TAXATION OF INTEREST BENEFITS FROM EMPLOYEE LOAN

BACKGROUND

September 25, 2017, the Chairman of the Lagos State Board of Internal Revenue issued a public notice to the tax payers in Lagos to clarify the tax implication of the interest on loan granted to employees by their employers.

DEFINITION OF EMPLOYEE LOAN

According to the public notice, employee loans are granted by employer to her employees for specific reasons with expectations that such loans are repaid in full through a pre-agreed deduction from the employees’ salary with or without any interest.

LEGAL BASIS

Section 3 (1)(b) of the Personal Income Tax Act (PITA) imposes tax on any salary, wage, fee allowance or other gain or profit from employment including compensation, bonuses, premium, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee. More often than not, an employer may offer loans to its employees at an interest rate lower than the market interest rate or a zero percent interest rate. This arrangement gives rise to benefits which are taxable in the hand employees.

EMPLOYERS’ OBLIGATION

  • It is mandatory that all employers compute tax on the difference between adjusted Monetary Policy Rate (MPR) and the interest rate applicable to loan given to its employees and remit this to the relevant tax authority. Note that adjusted MPR is MPR (this is currently at 14%) minus 3%.
  • Employers are required to file, alongside their annual returns, a schedule showing the information on its employee’s loans and payment terms.

 WHO IS AFFECTED

This provision will apply to directors and employees of a company and will continue to apply even after the relationship with the company has been terminated as long as the loan remains unpaid.

CONCLUSION

In the light of this clarification, it is expected that employers will comply with the public notice as issued by the Lagos State Board of Internal Revenue with immediate effect. For further clarifications on this, do not hesitate to contact us.

FG APPROVED NEW INTEREST RATE ON DEFAULTERS OF UNPAID TAXES FOR 2017 FISCAL YEARS

BACKGROUND

The Federal government of Nigeria through the Minister for Finance announced on May 22, 2017 a new interest rate which will be applicable on unpaid tax debts for 2017 fiscal year. According to the minister, new applicable interest rate shall be five percent over the prevailing Minimum Rediscount Rate of the Central Bank of Nigeria which stands at 15 percent as at date.

For the legal backing of the new interest rate, one could make reference to Section 32 of Federal Inland Revenue Service Establishment Act, 2007. Section 32 (1a) of the Act explains how interest rate on unpaid tax liabilities denominated in naira will be determined while Section 32(1b) addresses interest rate for liabilities denominated in foreign currencies.

IMPLICATION

The minister of finance has directed the chairman of the Federal Inland Revenue Service to commence the implementation of the new interest rate on all unpaid taxes effective July 1, 2017. For the liabilities denominated in naira, the applicable rate from July shall be 19% while 16% will be applicable on foreign currency denominated tax liabilities.  These rates will be applied on all liabilities owed to FIRS and which remain unpaid as at July 1, 2017.

 

CONCLUSION

Going by the new interest rate for unpaid taxes, companies are expected to know that greater financial consequences come with noncompliance with the tax laws, especially in the area of tax remittances. In the light of this, the FIRS expect that this new interest rate will support the efforts of the FIRS to ensure tax payers pay their taxes as and when due for government to be provided with a sustainable source of revenue which in returns will be used to finance the provision of infrastructures while economic growth is being driven.

 

NEWSLETTER ON TAX AMNESTY

BACKGROUND

June 12, 2017, the Acting President (AP) signed a budget of N7.44 trillion into law with an anticipated deficit of N2.36 billion. It is no surprise that seventeen days after the 2017 budget became a law, the Federal government through the AP announced a nine month tax amnesty programme. The AP launched a Voluntary Assets and Income Declaration Scheme (VOIDS) that will provide all current tax defaulters the opportunities to regularise their misdeeds, as it relates to all form of taxes not paid in the past, within the space of nine months.

The scheme is expected to cover Company Income Tax, Value Added Tax, Withholding Tax, Petroleum Profits Tax, Education Tax, Information Technology Development Levy, Capital Gains Tax and Personal Income Tax. The scheme, is to be executed by the Federal Inland Revenue Services and all States Board of Internal Revenue, would focus on all companies incorporated in Nigeria and all taxable persons regardless of location.

