In a landmark judgment, a Federal High Court sitting in Lagos has mandated that all hotels, restaurants and relaxation centers must henceforth remit consumption tax to the coffers of the Lagos State government.
In the judgment delivered by Justice Aikwa J, the Court dismissed the originating summons and resolved all the questions and reliefs in favor of the Lagos State Government.
Delivering the judgment, Aikwa held that consumption tax is not stated in either the exclusive and concurrent legislative list in the Constitution of Nigeria. As a result, the absence of consumption tax on the concurrent and exclusive lists puts it on the residual list which is within the legislative competence of State Governments.
The court further held that the provisions of the Value Added Tax, VAT Act relating to consumption tax are inconsistent with the Nigerian constitution. As such, the Minister of Finance has corrected the anomaly by including consumption tax in the list of taxes collectible by State Government. Thus, the responsibility for collecting consumption tax lies on the State Government.
As a result, the court held that the plaintiff in this case the hoteliers are obliged to comply with the HORC Law 2009 and HORC Regulations 2017 and therefore barred the Federal Inland Revenue Services, FIRS from enforcing VAT provisions as it relates to consumption tax on goods and services consumed in Hotels, Restaurants and Event Centres in Lagos State.
It will be recalled that in its attempt to boost the internally generated revenue of the State Government, former Governor Akinwunmi Ambode had issued regulations to ensure greater transparency of Hotels and restaurants in reporting collection of consumption taxes on the premises.
Challenging the directive, the Hotel Owners had initiated a court case against the Lagos state government. Mr. Supo Shasore, SAN, a former Attorney General of Lagos State on behalf of the hoteliers had sought to nullify the regulations on grounds that the FIRS was already imposing VAT and was the only authorized body to impose consumption taxes in any guise. They also argued that the Fiscalization regulations were inoperable and unconstitutional as VAT had covered the field.
Attorney General of Lagos State had opposed the suit and had counterclaimed contending amongst other things that the only constitutional and lawful body empowered to assess, impose and collect tax from customers of the Plaintiff for goods and services consumed in hotels, restaurant and event centers in Lagos State. They also sought the Court’s determination on whether Sections 1,2,4,5 & 12 of the VAT Act by which the FIRS has been imposing tax on customers for goods and services consumed in hotels, restaurants and event centers is not inconsistent with sections 4(2), 4(a)&(b) and 4(7)(a)&(b) of the 1999 Constitution is not unconstitutional and invalid.
However, on Friday 3rd October 2019 the Federal High Court sitting in Lagos delivered a landmark judgment upholding the right of the Lagos State Government to among other things enforce its Hotel Occupancy and Restaurant in the case which commenced during the administration of former Governor Akinwunmi Ambode.
