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Consume more, pay more tax in Lagos hotels, restaurants

Because the business has provided jobs for people, recorded impressive profit margin and turn over and, most times, make use of public utilities, observers say…

Because the business has provided jobs for people, recorded impressive profit margin and turn over and, most times, make use of public utilities, observers say there is no gain saying the fact that hospitality businesses should be taxed to support the growth and development of the state.

Perhaps, this was what spurred the Lagos State government to introduce Hotel Occupancy and Restaurant Law. The law was assented to by the state governor, Mr Babatunde Fashola in June, last year. It imposes tax on goods and services or items consumed in hotels, event centres and restaurants within the state.

Fashola, who said that the 18-section legislation was people-friendly, with section one imposing tax on any person who paid for any consumable services in any hotels, event centres and others, stated that he sent the bill as an executive one to the State House of Assembly in order to address the nagging issue of double taxation.

He, however said that the law was not applicable to traditional eating joints, such as mama put and other low profile places.

“We shall give due priority to the upgrade of infrastructure and security around hotel facilities and tourists sites. We expect that the attendant boost to economic activity in the tourism and leisure industry will also aid support industry to greater profitability, attract even more visitors to Lagos State and generate even more employment opportunities.

“As a people and as a nation, we have decried relative level of our development and we have compared ourselves with the progress made in other jurisdictions and we have not asked ourselves enough what price other jurisdictions have had to pay for the level of their development. This is one of the things that the law seeks to promote and develop, to do some of those things that are done in other jurisdictions by whose standards we measure ourselves.

Besides, the Special Adviser to the Governor on Taxation, Mr Ade Ipaye, said the law was in order as it conformed with the 1999 Constitution.

He explained that the sales and consumption taxes were the exclusive preserve of the State House of Assembly.

According to him, this power had been accordingly exercised in Lagos State when the Hotel Occupancy Law and Restaurant Consumption Tax Law were passed. But stakeholders in the state had expressed mixed reaction to the nine months law.

According to a tax expert, Mr Taiye Babajide, the introduction of Hotel Occupancy and Restaurant Law by the state government was a right step in the right direction and did not tantamount to double taxation in the real sense of it.

“This is tax that is directed at a specific and defined businesses. Owners of Hotels and bars would not be anyway subjected to other rounds of taxation. That is why the state government categorised it as an executive bill and which was also sent to the state assembly for thorough deliberation before it was assented to by governor Fashola.

“The law is in line with the constitution of the country and would protect the interest of the people in the state. The revenue the state has got from it so far has been used to provide infrastructures you see here and there in the state.”

Also reacting, a lawyer, Tunde Adetayo told our correspondent that the state government did not foul following the introduction of Hotel Occupancy and Restaurant Law. According to him, it was the exclusive preserve of the state to impose sales tax law.

However, Mr Adeoye Emmanuel, a property consultant, said the new law was nothing but an agent of double taxation. He said most of the owners of hotels and bars in the state were already being taxed on source of materials they used in running their business, adding that there should be no reason why the government should continue with the levy.

‘’Even the people who patronize these hotels are being unnecessarily taxed, even though they may have been double taxed by the state and the federal government somewhere.’’

Aligning his position with Emmanuel’s, an hotelier who identified himself as Banji told our correspondent that the  nine months old law was unfavourable to him and some of his colleagues. “You see, we are helpless; we just have to pay the tax. Sometimes we are forced to transfer the liability to our customers, some of whom have device ways of spending little in the hotels in order to escape an aspect of the tax.’’

Banji may have spoken the minds of his colleagues, who under the aegis of Registered Trustees of the Fast Food Confectioners of Nigeria recently sued the state government at the Federal High Court, challenging the validity of the law.

Mass Everest Hotels Limited and Chariot Hotels Limited also filed a similar suit against the Attorney-General of Lagos State and the State Internal Revenue Service (LIRS) at the State High Court, contending that the state government could not validly make the consumption law in view of the provision of section 4(2) and (3) of the Constitution and section 1 of the Taxes and Levies Act. They therefore prayed the court to restrain the government from enforcing the law.

In the verdict of the two cases, the Federal Court presided over by Justice Okechuckwu Okeke restrained the Lagos State government from implementing the law, a position that has already been appealed against, the lower court presided over by Justice Hakeem Oshodi, recently held that the consumption tax law was validly passed by the Lagos State House of Assembly, adding that it was separate and distinguishable from the taxes exclusively reserved to the federal government.

The court also identified that the hotel operators lacked the locus standi to sue because they were agents for collection while the tax was on consumers.

The presiding Judge said: “The tax is limited, and not general. It is not targeted on income or profit or capital gains, but for the use or progression or for the right to the use or possession of any hotel, hotel facility or events centre, or who purchases consumable goods or services in any restaurant whether or not located within a hotel in the state.”

Besides, it seems some hoteliers are already pitching their tents with the new law and willing to ensure that it succeeds.

For instance, recently some sanctioned hotelier in Lagos metropolis threatened to sue their executive members over misleading information on the five per cent consumption tax levies. Some of them who reacted during the closure of their hotels expressed dismay over the executive attitudes of misleading members not to pay their tax to the state.

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