It is expected that every person who had one time or the other defaulted in paying taxes to the relevant tax authorities in the past, come out to declare the amount owed and pay such tax debts within the space of 9 months.

OBJECTIVES OF THE SCHEME

The objectives of the scheme were clearly stated as:

 To increase tax awareness

 Grant taxpayers a time-restricted opportunity to regularise tax status

 To increase the tax base (targets at least 4 million new taxpayers)  and consequently improve on internally generated revenue

 Increase tax GDP ratio

 Voluntary compliance with tax laws.

LEGAL BACKING

The executive order, signed into law, is the legal backing for the scheme.

EFFECTIVE PERIOD

The scheme becomes effective July 1, 2017 through March 31, 2018.

BENEFITS TO TAX PAYERS

The benefits of the programme to the tax payers that take advantage of this opportunity include:

 Waiver of interests and penalties incurred on tax debts

 The tax payer comes out clean without being persecuted

 Payment of tax debts could be staggered

 No restriction on periods/years covered by the scheme

 No investigation or tax audit will be conducted on tax payers that voluntarily  declare their tax debt.

CONSEQUENCE OF NOT TAKING ADVANTAGE OF THE SCHEME

At the end of the scheme, stated below is the fate of any tax defaulter who fails to declare his/her incomes and assets:

 Face full wrath of the law including jail terms.

CONCLUSION

To ensure the success of this programme, the VP has declared Thursdays as “Tax Thursday” to educate and create tax awareness among Nigerians. In addition, the Federal Government has entered into agreement with different countries that will provide information about income earned and assets owned by Nigerian in those nations which will be used against tax offenders who refuse to take advantage of the scheme.This shows that it is no longer business as usual. It is time to be responsible as citizens, pay all outstanding taxes and ensure full compliance with tax laws as legal entities and individuals.

TAX AMNESTY IN NIGERIA: A SUCCESS OR A FAILURE

Overview of Tax Amnesty
Tax Amnesty is a time restricted opportunity for a group of identified tax payers to pay a specified amount in exchange for forgiveness of a tax liability (including interest and penalties) with respect to past tax period or periods and without fear of criminal prosecution. In most circumstances, the same law that legitimizes tax amnesty discloses clearly stricter penalties to be applied on those potential or existing taxpayers that have decided not to take advantage of it when they should have. Tax amnesty is one of the strategies adopted by tax administrators to encourage voluntary compliance in other to increase tax base and tax revenue.

Critics of tax amnesty are of the opinion that tax pardon encourages non-compliance by dishonest tax payers and believe that government is been unfair to the honest tax payers. The question is, what incentive(s) is available to the honest tax payers? As a result of this lingering question, the critics of tax amnesty believe punishing tax-offenders is a fair and better way of addressing the issue of non-compliance with the provisions of the tax law.

The benefits associated with tax amnesty vary in accordance with the set objectives for the programme and both participants; the government and tax payers stand a chance to benefit from the programme. With the study of the objectives and the successes of the tax amnesty programmes in different countries, it could be concluded that that the following are the benefits to be derived from the scheme among others:

 On the part of the government it is expected:
 to increase the tax base of a country;
 enhances economic growth;
 improves government current and future tax revenue;
 encourages capital repatriation

 For the citizens, it is expected to:
 reduce tax burdens with respect to the payment of interest, penalties and jail terms;
 make tax payers to come out clean; and
 give tax payers the opportunity to do businesses fairly and legally.

Taking a cue from Indonesia
Taking a quick look at Indonesia, the government of Indonesia in 2016 announced a tax amnesty programme that ran from July 18, 2016 to March 31, 2017 (nine month period).The tax amnesty was signed into law on June 28, 2016 with the aim to increase tax revenues, make fairer tax reforms possible due to an expanded tax base and accelerate economic growth. In terms of increase in capital repatriation, a target of $ 12. 4 billion was set to be achieved by the end of March, at the end of the scheme. Benefits for participation and consequences for non-participation were clearly stated.The scheme was scheduled to be in three phases. The second phase came to an end on December 31, 2016. As at that date, a total of 27,000 new tax payers had been registered while 600,000 tax payers subscribed to the scheme and a milestone of $8 billion achieved on capital repatriation. It can be concluded that a handful of attention was paid to the repatriation of funds just to achieve economic growth. In the light of this, the Indonesian tax amnesty programme could be adjudged to be one of the most successful in the world even when it is yet to be concluded, as at the time of this article.

