FIRS Can Collect VAT from Lagos Hotel Owners, Appeal Court Rules

The Court of Appeal sitting in Lagos has upheld the appeal filed by the Federal Inland Revenue Service (FIRS), against the Lagos Hotel Owners Association of Nigeria.
The court set aside the Federal High Court judgment in favour of the Lagos Hotel Owners Association of Nigeria.

Justice Rilwanu Aikawa of the Federal High Court on October 3, 2019, declared that the FIRS lacked the powers to collect VAT from the association’s members.
In 2009, the Lagos State Government enacted the Hotel Occupancy and Restaurant Consumption Law of Lagos State (Consumption Tax Law).
The Consumption Tax Law imposes a Consumption Tax of five per cent on the value of goods and services consumed in hotels, restaurants and event centres within Lagos State.
Thus, consumers of goods and services in hotels, restaurants and event centres suffer both Consumption Tax and VAT on the same tax base, amounting to double taxation.
Following this development, the Registered Trustees of Hotel Owners and Managers Association of Lagos (HOMA) sued the AG in Lagos State and FIRS in suit No. FHC/L/CS/360/2018.

The association sought a declaration that the Consumption Tax Law of Lagos State was inoperable and of no effect, because the VAT Act has fully covered the field on the subject of Consumption Tax.
The lower court presided over by Justice Rilwanu Aikawa ruled in favour of the Lagos State Government upholding the powers of the state government to charge and collect Consumption Tax.
In reaching this decision, the court relied on the 1999 Constitution and held that Consumption Tax on goods and services consumed in hotels, restaurants and event centres is a residual matter, which is within the exclusive legislative competence of a state government.
The lower court upheld the powers of the Lagos State Government to charge and collect Consumption Tax from hotels, restaurants and event centres within the state.

It also restrained the federal government from collecting VAT on goods consumed in hotels, restaurants and event centres.
According to the court, Consumption Tax on hotels, restaurants and event centres is in the purview of the state government based on the 1999 Constitution and the Taxes and Levies (Approved List for Collection) Act (Taxes and Levies Act).
It said the provisions of the VAT Act in respect of the consumption of goods and services in hotels, restaurants and event centres are inconsistent with the Constitution and the Taxes and Levies Act and are therefore void.

The court further held that under the Taxes and Levies Act, Consumption Tax arising from transactions involving the sale of goods and services in hotels, restaurants or event centres is to be collected by the state government.
The court also stated that since the Taxes and Levies Act (as amended in 2015) was enacted after the VAT Act of 1993, its provisions have tacitly repealed any provisions of the VAT Act concerning hotels, restaurants and event centres and should thus prevail.
It, therefore, restrained the FIRS from collecting VAT on transactions relating to the consumption of goods and services in hotels, restaurants and event places in Lagos.

Displeased with the verdict, FIRS proceeded to the Court of Appeal and subsequently secured a stay of execution pending the outcome of the appeal filed.
But in a judgment on Friday, the appellate court set aside the Federal High Court’s judgment. It also struck out a counter-claim filed by the Lagos State Government against the FIRS.
However, there is also an ongoing legal tussle between FIRS and some state governments on the issue of VAT collection.
But no date has been fixed for the hearing of the case at the Supreme Court.

Wale Igbitade

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