NIGERIAN FOREIGN BASED PROFESSIONALS RUSH BACK HOME FOR JOBS

At about this time last year, the average American based Nigerian professional would not give much thought to a proposition for him to come back to Nigeria and pick up a job. The scenario has, however, changed over the last six months. With massive jobs losses arising from an inclement economic storm that suddenly came upon countries in the highest hierarchy of development, foreign based Nigerian professionals are now becoming more receptive to overtures made to them by Nigerian companies to come back home to work.

The option to come back home has actually been embraced by these foreign based Nigerian that have become victims of massive layoffs in the United States of America especially or are being threatened to be laid off.

The job loss statistics don’t seem to favour Nigerians, the Labour Department had announced that this past October was the tenth straight month of job losses with another 240,000 lost in the preceding month.

Companies that once were the stars of the business firmament were losing their shines and declaring losses. Citigroup announced last month it cut 11,000 jobs in the third quarter, bringing the total number of job cuts in 2008 to 23,000. According to Bloomberg, Citigroup aims to shrink its workforce to about 290,000 employees by next year from 352,000 as of Sept. 30.

Fidelity and Mattel have also announced 1,300 and 1,000 job cuts, respectively just as Ford had said it would cut its North American salaried workforce by an additional 10 percent. General Motors Corp., has also reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles, bringing the number of failures of federally insured banks this year to 19. DHL has also said it would significantly reduce its air and ground operations in the United States and cut 9,500 jobs within the country

Still, the Labor Department’s unemployment report provided stark evidence that the economy’s health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.

About 10.1 million people were unemployed in October, the most since the fall of 1983. With employers slashing jobs every month so far this year, some 1.2 million positions have disappeared, over half in the past three months alone. Factories, including auto makers, construction companies, especially home builders, retailers, mortgage bankers, securities firms, hotels and motels and educational services, all cut jobs. Private companies cut 263,000 jobs, the most since the country was beginning to emerge from the 2001 recession. It marked the 11th straight month of such reductions.

All the economy’s woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market may have set a new tone for Nigeria’s gain as some banks and other corporate organizations feverishly woo the foreign based Nigerian professionals.

Just last week, one of the many foreign based that are taking positions in Nigerian banks and other companies resumed at a new generation bank head office in Lagos. He had opted out of Arthur Anderson’s Illinois office for the new job in Nigeria. His reasoning is that business was shrinking for the audit practice of the company because most of the companies on the audit list of Arthur Anderson were more or less folding up.

Another returnee told FORTUNE&CLASS that there is a resurgence of hope in the economic development of Nigeria in the rank and file of Nigerian communities abroad. For this returnee, like another one that spoke with FORTUNE&CLASS the remuneration offered foreign based Nigerian professional to move back to the country are quite better than what their total package in the USA for instance.

Another attraction for Nigerian based foreign professional to start heading back home is the contemplation of his freedom to interact with his or her kith and kinsmen back home in Nigeria.

CHURCHES, MOSQUES, NGOs TO START PAYING TAXES FROM NEXT YEAR

The tax exemption status of religion based organizations and non government organisations are to be reviewed to align with international standards. This, according to a source in the Presidency, is to appropriately integrate otherwise tax exempt organizations into the taxable entities mainstream so as to drive the new impetus to fund the growth of the national economy from non oil revenue.

In line with this new thinking, the source informed that the Presidency has given its backing to the Nigeria Accounting Standard Board to evolve accounting standards that will serve as framework for tax exempt organizations to file their accounts and to be able to delineate which of their income is taxable from next year.

“The government does not intend to tax the income of churches, mosques or non-governmental organization or any other organization that naturally enjoys tax exemption status. The law is clear on the exemption status of such organizations. What the government has decided to do is to streamline income made in the furtherance of charitable activities of the tax exempt organizations and remove it from income made from what is known universally as unrelated business income,” the source said   

“So many religious organizations have, in fact, transformed into profit earning business enterprises and it is just proper that they are properly assessed for the purpose of taxation under the unrelated business income tax (UBIT),” the source argued. “These organizations are involved in various types of commercial activities, such as operating publishing houses, hotels, factories, radio and TV stations, parking lots, newspapers, bakeries, and restaurants. The Tax Reform will make income derived by churches from unrelated trade or business subject to tax.”

Another source at the Nigeria Accounting Standard Board argued the justification for taxing the unrelated business income of tax exempt organisations

The problem at which the tax on unrelated business income is directed is primarily that of unfair competition. The tax-free status of religion based organizations and NGOs enables them to use their profits tax-free to expand operations, while their competitors can expand only with the profits remaining after taxes. Also, a number of examples have arisen where these organizations have, in effect, used their tax exemptions to buy an ordinary business. That is, they have acquired the business with little or no investment on their own part and paid for it in instalments out of subsequent earnings – a procedure which usually could not be followed if the business were taxable. The idea is to impose the same tax on income derived from an unrelated trade or business as is borne by their competitors. It is, however, not intended that the tax imposed on unrelated business income will have any effect on the tax-exempt status of any organization,” the source explained.

The United States of America’s Internal Revenue Service Code, the template, which the NASB, is likely to adapt in its accounting standard to effect taxation of unrelated business income of affected organizations from next year, explains that churches and religious organizations, like other tax-exempt organizations, may engage in income-producing activities unrelated to their tax-exempt purposes, as long as the unrelated activities are not a substantial part of the organization’s activities. However, the net income from such activities will be subject to the UBIT if the following three conditions are met:

•                      the activity constitutes a trade or business,

•                      the trade or business is regularly carried on, and

•                      the trade or business is not substantially related to the organization’s exempt purpose. (The fact that the organization uses the income to further its charitable or religious purposes does not make the activity substantially related to its exempt purposes.)

 

Exceptions to Unrelated Business Income Tax

Even if an activity meets the above three criteria, the income may not be subject to tax if it meets one of the following exceptions: (a) substantially all of the work in operating the trade or business is performed by volunteers; (b) the activity is conducted by the organization primarily for the convenience of its members; or (c) the trade or business involves the selling of merchandise substantially all of which was donated.

In general, rents from real property, royalties, capital gains, and interest and dividends are not subject to the unrelated business income tax unless financed with borrowed money.

 

The code also provides examples of Unrelated Trade or Business Activities:  Unrelated trade or business activities vary depending on types of activities, as shown below.

Advertising

Many tax-exempt organizations sell advertising in their publications or other forms of public communication. Generally, income from the sale of advertising is unrelated trade or business income. This may include the sale of advertising space in weekly bulletins, magazines or journals, or on church or religious organization Web sites.

 

Sale of merchandise and publications

The sale of merchandise and publications (including the actual publication of materials) can be considered the conduct of an unrelated trade or business if the items involved do not have a substantial relationship to the exempt purposes of the organization.

 

 Rental income

Generally, income derived from the rental of real property and incidental personal property is excluded from unrelated business income. However, there are certain situations in which rental income may be unrelated business taxable income:

•                      if a church rents out property on which there is debt outstanding (for example, a mortgage note), the rental income may constitute unrelated debt-financed income subject to UBIT. (However, if a church or convention or association of churches acquires debt-financed land for use in its exempt purposes within 15 years of the time of acquisition, then income from the rental of the land may not constitute unrelated business income.),

•                      if personal services are rendered in connection with the rental, then the income may be unrelated business taxable income, or

•                      if a church charges for the use of the parking lot, the income may be unrelated business taxable income.

 

Parking lots

If a church owns a parking lot that is used by church members and visitors while attending church services, any parking fee paid to the church would not be subject to UBIT. However, if a church operates a parking lot that is used by members of the general public, parking fees would be taxable, as this activity would not be substantially related to the church’s exempt purpose, and parking fees are not treated as rent from real property. If the church enters into a lease with a third party who operates the church’s parking lot and pays rent to the church, such payments would not be subject to tax, as they would constitute rent from real property.

Whether an income-producing activity is an unrelated trade or business activity depends on all the facts and circumstances.