Introduction of Tax Amnesty Programme in Nigeria

In the case of Nigeria, the Federal Inland Revenue Service (FIRS) announced what is believed to be a partial tax amnesty programme which commenced on October 5, 2016. The programme covered liabilities arising between 2013 and 2015 and had its window period opened for 45 days. Erring citizens were expected to come out to declare their exposures to the tax authority and pay twenty five percent of whatever amount was owed to the Revenue in order for the interest and penalty on the liabilities to be waived.

Outcome of the Nigeria Tax Amnesty Programme
At the end of the 45 days tax amnesty programme which was announced by the Chairman of FIRS, it was established that a total of 2,735 tax payers keyed into the scheme and the sum of 27 Billion Naira was generated, representing 25% of the total revenue expected from the tax waiver programme.

Issues with the Nigeria Tax Amnesty Programme
Considering the outcome of the programme it cannot be said that the programme was successful, a much better result was expected from a country with a population of over 180 million.Mr Oseni Elemah, Chairman of Edo State Board of Internal Revenue stated that “over 80% of taxable Nigerians do not have Tax Identification Numbers (TIN) and therefore evade tax”.

The Nigeria tax amnesty programme was characterized with ambiguities. Listed below are some of the questions begging for answers:

 Are the years 2013 to 2015 accounting years or years of assessment?
 What happens to the liabilities before these periods?
 Can tax payers who are currently being audited for the years mentioned above key into the scheme?

Why the Nigerian Tax Amnesty Programme is considered a failure
The Nigerian Tax Amnesty programme is perceived to have lacked clarity and direction and deemed to have failed for the following reasons:

 It was perceived that revenues from the programmes were scheduled to finance the 2016 budget deficit, this is because the scheme was made public at a time when a budget deficit of 2.2 trillion naira was imminent.
 The programme was too restrictive on the periods covered therefore majority of the potential tax payers who were supposed to take advantage of the programme, could not do this because the chunk of the fines and penalties accumulated by them are traceable to periods prior to 2013.
 Also, lack of trust in the government of Nigeria as a result of the antecedents of civil servants and political office holders with funds management. Nigerians believe that no matter how much revenue our government generates, infrastructures will still not be made available but rather corrupt practices will be on rampage.

Conclusion
In the light of the success achieved by the tax amnesty scheme executed by the government of Indonesia, it is expected that Nigeria will borrow a leaf from them and also take advantage of her own population.

A cue from Indonesia means that the Nigerian government should learn to be specific and set measurable, achievable objectives with clear cut directions with no ambiguities. Economic growth should be one of the primary objectives and repatriation of capital by Nigerians abroad should also be given considerable attention as this aids economic growth.

REMITTANCES AND GROWTH

Migration study usually covers the movement of people and resources among different regions. It is concerned with globalization and the impact of these movements on economic growth and development. Migration (forced or voluntary) has and would continue to play an important role on the pattern of development experienced in most regions of the world. From the Forced migration of Africans to the ‘New World’ during the era of slave trade to the voluntary migration of individuals to greener pastures in recent time, one common factor is human capital which drives economic sustainability, self-sufficiency and growth. The role of human capital as it relates to growth will never be over stated. Robert Solow (1956) postulated that; for growth in the short term, investment in physical capital was sufficient but that to ensure long term growth, technological advancement was necessary. However, it should be noted that human capital drives both short and long term growth. Human capital formation in the necessary areas drives physical capital accumulation in the short run and technological advancement on the long run.

While, migration has cultural and socio-economic implications on the society, remittances are perhaps the most tangible and least controversial link between migration and development. According to the official estimates, migrants from developing countries sent about $431.6 billion to their countries of origin in 2015, three times the size of official development assistance to such countries. The past few years has witnessed remarkable interest in issues of how remittances affect economic growth by policy makers as well as scholars. This has resulted in a shift from pessimistic to optimistic views on these issues, characterized by increasing research particularly on international labor migration as well as a growing number of research and teaching centers that focus entirely on migration.

