August 14, 2020

Validity of Consumption Tax vis-ávis VAT in Nigeria

In an offer to increment inside created income, many State Governments have presented charges on people and exchanges inside their locale. In 2009, Lagos State, sanctioned the Hotel Occupancy and Restaurant Consumption Law of Lagos State (Hotel Consumption Law), which forces utilization charge at 5% on the estimation of merchandise and ventures expended in inns, eateries and occasion focuses inside Lagos State. Kano State additionally sanctioned a comparable law.

The legitimacy of such utilization charges has been a combative issue, particularly given that the Value Added Tax (VAT) gathered by the Federal Government forces a comparative duty on the estimation of supply of products and enterprises all through the Federation. Accordingly, the issue has been a subject of case in various courts and the subsequent decisions have offered ascend to different editorials lately.

This issue was again brought to the fore on 3 October 2019, when the Federal High Court (“FHC”) sitting in Lagos maintained the forces of the Lagos State Government to charge and gather utilization charge from lodgings, cafés and occasion focuses inside the state on account of The Registered Trustees of Hotel Owners and Managers Association of Lagos (Hotel Owners) v Attorney General of Lagos State (Hotel Owners’ Case). Inquisitively, all things considered, the FHC likewise controlled the Federal Government from gathering VAT on products expended in lodgings, eateries and occasion focuses in the State.

This choice has conveyed blended signs to citizens given that in arriving at its choice, the FHC in the Hotel Owners’ case veered off from the thinking of the courts in past choices, for example, on account of Attorney General of Lagos State v Eko Hotels Limited (Eko Hotels Case) where the Supreme Court maintained the assortment of VAT over the recent Lagos State deals charge.

This Article tries to examine the choice of the FHC in the Hotel Owners’ case, its suggestion on past choices and the proceeded with burden of VAT in Nigeria.

Background and Summary of the Hotel Owners’ Case

The VAT Act of 1993 acquainted VAT in Nigeria with force and charge at 5% on the estimation of products and enterprises provided in Nigeria. It is controlled by the Federal Inland Revenue Service and its presentation supplanted the past deals charge which was managed by the States. Income from VAT is shared among the three levels of government in the proportion of 15% to the Federal Government; half to the State Governments and 35% to the Local Governments.

In 2009, the Hotel Consumption Law of Lagos State presented an utilization assessment of 5% on the estimation of merchandise and ventures expended in inns, eateries and occasion focuses inside Lagos State basically oppressing shoppers of products and enterprises in these areas to both utilization duty and VAT on a similar expense base.

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