“We don’t pay taxes. Only the little people pay taxes.” This was the assertion of Leona Helmsley, one of the richest Americans, who made national news in 1989 when she was sentenced to 18 months in prison for mail fraud and tax evasion.

As if in opposition to the millionaire, the Lagos State Internal Revenue Service (LIRS) imposed consumption taxes on those who patronize hotels and restaurants on the premise that if such classes of people are so rich that they can afford to enjoy the costly services of the hotels, they can pay 5 per cent to the state government as tax.

This has generated a lot of controversies as business owners especially hoteliers, accused the government of imposing multiple taxes on people and businesses; especially through the introduction of CT, an action that prompted them to sue the state government.

The state tries to refute the allegation, using various media. Defending the position of the state government in imposing Consumption Tax (CT) on hotels and events centre in Lagos, the Chairman of the State Internal Revenue Service (LIRS), Mr. Babatunde Fowler, said: “In Lagos State, we do not have cases of multiple taxation. The consumption tax is not to be paid by the owner of a hotel or event centre. It is those who go to patronise the business that pays 5 per cent.”

The president of the Lagos Hoteliers Association Mr. Francis Odunuga, described the CT as an additional burden to hoteliers, listing 11 other payments that his members pay to the tiers of government. Some of these, he said, included: the Value Added Tax; parking permits, personal income tax by employees of members of the association; tenement rate and Land Use charge on business premises, fire safety service fee; food handlers’ permit, fumigation permit; advertisement permits as well as payments to the Nigeria Tourism Development Corporation (NTDC).

However, in spite of a Federal High Court interlocutory injunction that restrains LASG or its agents from disturbing or intimidating the operators, LASG went ahead and sealed up the premise of about 20 hotels recently. In the heat of this battle of supremacy, the LIRS chairman seized the opportunity offered to him at the March breakfast forum organised by the Nigerian South African Chamber of Commerce in Lagos, to refute the allegation of double taxation and explain the burden of consumption tax. Fowler reiterated that LASG does not charge multiple taxes, but regretted that user charges or other dues or levies imposed by both legal and illegal authorities, have being called taxes.

For example, Fowler said the state government should not be held accountable for union or association dues. When there was rumour of taxes on mobile phones, LASG investigated and found out that it has nothing to do with the state. He advised that people should request for official receipts, phone numbers and addresses of those they pay taxes to, because impostors parade themselves as tax collectors from state or local governments.

LASG, according to him, have met with all local government chairmen to streamline and reduce the number of taxes chargeable to any one doing business in Lagos state. So, the number of taxes is now less than the number approved by the Federal Government. The consumption tax is the prerogative of state governments under a democratic government. Based on this, the state House of Assembly, passed a bill and made a law for consumption tax to be charged on hotels.

“But the tax is not to be paid by the owner of the hotel or event centre. It is those who go to patronize the business that pays 5 per cent of their charges,” Fowler explained.
This conforms to a ruling held last December by Justice Hakeem Oshodi that consumption law was validly passed by the House of Assembly. And that the law was separate and distinguishable from taxes exclusively reserved for the Federal Government. The court identified that the hotel operators lacked the locus standi to sue, because they were just agents for collection of the tax, while the tax was on consumers. “The payer of the tax is the consumer and it is paid, when they consume the goods and services stated in the law,” Oshodi had stated.

Explaining further, Fowler said that a bottle of coke that cost less than N100 in the open market cost about N400 in a five-star hotel. So if a consumer can afford N400 to buy a bottle of coke and the state government collects 5 per cent of that amount which is extremely minimal, such a consumer will not feel it. After all, the same 5 per cent is often left for the waiter when collecting a balance.

The hotel indirectly has a lot of benefits to get from this, according to the taxman: The Armoured Police Vehicles, the Rapid Response Squard and the policemen kitted with bulletproof vests that provide security for Lagos residents and the hotels in particular, are among the benefits. “If you drive around Lagos, within 400 to 500 yards of any major entertainment centre: be it hotel, restaurant or whatever, you see a police vehicle parked nearby. That’s to make it safe for you and I to go out at night. That gives the hotels additional businesses,” Fowler stated.

