Appeal Court Voids Judgment Against FIRS’ Collection Of VAT From Lagos Hotels

The Lagos Division of the Court of Appeal has set aside the judgment of the Federal High Court which barred the Federal Inland Revenue Service (FIRS) from collecting Value Added Tax (VAT) from the Lagos Hotel Owners Association of Nigeria.

Justice Rilwanu Aikawa of the lower court had declared that the FIRS lacked the power to collect VAT from the association’s members.

The judge upheld the powers of the Lagos State government to charge and collect Consumption Tax from hotels, restaurants and event centres within the state.

The Lagos State government had in 2009 enacted the Hotel Occupancy and Restaurant Consumption Law of Lagos State (Consumption Tax Law).

The 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 Lagos State Attorneys-General and FIRS in suit No. FHC/L/CS/360/2018.

The association had asked the court for 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.

Justice Aikawa ruled in favour of the Lagos State Government upholding the powers of the state government to charge and collect Consumption Tax.

The judge also restrained the Federal Government from collecting VAT on goods consumed in hotels, restaurants and event centres.

Not satisfied with the verdict, FIRS proceeded to the Court of Appeal and subsequently secured a stay of execution pending the outcome of the appeal filed.