There has been a growing debate on what drives remittances and how the often voluminous migrant remittances are used and their contribution to the development of the migrant’s country of origin. This issue was included in the G8 meeting agenda of 2004 and in the spring meeting of the World Bank in 2005, emphasizing the increasing importance of migration and the associated migrant’s remittances. Remittances have been argued to have indirect relationships with Gross Domestic Product (GDP) as migrant workers are expected to increase their support for family members during periods of fall in economic activities back home to help them in compensating for the reduction or loss of family income due to unemployment or other crisis-induced reasons.

In most economic literature, four motives have been identified for making remittances; the altruistic motive, the motive for self-interest, motive for co-insurance and the motive for loan repayment. Altruistic motives views remittance as a way of showing commitment to family members left behind. The underlying concept of this motive is to satisfy the consumption need and increase welfare of the recipients of such remittances. Thus, an increase in remittances is expected to cause increase in household welfare and consumption. The motive of self-interest holds that economic and financial interest are the main motives for sending remittances to the recipient. Migrants save and send money that can be invested and therefore positively affect the productivity and welfare of the entire economy. Therefore, it is expected that an increase in remittances would cause investment to increase in the receiving economy. The motives for co-insurance and loan repayment views remittances as a means of repaying previous loan or debt incurred during training of the migrant or cost of migration. It is expected that higher remittances increases the opportunity to fulfill obligations.

Remittances can serve as a stable source of foreign exchange that eases the foreign exchange constraints and help finance external debts. It can also serve as a source of household savings for investment that can be channeled towards capital formation, development and income redistribution through job creation. At household level, it also has the potential to increase standard of living, human capital formation and reduce poverty. However, it could result in reduced pressure on the government to implement structural reforms since citizens live under the illusion of a rise in standard of living. If households expect remittance flow to continue into the unforeseen future, then they would have to reduce savings and this would have negative impacts on growth and development. It can also reduce labor contribution to growth as people would tend to cut back their work hours because their remuneration is augmented by this windfall gain. The need to send remittances and reduce poverty may result in brain drain since more people would want to leave in search of greener pastures, this would reduce the number of professionals available to facilitate economic growth and development.

Understanding how remittances cause a reduction in savings of recipient families thereby negatively affecting growth may seem difficult. However, if people consider that remittances flow will continue for the foreseeable future, then according to the permanent income hypothesis, they tend to increase current spending and consumption by cutting back their saving. As a result, in the long run the outcome turns out to be negative rather than positive for the development of most economy.

THE PRINCIPLES OF PAY AS YOU EARN

PERSONAL INCOME TAX IN NIGERIA

THE PRINCIPLES OF PAY AS YOU EARN (PAYE)

With the proposed 2016 budget of the Federal Republic of Nigeria and those of the State governments in Nigeria, it has been established that internally generated revenue is the major source of finance for budgets and not Oil as the case used to be. Talking about this tax-returns-hmrcnew bride called internally generated revenue, taxation is its nucleus. It is a pity that an average Nigerian lacks the shallow not to talk about the in depth knowledge of principles of taxation in Nigeria.

In view of this, it is expected that the governments will want to bring more Nigerians into the tax net as over 40% of the gainfully employed residents in Lagos for example evade tax. As at today, the Lagos State Government is executing her plans to ensure more Lagos residents are dragged into the tax net. Recently, Lagos State established a Rapid Tax Prosecution Unit which will harass and threaten tax evaders. As a result of this, the issues of taxation cannot be over flogged in Nigeria especially during this period.It has been discovered that majority are not aware of the process of computations required to ascertain the PAYE chargeable on salaries to be paid based on self-assessment.

What is PAY AS YOU EARN?

PAYE is the tax imposed on the income of employees, deducted at source and remitted to the relevant tax authorities by the employer. The self -employed, sole proprietors, owners of business ventures and partners in a partnership, as the case may be, are also expected to pay PAYE on the incomes earned by them and remit same to the relevant tax authorities. It is administered by the Personal Income Tax (Amendment) Act 2011.

