November 21, 2019

Justice Rilwanu Aikawa of the Federal High Court in Lagos has barred the Federal Inland Revenue Services (FIRS), from enforcing VAT provisions on goods and services consumed in hotels, restaurants and event centres in Lagos State. Justice Aikawa gave the order while delivering judgment in the suit seeking to restrain the Attorney General (AG) of Lagos State from enforcing the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations Law (HORC), 2017, in the view that VAT Act has covered the field.       In the suit, the Registered Trustees of Hotel Owners and Managers Association of Lagos (HOMA) had sued the AG in Lagos State and FIRS in the suit no. FHC/L/CS/360/2018. The HOMA had asked the court to declare that by virtue of Section 7, of the VAT Act, the second defendant (FIRS) was the only lawful and constitutional agency charged with the administration and management of consumption tax generally and particularly in Lagos state. Justice Aikawa, in delivering the judgment, dismissed the suit and held that it was lacking in merit, adding that the plaintiff was obliged to comply with the HORC Law 2009 and the HORC Regulations 2017. The court also raised two issues by herself; whether the Federal High Court had the jurisdiction to pronounce on the constitutionality of VAT. The court resolved that it has jurisdiction. Aikawa also held that the issue of the powers of the minister to amend the schedule to the Taxes and Levies (Approved List for Collection) Act was not in dispute before the court and so no pronouncement could be made on it. The court in dismissing the originating summons, as lacking merit and resolving the questions and reliefs sought in favour of the first defendant, held: “That consumption tax is not stated in either the exclusive and concurrent legislative list, in the Constitution of Nigeria, therefore, the absence on the concurrent and exclusive lists, puts consumption tax on the residual list, which is within the legislative competence and powers of state governments. “That VAT Act can’t cover the field over what the federal government has no power to legislate upon, under the constitution, therefore the determinant factor in the issue of covering the field, is whether there is the power to make the Law. “The provisions of VAT Act relating to consumption tax are inconsistent with the Nigerian constitution. “The Minister of Finance has corrected the anomaly, by including consumption tax in the list of taxes collectible by the state government, therefore, the responsibility for collecting consumption tax lies on the state government. “The provisions of Sections 1, 2, 4, 5 & 12 of VAT Act are in breech of the 1999 constitution and the plaintiffs are obliged to comply with the HORC Law 2009 and the HORC Regulations 2017. “FIRS are barred from enforcing VAT provisions as it relates to a consumption tax on goods and services consumed in Hotels, Restaurants and Event Centres in Lagos State, ” the judgment read. The News Agency of Nigeria (NAN) reports that the Registered Trustees of HOMA had filed an originating summons asking the court to determine the following: “Whether the VAT Act regulating the 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 restaurants in Lagos State. “Whether by virtue of Section 7 of the VAT Act, the second defendant (FIRS) is not the only lawful and constitutional agency charged with the administration and management of consumption tax generally and particularly in Lagos State. “Whether the provisions of the Hotel Occupancy and Restaurant Consumption (Fiscalization) Regulations 2017 are of no effect, in view of the fact that VAT Act has covered the field”. Consequently, the first defendant, (AG Lagos State), filed a counter-claim urging the court to determine; “Whether the provisions of Sections 1, 2, 4, 5 & 12 of VAT Act by which the FIRS imposes tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State is inconsistent with the provisions of Sections 4(2), 4(a) & (b) and 4 (7) (a) & (b) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and therefore unconstitutional and invalid? “Whether by the provisions of Section 4 (7) of the 1999 Constitution of Nigeria, the provisions of the Taxes and Levies (Approved List for Collection) Act Cap T2 Laws of the Federation of Nigeria as amended by the Schedule to the Taxes and Levies order 2015) and the provisions of HORC Law 2009. “Whether the counter-claimant is the only constitutional and lawful body empowered to assess, impose and collect taxes from customers of the Plaintiff for goods and services consumed in hotels, restaurants and event centres in Lagos State.   Source: Guardian

Financial analysts have described the proposed Communication Service Tax Bill as a misadventure and would only serve to overburden consumers who already bear 5.0% Value Added Tax (VAT) on telecommunications services. The 2016 version which failed, was meant to help boost government revenues from non-oil taxes in the wake of the collapse in oil prices between 2014 and 2016. The 2019 version of the bill passed the first reading in the Senate last week and it proposes a 9.0% Communication Service Tax (CST) to replace the planned increase in VAT from 5.0% to 7.5% by the FG.        The CST when passed into law will be levied on the consumers of voice calls, MMS, SMS, data usage and Pay per View TV services provided by mobile telecommunication and internet service providers. Failure of telecommunication companies to file returns attracts N50,000 and N10,000 fines daily until compliance while non-remittance of the tax will attract a monthly interest on the unpaid tax at 150.0% of lending rates by commercial banks. However, analysts at Afrinvest posited that the CST would overburden consumers who already bear 5.0% Value Added Tax (VAT) on telecommunications services. They said for the telecommunications sector, the proposed CST worsens the issue of tax multiplicity. In addition to existing taxes, companies would bear increased costs of compliance and lower patronage as consumers react negatively to new taxes. They further argued that with the sector contributing 1.2% to the real GDP growth of 1.9% in Q2:2019, there is the prospect for even slower economic growth. “We do not expect the CST to generate as much as the proposed VAT of 7.5% which we conservatively estimate to bring in additional N545.1 billion as VAT revenue. Revenues from the CST of 9.0% would clearly fall short of the FG’s expected increase in VAT, even without considering the changes to consumer demand and growth in the sector. “We believe the FG’s approach towards taxes could affect economic growth and dampen the investment climate, with negative implications for tax collections,” Afrinvest noted.   Source: Daily trust