INTRODUCTION
This write-up is premised on the demand made for payment of VAT by the Federal Government which is currently charged on goods and services (except those exempted) purchased by a consumer at the rate of 7.5% of the total sales and the demand by State Governments for consumption taxes (called by various names) on goods and services purchased by a consumer at the rate stipulated in the law and charged on the total sales to such consumer. The major question that calls for concern is whether these demands amount to double taxation and whether Companies are obliged to accede to the demand of both taxing authorities.
Highlighted below is a table of consumption taxes which are imposed by some of the State Governments and which are payable in addition to VAT. Also highlighted in the table are comments on the status of some of these laws for which further elaboration will be given elsewhere in this write-up.
VAT on the other hand is imposed at the rate of 7.5% on the cost of all vatable goods and services which if applied to hotels and restaurants will mean goods and services consumed in these organisations.
This question as to who is to collect VAT or consumption tax has been a subject of debate as far back as 1979 and has continued till date, largely due to the interpretation of the provisions of the Constitution, the most recent of which is the case of AG Rivers State v. FIRS & AG Fed.
|
State |
Law imposing consumption tax |
Summary of the provisions of respective state laws |
Comments |
|---|---|---|---|
|
Oyo |
Oyo State Hotels Occupancy and Restaurant Consumption Law, 2021 |
Imposes 5% tax on the total amount payable by a consumer (excluding VAT) on goods and services provided in hotels, restaurants, and event centres |
|
|
Abuja |
Entertainment Tax Act, Laws of the FCT 2007 and Entertainment Fees Regulations 2014 |
Imposes a 5% entertainment fee on the total bill or invoice (excluding VAT) on goods and services provided in a hospitality or leisure establishment in the FCT |
Invalidated by the FCT High court in earlier suits but validated by the Court of Appeal in Hon Minister of FCT & Anor v. Olayinka Oyelami Hotels Ltd (2017) LPELR-42876 (CA) |
|
Ogun |
Event Centres Occupancy and Restaurant Consumption Law (2011) |
Imposes 5% tax on foods and drinks consumed in hotels, restaurants, bars and event |
|
|
Rivers |
Hotel Occupancy and Restaurant Consumption Law, 2016 |
Imposes a tax of 4% of the total bill issued to the consumer (excluding Value Added Tax) in respect of goods and services consumed in hotels, restaurants and event centres within the state |
|
|
Cross Rivers |
Cross River State Tourism Development Levy Law, 2017 |
Imposes a tax of 5% of the total consumption of goods and services by a consumer in the hospitality section |
|
|
Delta State |
Delta State Hotel Occupancy, Restaurant and Departmental Stores Consumption Tax Act, 2017 |
Imposes a tax of 5% of the total bill issued to a consumer for goods and services provided in any restaurant, hotel, hotel facility, event centre, departmental store or supermarket in the state |
Has been challenged by the citizen with a general refusal to comply |
|
Edo state |
Hotels and Event Centres Occupancy and Restaurants Consumption Law of Edo State 2011 |
Imposes a tax of 5% of the total bill issued to a consumer for goods and services provided in any restaurant, hotel, hotel facility or event centre in the state |
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|
Kano State |
Section 96 and 97, Kano State Revenue Administration (amendment law) 2017 |
The said sections impose consumption taxes at the rate of 5% of the total cost of goods and services bought by or supplied to consumers in hotels, restaurants, eateries, bakeries, takeaway, suya spot, shopping mall, stores, event centres and other similar businesses |
Has been rendered null and void in Nigeria Employers Consultative Association (NECA) and Retail Supermarkets Nigeria Limited v. Kano SIRS |
|
Ondo State |
Ondo State Revenue Administration Law, 2018 |
The law imposes a tax at the rate of 5% of the total bill issued to the Consumer (excluding VAT) for the use or possession of any hotel, hotel facility or event centre or for purchase of consumable goods or services in any restaurant whether or not located within a hotel. |
|
|
Lagos |
Hotel Occupancy and Restaurant Consumption Law, 2009 |
The law imposes a tax at the rate of 5% of the total bill issued to the Consumer (excluding VAT) for the use or possession of any hotel, hotel facility or event centre or for purchase of consumable goods or services in any restaurant. |
Was upheld in Mas Everest Hotels Limited v. AG Lagos (2010) 2 TLRN 1; and HOMAL v. AG Lagos & FIRS (2019) 47 TLRN 1 to the effect that only the FIRS cannot collect VAT in these organisations. This position has now been set aside on appeal in the HOMAL case and the Courts have upheld FIRS power alone to impose VAT |
|
Enugu State |
Finance Law, Cap 77 Laws of Enugu State, 2004 |
The law imposes 5% tax called Purchase Tax on total bill issued to a customer on sales or services purchased at a hotel, hotel business including guest house, inn, motel, and other similar institutions which provide a boarding, lodging, catering, laundry and other ancillary services; sale of cigar, cigarette, beer, alcoholic drink, soft drinks, etc; laundry services… |
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