Features of PAYE

It is expected by the law that all employers, as government agents, in Nigeria to compute PAYE on the salaries of their employees, deduct the computed PAYE at source and also remit same to the relevant tax authorities on a monthly basis. The PAYE of all the gainfully employed residents of each State in Nigeria must be remitted to the Internal Revenue Service of that State in which they work on or before the 10th working day following the month when salary was paid. If you work in Lagos for example in January 2016, your PAYE must be remitted to the Lagos State Board of Internal Revenue Service (LIRS) on or before February 10, 2016. Where the February 10, 2016 fell on a Saturday/Sunday, PAYE must be remitted latest by the Friday preceding the weekend.

Penalties for the failure to remit PAYE

Where an employer refuses or neglects to operate the pay as you earn scheme, such an employer would be liable. Penalties may be imposed for:

  • Failure to deduct the correct tax from employee’s income
  • Failure to pay tax deducted from employees pay
  • Failure to make correct returns of the employees.

Where an employer refuses or neglects to deduct or remit PAYE deducted, a penalty of 10% per annum is imposed. In addition, interest is charged at the ruling commercial interest rate.

Basis of Assessment

PAYE is assessed to tax on actual year basis. This means that the income earned in the year 2015 should be assessed in same period.

Computation of PAYE

3-payeThe first step is to establish the total emoluments/gross salaries of individuals. Kindly note that where any employee had enjoyed the use of an asset owned by the employer e.g. a car or lived in a rented apartment paid for by the employer, such reward is described by the law as “Benefit In Kind”. These are treated as explained below:

 

  • For the assets owned by the employer: Examples of these could be a car and a house. Where this is the case, 5% of the market value of the asset should be added up to the total emolument of the employee. For a car with N5 million value only N250, 000 will be added back to the annual salary of the beneficiary as taxable.
  • In the case of a rented asset: For example, a rented apartment for the employee but paid for by the employer, the total amount paid per annum by the employer will be added up to the annual salary of the employee.
  • Where support staff has been provided: When a driver, cook or a gardener has been provided and paid by the employer for the use of the employee, the amount/wage paid to the support staff will be added to the salary of the employee.

Subsequent to the determination of the total emolument, the following are the allowable deductions by the law from the total emolument of each employee to arrive at taxable income:

  • Consolidated Relief Allowance: This is the higher of
  • 20% of the total emolument plus N200,000 or
  • 1% of gross earnings
  • Pension contribution: This is the employee contribution of 8% in line with the Pension Reform Act 2014
  • National Housing Fund contribution
  • National Health Insurance Scheme contribution
  • Life Assurance Premium contribution

After the taxable income had been ascertained, the following graduated rates are applied on the taxable income to calculate the tax payable:

  • First N300,000 at 7%
  • Next N300,000 at 11%
  • Next N500,000 at 15%
  • Next N500,000 at 19%
  • next N1,600,000 at 21%
  • above N3,200,000 at 24%

Employees are expected to be paid after pension and PAYE has been deducted at source by the employers. Kindly note that where any of the allowable deductions stated above other than pension had been applied to arrive at the net pay, it is imperative that such deductions are paid to the relevant statutory bodies and evidences of the remittances are obtained by the employer. If the employer fails to obtain these evidences then the tax authority has the power to disallow such deductions in the computation of PAYE. The PAYE computation described above is for a whole year and this is divided by 12 and applied monthly.

Residency Rule

An individual is considered resident in Nigeria throughout the year of assessment if he:

  • is domiciled in Nigeria;
  • sojourns in Nigeria for a period or periods in all amounting to 183 days or more in a 12 month period;
  • serves as a diplomat or diplomatic agent of Nigeria in a country other than Nigeria (FIRS, 1993, P.1)

When the residence of a tax payer has been determined the total income of the individual is assessable by the tax authority in whose territory the taxpayer is deemed to reside irrespective of the territory from which each income is derived.

Annual Returns

It is expected by the law that all employers file annual returns of PAYE paid in a particular year for all employees latest by the 31 January following that year. That is, for all the PAYE deductions in 2015, annual returns must be filed by 31 January, 2016. Failure to do this will attract a penalty of N500, 000

Conclusion

At this juncture, it is imperative that companies are not caught at the other side of the law especially when jail terms are calling for offenders. The time for the correct computation is now. For further clarifications on the matters surrounding PAYE, you could talk to a tax consultant.

Theophilus Olufemi is a tax consultant with TAC Professional services

For more information, discussion and questions kindly contact Theophilus Olufemi on:
Tel: +234 8096257081
theophilus@tacgroupng.com

Disclaimer: This piece of information above represents our views to enlighten the entire public on the principles of PAYE. This does not represent any tax advice in any way and TAC Professional Services will not be held liable for the use of this information.

WHT rates for resident companies/ individuals and non-resident companies or individuals.

The period for filing WHT is 21 days after the duty to deduct arose for deductions from companies.

The penalty for failure to deduct or remit tax is 10% of the amount not deducted/remitted.

Note that companies are required to submit, in electronic form, a schedule of all their suppliers for the month showing the tax identification number (TIN), address of the suppliers, the nature of the transaction, WHT deducted, and invoice number.

Download below WHT rate for every transaction

Withholding Tax Rates

SUCCESSION PLANNING : BOTH SIDES NOW

The need for successsion and transition planning of tax and accounting practioioners and their firms has been growing in the past ten years. Part of this drive, of course, is an aging practitioner base. Another is the changing dynamics of clients – particularly their need for a more sophisticated assistance in the business and tax planning, and issues related to their own succession.

This article is an excerpt from the presentations made in the just concluded Integra international conference 2015, held in Houston, USA.

Follow the link below to read the full article.

Source: Fowler SuccessionPlanning-MFowlerNSACCT.pdf

2015 PROPOSED VAT INCREMENT: IT’S EFFECT ON NIGERIAN BUSINESSES

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On 18th December 2014, the Coordinating Minister of the Economy and the Minister of Finance Dr. Mrs. Okonjo Iweala, laid the proposed budget before the House of Representatives and National Assembly called the transition budget and part of its parameters to generate revenue from taxes is the proposed increment in vat rate from 5% to 10%.

Looking into value added tax as a major factor in the contemporary world, it is a major source of government revenue in the past years and even in recent times, therefore resulting in strong enforcement for recovery and tax compliance on the part of the tax regulators and government agencies. from the perspective of the buyer, value added tax is a tax on the purchase price of goods and services known as input vat and to a seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution known as output vat. The manufacturer remits to the government the difference between these two amounts, if output vat is more than input vat and if otherwise the difference will be vat refundable.

Extracts from the overview of the proposed budget of the minister, it was said that it will be important to focus on tax policy to see where opportunities lie to streamline and rationalize certain taxes and levies whilst looking to boost others. For example, Nigeria has one of the lowest vat rates in the world and medium term efforts must involve the legislature to see what opportunities exist with vat which largely benefits states. Whilst state governments get 85% of vat, the federal government gets just 15%. A 5% increase in vat rate for instance would yield N614 billion, most of which would go to the states and local governments. It is gain saying to note that a large chunk of this proposed income from vat will be paid by the masses which have businesses that is still struggling for survival in the economically harsh situation as the burden of it falls on personal end-consumers of products.

This proposed increase will be very unfair to the Nigerian populace if it is based on the fact that the rate of vat which is 5% as stipulated in section 4 of the vat act 1993 is one of the lowest rates in the world, as claimed by the minister.

Studies have shown that other countries with higher rates like United States and South Africa have got a lot to show for it, in terms of good infrastructural facilities and social amenities in the country that is adequately sufficient and highly beneficial to the present citizens and their future generations

This is seen to be a severe austerity measure on the masses in the long run, considering the fact that every individual in the country has to consume goods and services that are vatable in other to survive, since it is charged on almost all consumable products.

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Highlights of its effect on businesses in Nigeria

• Drastic decrease in purchasing power of money
This will definitely lead to increase in inflation rate, since the government wants to get a chunk of the insufficient disposable income left in the hands of the Nigerian populace, businesses tend to find it difficult to survive the daring situation. Individuals are left with the only option to reduce their spending on luxury, and spend majorly on necessities. There is always an adverse effect on the economy whenever there is a change in fiscal policies aimed at generating more funds for the country.

As a matter of fact, manufacturers who are opportunists, will take advantage of the increase in vat rate, to shoot up their prices even when their goods and services are not vatable under the VAT Act 1993.

• Decrease in level of Savings of individuals

In the business world, the Profits of businesses are either distributed as dividends or ploughed back into the business for expansion, this could generate more funds by identifying various investment strategies and taking advantage of such opportunities. A rational Nigerian is not afraid of giving up something now to enjoy in the future, what then happens in a country that plans more for recurrent expenditure compared to the capital expenditure in her proposed budget after getting all the increases in revenue including oil and non-oil revenue sources, expending a larger amount on recurrent expenditure. The future plans are so shallow jeopardizing

• Possible closure of infant industries
A higher percentage of businesses in Nigeria despite the long years of existence are still struggling to survive due to the dwindling economic situation of the country, and increase in VAT rate, makes it harder for them to survive, since operating expenses consumes a larger part of the revenue, and individuals are left with the option of providing for themselves what is meant to be provided by the government for them to continue in business. It is pertinent to note that a manufacturer battling with little or no profit, will find it unbearable paying the increased tax on their meagre profit.
This will possibly result in unemployment, as it is already discovered that some of our graduates are responsible for the crimes in the country, as they are one of the social groups always at the receiving end of the bad economic policies.

• Adverse effect on investments

From the budget estimates N634billion has been proposed to be expended on capital projects, which will be largely funded through huge borrowing thereby having an adverse effect on debt servicing costs. Using debts to finance investments is like pouring water into a basket, in that the debt servicing costs, will take its toll on the profits generated on such investments.

Businesses and individuals will have their fill of the adverse effect of the VAT increase since the disposable income left in their hands will be insufficient for present necessities needless to mention investment, in the tough economic environment.

Businesses have to deal with a myriad of issues and overcome many hurdles to become established and remain afloat considering the points highlighted.

In conclusion, it is therefore advisable to business owners to factor in these stringent government policies into plans, transform them to easily decipher opportunities embedded in them. The survival of businesses in 2015, cannot be over emphasized, for it to overcome the severe terrain of operating costs in the long run and the new tax policies about to be unraveled.

ARTICLE BY: ADELEKE ADEOLUWA ABIOLA
DESIGNATION: TAX CONSULTANT

CONTINUOUS RELEVANCE OF THE YOUNGER GENERATION WORKFORCE IN THE MODERN DAY WORKPLACE THROUGH KNOWLEDGE TRANSITION.

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INTRODUCTION

The continuous relevance of the younger generation cannot be overemphasized in the 21st century workplace and this has brought about a wide range of transformation in different sectors of the economy. It is basically owing to the fact that they have grown to embrace the technological innovations that has rapidly increased over the modern age.

Hiring new, young talents just out of higher institutions can be a whole lot challenging but most established practices of management have now realized that it is the secret ingredient for transforming the corporate culture of every organization. With a shift of the younger employees into the workforce, companies are therefore finding that there are different attitudes and work habits that need to be incorporated into the existing culture to enhance company growth and development.

Dynamic university graduates are now entering the workforce, having never known a world without computers, cell phones, email, or instant messaging. They have been brought up in a fast-paced, instant world that is ever-changing and these younger employees are looking for innovative ways to complete tasks of the older employees in the workforce without delays.

The fact remains that in the modern day workplace, there is a high speed of development requiring workers from different generations to learn new technologies quickly. This suggests a need to catch up with fast-changing technology meaning that workers have less time to get up to speed on important new skills. It also means older employees must be willing to learn from younger ones who grew up immersed in computer and mobile technologies.

It is pertinent to state that the older generation workforce is quite resistance to change and this is due to the fact that they are in some way stereotyped, rigid and extremely process driven but this is not so with the younger generation; so energetic, fast, agile, adventurous, full of life and all-out to challenge the status quo.

Employers are tired of depending on employees carrying out routine job functions. The younger generation of the workplace have therefore deployed professionalism in terms of their multi-tasking skills and creative talents in their respective workplaces and this has challenged the old processes and brought about an emergence of a system that is much more flexible and dynamic in the work environment.

Even the Nigerian financial institutions now have much better corporate governance practices. They have totally introduced professionalism as opposed the old bureaucratic processes by which things were done. The massive deployment of top grade information technology manned by young and highly competent professionals in the sector has tremendously elevated banking practice in the country. Although there is still room for improvement but there is departure from the past.

”The younger generation employees believe job functions can be executed faster without delay in process. Also, as opposed the old generation ‘process philosophy’, the younger generation seems to have introduced so much innovation into the confines of the workplace.”

The tendency of the younger generation to get distracted sometimes cannot be over emphasized, but with smart older generation workers in the picture to play a supervisory role, there will be little or no damage incurred.

Although there are commonalities among the generations, there are differences as well. Conflicts often arise from differing learning styles, especially as they relate to how information is acquired and used. Experts say; the younger generation employees for example, tend to process information quickly and prefer to get it done through computers or social media. They learn faster than the older generation.

Areas of effective knowledge transfer

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Younger generations will continue to be relevant in the workplace if knowledge transition to the older generation takes place in the following areas;

  • New Technology: This is the most obvious area. Whether its computers or any other device with bits and bytes, chances are that younger workers know how to use it. If they don’t, they’re comfortable learning how. And, like most people with a skill, they’re usually happy to pass on what they know.
  • Professionalism: Putting a touch of excellence in all that the organization is all that matters. The younger generation unlike the older have rebranding capabilities. Having explored their wide range of opportunities, they can transform a sector simply by making the same old things look new and different.
  • Intrapreneurship: In today’s increasingly competitive environment, companies need to find that ‘added extra’ to stay competitive to retain existing customers and attract new customers. An intrapreneur is one within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.  They behave like an entrepreneur, except within a larger organization they can enable businesses to expand into other areas of their market by identifying new products or services to existing or new customers.  This is a major trait a younger generation possesses and it can be thought.
  • Diversity: Younger workers come from diverse households and backgrounds. Their “wider perspectives” can help open older workers’ eyes to the changing world and workforce.
  • Job-Hopping: “Older workers have been told that only bad, disloyal or incompetent employees leave. While older workers may regard career change as negative, young people understand that it can be fulfilling, energizing — even life-changing.
  • Risk Taking: “Younger workers are extremely entrepreneurial; they’re excellent out-of-the-box thinkers. That’s especially true compared to people who have spent their careers respecting corporate hierarchies and processes, not taking a lot of risks.” Though that was not necessarily bad in earlier times, “a new era demands a new way of thinking.
  • Balancing Work/Life Issues: “Older workers have done a horrible job with family and work-life balance issues,” expert says. “Younger workers are not career-driven. They can show older workers different attitudes and values.”
  • Fulfilling Dreams: “Older workers have had tons of responsibilities throughout their careers, but now that they’re without kids or mortgages, they’re free,” Experts say. “They can go out and fulfill their dreams — but they may not realize it. If they see how younger workers act and feel, they can follow their lead.

Facilitating the transfer

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Fortunately, there are things management can do to ensure knowledge is transferred effectively from the younger generation to the older generation employees. These include:

  • Reverse coaching

Senior employees are paired with new generation employees for knowledge sharing and basic technical knowledge. In this case, a younger worker proficient in social media and information technology can teach these skills to an older worker.

  • Job switch

In such programs, older employees are to undertake tasks of younger employees especially one that exposes them to the use of Information Technology tools to enable such senior employees facilitate their exposure to related job functions.

  • Cross-generational team building events.

Bringing both generations together for non – work tasks helps build communication, in this case employees work together on a project. In general, the more comfortable the older people feel with the younger, the more likely they are to ask them to share what they know or how to do something.

  • Integrating project teams.

Workers are assigned to what is called “cross-functional project teams whereby employees work together on various initiatives or committees, and it gets them talking to each other. “Different generations then work shoulder to shoulder, regardless of tenure, age or experience, and it’s an environment where anyone can feel free to speak up, you will be surprised how much the younger generation have to offer.

Conclusion

While the times and organization’s employees are changing, it is important to note that not only the younger employees need to be understood, but also the more senior employees need help understanding and embracing the change. It is pertinent to consider how companies will embrace, manage, promote, and retain these new, highly technical workers because the younger generation employees are not going away, they will only grow in the workforce.

MOSOPE CARDOSO IS A HUMAN RESOURCE PERSONNEL WITH TAC PROFESSIONAL SERVICES.