Cirest’s presentation of the new Enhanced Next-Generation Free Economic Zone (ZFANG) program marks an important milestone in the development policy for eastern Réunion. The six municipalities in the region now benefit from a more favorable tax regime designed to support economic activity and attract new investors.
From a technical standpoint, the measures are substantial.
The deduction from taxable income increases from 50 % to 80 %, the exemption from the business property tax is increased to 100 % of the taxable base within the limits provided by law, while property tax relief measures are also expanded. However, the companies concerned remain subject to the same eligibility criteria: fewer than 250 employees, less than 50 million euros in revenue, and a productive activity actually carried out within the country.
For elected officials, this reform represents recognition of the specific challenges facing eastern Réunion, where unemployment and poverty rates remain among the highest on the island. It also reflects the government’s commitment to using tax policy to reduce regional disparities.
But the meeting organized by Cirest also highlighted the limitations of this approach.
Some of the targeted economic sectors were already receiving the maximum exemption allowed under the previous system. For these companies, the reform therefore offers no additional benefit. According to the Bourbon Economic Club, only a minority of local businesses could actually improve their situation as a result of this change. Even more significantly, the tax authorities acknowledge that no impact study has yet been conducted to assess the number of companies affected or the expected effects on investment or employment.
This lack of evaluation highlights a reality well known to economists: tax incentives alone are never enough to bring about lasting change in a region.
The decision to invest depends primarily on the profitability of projects, regulatory stability, the availability of land, the quality of infrastructure, administrative processing times, energy costs, access to financing, the qualifications of the workforce, and the size of the markets. Taxation is only one factor among a much broader set of competitiveness factors.
The statements made by economic representatives are, in fact, in line with this view.
Many believe that the real obstacle to development in the East lies less in the level of taxation than in the difficulty businesses face in crossing a growth threshold. Many remain very small businesses that struggle to recruit mid-level managers, skilled technicians, or management expertise that would enable them to scale up.
That is why several officials are proposing to go beyond ZFANG alone by strengthening the LODEOM, in particular through additional exemptions from social security contributions for skilled jobs.
Such a development would help lower labor costs for management positions, which are often essential for organizing a company, fostering innovation, entering new markets, and improving productivity.
This line of thinking ties into a broader issue: that of consistency among the various public development tools.
A free trade zone achieves its full potential when it is accompanied by an active land policy, training programs tailored to the needs of businesses, investments in infrastructure, easier access to financing, and a genuine strategy to attract businesses. Without this integrated approach, there is a risk of creating a tax advantage that improves the profitability of certain businesses without fundamentally changing the region’s economic dynamics.
The experience of Réunion thus offers lessons that extend far beyond the island itself.
Overseas territories already benefit from numerous specific measures: investment incentives, tax breaks, social security exemptions, European programs, and measures to ensure territorial continuity. However, their economic performance remains highly uneven. This shows that development does not result solely from the accumulation of tax benefits, but rather from their integration into a strategic, stable, and coherent vision.
The strengthened ZFANG therefore represents a real step forward. It improves the competitive conditions for certain businesses and enhances the appeal of eastern Réunion. However, it cannot be considered a solution on its own.
As several speakers have pointed out, the real challenge remains to build an economic environment capable of transforming these tax incentives into investments, new businesses, skilled jobs, and, ultimately, sustainable growth. Only then can the free trade zone policy become a genuine tool for development rather than merely a mechanism for tax relief.
Gérard Dorwling-Carter