He noted that a number of conferences for the last 12 months have been held in the state because of the security situation, infrastructure and the quality of hotels. “So, we believe that this establishment that is getting additional business should be an agent of collection for people, who come to patronise them. We do not believe that if you are that wealthy to lodge in a hotel or buy coke four times the cost outside, 5 per cent would affect your financial wellbeing. It is just a way of spreading it and making sure that everybody around can be taken care of, “he further explained.

Again, when people organise their events like weddings and move around their normal businesses, they need traffic control. The State Traffic Management Agency (LASTMA) does not charge them for traffic control. Neither do the women sweeping the streets or refuse disposers charge anybody.

Yet, the taxman opined, LASG pays them and provides their working materials like vehicles, uniforms, brooms and more. The businesses are getting an additional service and income that is why the hotel occupancy law was put into place.According to Fowler, other benefits that Lagosians get from the taxes they pay are obvious. Roads, schools, hospitals are being renovated and new structures built in all local governments of the state.
Echoing the Speaker, House of Assembly, Fowler said: “If the state government does not look after the man in Ajegunle, the man in Ikoyi equally will not sleep.” This means that if there is no free health care, no school for those that are less-privileged in the areas that the wealthy hardly visits, the people in those areas will go to the wealthy and take what they want by force. “So, in paying your taxes, you are empowering the government to do what it is supposed to do,” he reiterated.

But Odunuga believed that since the matter is in court, the state government should respect the rule of law. “If the court rules that we should pay, then we will sit down, negotiate and pay. The court has restrained them and they should obey the law,” he said.

On the complaints by Lagosians that tax consultants are too many and extort money while doing their assessment. The LIRS helmsman was emphatic that it is against the law for a consultant to do a tax assessment. As the government is pruning down the consultants, none of them is expected to carry out a tax assessment. According to him, “what the consultants do for us is to collect data from you, bring it to our office where we use a computerized system to analyse the data.”

Admitting that consultants sometimes do not add to the integrity of LIRS, Fowler insisted that when such extortionist outfits are found, they are usually blacklisted by the LIRS. He encouraged taxpayers that “you have every right to report a consultant, who does not carry himself in a professional manner.” All the consultants are chartered accountants, or they are members of Chartered Institute of Taxation of Nigeria (CITN), so, their professional bodies could be informed about their professional misconduct.

The taxpayer also have one month by law to object to any high, unrealistic tax liability imposed by assessors and such taxpayer would receive fair hearing if backed by evidence. He said that the use of consultants was prominent because there was inadequate staff in time past. But at present, the LIRS has recruited staff that are under training and will soon be deployed to do what the tax Consultants are doing. “But please, if you are not satisfied with the behavior of our consultants, feel free to write to my office or call me and we will certainly settle the matter,” Fowler pleaded.

Since compliance with certain tax obligation is voluntary, there is an annual award ceremony organised by the state government to make those who are tax complaint special. It is the practice of the state governor to personally present awards to individuals and corporate organisations showing that they are law abiding and tax complaint. Such entities cannot get financial reward because this is a law and this goes a long way to show good corporate governance.

He advised the public to get a booklet containing all the legally approved taxes payable to avoid paying for unapproved taxes that are charged by illegal collectors parading themselves as government tax agents. People should stop giving in to them easily. They may disturb or delay one for an hour or two but the more we give them the more they are encouraged to remain in the streets.

A copy of the law establishing the consumption tax reads in part: “the Lagos State House of Assembly enacts as follows: a tax is imposed on any person (referred to in this law as the consumer) who pays for the use or possession or for the right to the use, possession of any hotel, hotel facility or events center; or purchases consumable goods or services in any restaurant whether or not located within a hotel in Lagos State.
“The amount to which this tax applies shall be the total cost of facilities, consumable or personal services supplied to a consumer, by or on behalf of the hotel, restaurant or events centre.”

Post Reply

Posted: at 8-04-2010 01:50 AM (14 years ago) | Hero

oh.kay

Posted: at 8-04-2010 01:50 AM (14 years ago) | Hero

NEXT TIME BE careful, be very very careful, CAREFULLLLLLLLLLLLLLLL……………………………….

Posted: at 13-04-2016 04:12 PM (8 years ago) | Hero

Reply: