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2 InsideTax 3 CBAs & Severance Benefits: Where is the “loss of office”? It amounts to an abuse of the CBA framework to incorporate and sustain clauses that circumvent

1 the provisions of the law based on the union's potential to create or trigger industrial crisis at will 2 3 4 The circumstances of the 2016 budget employer's business or other factors. by the tax authorities, it is worthy to of Nigeria have made tax or taxation a Consequently, to enjoy the tax recall the wisdom in this statement: permanent agenda item and its exemption under Paragraph 26 of the One “key to revenue growth is tax discussion inevitable. The tax system Third Schedule of PITA, the reform that closes loopholes and that in Nigeria is yet to attain such a level compensation should be triggered is pro-growth. Then with a growing of maturity in which one can declare, strictly by loss of employment. economy, that's where your revenue “we don't need new taxes; we need growth comes in, not from higher 4 new taxpayers, people who are In the case of these CBAs, is the taxes”. employer in doubt as to the gainfully employed, [and new It is also sometimes described as multinational The automotive businesses] making money and paying appropriate treatment? Probably not. corporation (MNC). 1.1 Can you make the title as “CBAs & Severance Benefits: into the tax system”1 However, the need to avoid potential Wikipedia Where is the “loss of office”? industrial crisis regardless of duration Revised Guidelines On Acquisition of Foreign industry policy as Technology, Section 2, Section 8(c) pp. 8 and 12 1.2 Can you add a second pull out: …one key to revenue Individual and corporate taxpayers the and its disruptive impact for the …the danger I faced World Bank, NBS, IMF, BMI laudable as it may growth is tax reform that closes loopholes and that is pro- world over love tax reliefs, exemptions employer's business has made some Into-Africa Institutional Investor Intentions to 2016 by Economist Intelligence Unit growth… and/or holidays. Employees love tax employers cower to honour these was not accepted as appear to be without free pays. One instance of employee clauses. Given that such clauses 1.3 If possible a third pull out should be: …the danger I tax free pay is compensation for loss appear to have been designed to reasonable grounds close analysis, it only faced was not accepted as reasonable grounds for of office, although most employees do circumvent the provisions of the PITA, 2 for deferring my tax deferring my tax payments… not wish to suffer loss of employment employers in these situations clearly makes Nigeria in the 1.4 Is it possible to change the image used in the article as outside mutual agreement. need support from the authorities to payments… 21st century “road the issue is not a smiling matter be able to deal with resistance from The tax and regulatory framework their respective union. regarding industrial relations in Nigeria centric” allow for collective bargaining. The practical reality of these …the danger I faced Collective bargaining consists of the employers is no different from that of 3 process of negotiation between 1 Marco Rubio Brainy Quote was not accepted as Lauryn Hill when she said, “the 2 representatives of a union and danger I faced was not accepted as Wikipedia 3 An American Singer reasonable grounds employers (generally represented by reasonable grounds for deferring my 4 John Hoeven, brainy quote management, or by an employers' tax payments, as authorities, who for deferring my tax organization in some countries) in despite being told all of this, still respect of the terms and conditions of gratuity/end of service benefits as years in service and other benefits chose to pursue action against me, as payments… employment of employees, such as agreed upon resignation or enjoyed by workers”. At such time opposed to finding an alternative wages, hours of work, working termination of employment. In some of re-negotiation, the employer is solution”. conditions, grievance procedures, and instances, the funds for the expected to disengage all the staff about the rights and responsibilities of retirement benefits are kept with a and eventually re-engage them on Thus, tax authorities where they 2 This publication contains general trade unions. The outcome of this fund manager and in other cases, the different terms to be contained in a obviously disagree that the payment is not a compensation for loss of information only and Akintola Williams process is the collective bargaining fund is administered by the company. new CBA. However, payment of Deloitte is not, by means of this agreement (CBA), which typically severance benefit must be for office, often raise assessment notices publication, rendering accounting, operates for a defined period say, 3 to Terminal benefit characterized as compensation for loss of office to on the employers who by law are the business, financial, investment, legal, tax, 5 years and stipulate provisions for re- compensation for loss of office is qualify as tax exempt. collection agents for government on or other professional advice or services. negotiation after such periods. exempt from tax based on the due taxes whether at the material provisions of Paragraph 26 of the A compensation for loss of office time the liability fell due or as a Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private Adverse economic conditions naturally Third Schedule to Personal Income arises where an employee's consequence of a tax audit or company limited by guarantee (“DTTL”), provoke response from employers of Tax Act, Cap P8, LFN 2007 (PITA) (as engagement has been determined or investigation exercise. Such its network of member firms, and their labour, individual or corporate. One amended). The rationale for terminated through a unilateral employers where they settle the related entities. DTTL and each of its standard response is a review of exempting compensation for loss of termination arising under a process assessment notices are also unable to member firms are legally separate and operating costs. In reviewing such employment under PITA is to shield of redundancy or restructuring of the claw same back from the employees independent entities. DTTL (also referred costs, salaries and wages is one big to as “Deloitte Global”) does not provide an exited employee from double protected by the CBAs because of services to clients. Please see item that never escapes review. Thus, jeopardy and to enable him enjoy what the union can do to the www.deloitte.com/about for a more management's decision to downsize some measure of relief from the business. detailed description of DTTL and its usually trigger payment of severance burden of tax on the compensation …one key to revenue member firms. benefits. Severance package are received. It amounts to an abuse of the CBA framework to incorporate and sustain Akintola Williams Deloitte a member firm benefits which an employee receives growth is tax reform of Deloitte Touche Tohmatsu Limited, at the end of an employment. It is Recently, CBAs have included clauses clauses that circumvent the provisions provides audit, tax, consulting, therefore the norm for provisions to which state that the payment of that closes loopholes of the law based on the union's accounting and business process be made for end of service benefits, severance benefit at the time of re- potential to create or trigger solutions, corporate finance and risk be it for redundancy, retirement or negotiation of the CBA “shall be and that is pro- industrial crisis at will. In the final advisory services to public and private resignation of a staff. In most cases, without prejudice to continuity in analysis, in addition to pursuing clients spanning multiple industries. Please visit us at www.deloitte.com/ng the staff may be entitled to service and will not lead to loss of growth… accelerated expansion of the tax net

