Justice Rilwanu Aikawa of the Federal High Court sitting in Lagos has given a judgment upholding the right of the Lagos State Government to among other things enforce its Hotel Occupancy and Restaurant (fiscalization) Regulations 2017.
The court confirmed that Lagos state has powers to impose consumption taxes and declared sections of the VAT Act as unconstitutional.
The registered Trustees of Hotel Owners and Managers Association of Lagos had filed a suit before the court against the Attorney-General of Lagos and the Federal Inland Revenue Service in a suit delineated FHC/I/CS/360/2018, asking the court to determine whether the VAT Act regulating imposition of tax on consumption of goods and services has not covered the field on taxation of goods and services consumed in hotels, event centres and restaurant in Lagos State.
They also asked the court to determine whether by virtue of Section 7 of the VAT Act, the Federal Inland Revenue Service is not the only lawful and constitutional agency charged with the administration and management of consumption tax generally and particularly in Lagos State and whether the provisions of the Hotel Occupancy and Restaurant Consumption (Fiscalization) Regulations 2017 are inoperable and of no effect in view of the fact that VAT Act has covered the field.
It would 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.
The government had stated then that the automation of the system was introduced to address the high level of under-payment and non-remittance of what is due to government and had reiterated that it was important for all stakeholders to play their part in scaling up taxation being one of the ways government is able to fund its activities and implement projects and policies for the overall benefit of the people.
This regulation was however challenged before the court and was the subject matter of the suit in which Justice Aikawa delivered judgment. The Trustees of the Hotel Owners and Managers Association had through their Originating summons filed by Mr Supo Shasore (SAN) a former Attorney General of Lagos State, 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.
But in his defense, the Attorney General of Lagos State had opposed the suit and had counterclaimed the application, 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 centres in Lagos State.
They also sought the Court’s determination on whether Sections 1,2,4,5 and 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 centres is not inconsistent with sections 4 (2), 4 (a) and (b) as well as 4 (7) (a) and (b) of the 1999 Constitution is not unconstitutional and invalid.
Justice Aikawa in his judgment had dismissed the originating summons and resolved all the questions and reliefs in favour of the Lagos State Government by holding that consumption tax is not stated in either the exclusive and concurrent legislative list in the Constitution of Nigeria and the absence on the concurrent and exclusive lists, puts consumption tax on the residual list which is within the legislative competence of State Governments.
He also held that the VAT Act can’t cover the field over what the Federal Government has no power to legislate upon under the constitution and that the determinant factor in the issue of covering the field is whether there is a power to make the Law.
The court also held that the provisions of VAT Act relating to consumption tax are inconsistent with the Nigerian constitution and the Minister of Finance has corrected the anomaly by including consumption tax in the list of taxes collectable by State Government, holding that the responsibility for collecting consumption tax lies on the State Government.
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