Bill that will amend the Free Zones Act 1995 (Act 504) is by the third quarter of the year, barring any unforeseen delays, the Head of Legal at Ghana Free Zones Authority (GFZA), Mrs. Kristine Lartey has said.
The proposed amendments is aimed at addressing the gaps in the Act, and bring it up to par with developments in the free and special economic zone regimes worldwide as the Act has seen no major amendments since its promulgation in 1995. One key area of the proposed review is to confer on the GFZA, a corporate identity with the ability and power to operate more independently as a legal entity with some degree of autonomy.
According to her, the GFZA has had stakeholder engagements to elicit input from both government agencies, free zone companies and other entities who operate within the free zone space. Once the Act is being amended, input from all these stakeholders is important to ensure that at the end of the exercise, the new Act is a comprehensive piece of legislation that has all the relevant areas needing review addressed.
“The Authority is moving to the next step in the review process of drafting of the Cabinet Memorandum to be presented through our supervisory Ministry to Parliament. After Cabinet approval is received, then we will have to work with the Legislative Drafting of the Attorney General’s Department for the actual drafting of the Bill. The process requires engagement with the Parliamentary Select Committee on Trade and Industry.
Our target is that by the end of third quarter of the year, we should have the new Act” she told B&FT in an interview on the margins of a capacity building workshop for the parliamentary press corps, under the auspices of GFZA at Parliament House in Accra.
In its current form, the Act limits the GFZA in its function, and even though it is an Authority by name it is still a Secretariat with a Governing Board in its operations. Currently, the GFZA cannot sue and be sued because it does not have a corporate identity and so has to channel everything through the Ministry of Trade and the Attorney General’s Department as the case may be.
The mandate of the Free Zone Act 1995 (Act 504) is to enable the establishment of free zones in Ghana for the promotion of economic development; to provide for the regulation of activities in free zones and for related purposes.
It has clauses including incentives [tax concession and investors], investment guarantees, transfer of profits, guarantee against expropriation, and operation of foreign currency account.
Other areas contained are the composition of the governing board which has the Minister of Trade as its Chairman, to monitor the activities, performance of free zone developers and enterprises.
Qualification of enterprises and issues of tax holidays which were changed without recourse to the Authority are among some of the areas of concern grey areas that has necessitated the call for amendment.
Mrs.Lartey also explained that some of the areas of concern or grey areas that require categorical provision in the Act relates to how some directives from, and/or amendments initiated by some government agencies impact free zone operations, without any recourse to the Authority and the impact on some of the incentives contained in the Act.
A case in point being the Bank of Ghana’s (BoG) recent directive on the implementation of the use of electronic Letters of Credit, and the Internal Revenue Amendment Act, which increased the corporate tax payable after the 10 year tax holiday from 8% provided in the Free Zone Act to 15%. These changes of course do not make the free zone enterprises happy because the impact on some of the incentives that informed their decision to invest in Ghana.
‘Our relationship with our sister government agencies is key, and that is why we have had to engaged them to deliberate and understand each other’s perspective and communicate the rational for the proposed amendments.
By the enactment of the Free Zone Act, investors are being offered elaborate fiscal, trade and investment incentives to encourage the production of goods and services primarily destined for export markets through the attraction and utilization of Foreign Direct Investment and increasing the role of the local private sector.
Ghana’s Free Zones Programme is designed to promote processing and manufacturing of goods through the establishment of Export Processing Zones (EPZs), and, encouraging the development of commercial and service activities at sea- and air-port areas.