International capabilities with local delivery.

Oluseye Arowolo Yomi Olugbenro Partner | Tax & Regulatory Services Partner | Tax & Regulatory Services [email protected] [email protected]

© 2016. For information, contact Akintola Williams Deloitte. The reduced WHT rate is stated to apply to companies involved in “all aspects of building, construction and 5 related activities…“. Does this rate therefore have 3 effect to such

activities? by

companies?1.1 Column 3 Paragraphin both 1 non-oilLine 1: delete and “/” in frontoil of & “appears” gas?1.2 sectors?Column 3 Paragraph 1 Line 8: insert “in” in front of “involved” ?1.3 Make the 2nd pull out the 1st and make the 1st pull out the 2nd and complete that 2 sentence rather than using The reduced WHT

4 rate is stated to apply to companies 1 There is a very urgent involved in “all 2 need for intervention 3

to clarify the apparent aspects of building, 4 ambiguity and construction and 5 uncertainty around the related activities…“. application of the WHT (Amendment) Does this rate Regulations. This is therefore have because of the ever effect to such present possibility in activities by which taxpayers companies in both become exposed to additional liability that non-oil and oil & crystallises by way of gas sectors? assessment raised by the RTAs following any tax audit or investigation exercises where they determine ?as well as appreciate that the taxpayer had how critical it is for erroneously applied an MNE to be able the wrong rate; in this to monitor finance function, human case, the 2.5%. resources function, marketing function etc across multiple jurisdictions including Nigeria from a central point or that this is at a cost

International capabilities with local delivery.

Oluseye Arowolo Fatai Folarin Partner | Tax & Regulatory Services Lead Partner | Tax & Regulatory Services [email protected] [email protected] © 2015. For information, contact Akintola Williams Deloitte