Hoteliers and owners of other hospitality outfits in Lagos, who were hitherto defaulting in the collection and remittance of the five percent consumption tax, are now forced to do so as a recent law backs stiff penalty for defaulters since February 2018.
With the Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State as amended, hospitality outfits in Lagos are to collect and remit the five percent consumption tax from their customers to the government through the Electronic Revenue Assurance (ERA), courtesy of the Lagos Internal Revenue Service (LIRS).
However, collection and remittance of the tax have witnessed high level of compliance by hospitality businesses across the state since the commencement of the electronic revenue collection in February due to the penalty of up to six months jail or fine of N500,000 for defaulters.
It has exposed the books of most complying hospitality outfits to the LIRS appointed revenue agents through the ERA system, a development most hoteliers fear would give unnecessary access to revenue agents to their financial status and privacy.
Speaking on the impact of the development, Adekunle Oni, a hotelier, noted that hospitality outfits, which are already weighed down by the burden of multiple taxation in the state are forced to pay to remain in business or default and get a jail term.
“We pay 5 percent VAT to Federal Government and also 5 percent Consumption Tax to Lagos State over the same revenue product. Though LIRS insisted that the tax is not on us but on our customers, indirectly it is still on us because it is our guests we charge and the money moves to government through our system”, Oni said.
Modupe Olagunju, owner of a chain of eatery, argued that the law does not take cognizance of the financial state of the hospitality outfits as provision for exemption should be made for ailing hospitality outfits until they come of their financial crisis.
“We have complained of multiple taxation and nobody listens to us, over 50 eateries have closed in Lagos in the last five years yet some get noticed for tax payment. I think government should also encourage us to be in business because these businesses employ the many people government cannot employ in its over bloated workforce”, she said.
But the fear of Nwike Amanze, another hotel owner, is the use of the law to settle personal scores as some people’s businesses may be targeted for not supporting a government project or direction. “We are going into an election year and politicians can use any available tool to their advantage. You can close down a hospitality outfit for failure to remit its consumption tax in the last two months, whereas some outfits have failed to remit for months and are still in business”, Amanze said.
Of course, Ayodele Subair, chairman, LIRS, is impressed with the level of compliance and the impact of new revenue collection system implemented by AV Imperial Technologies Limited alongside its appointed agents.
For him, LIRS is after boosting the revenue drive and generation of the state.
However, the Lagos State Ministry of Tourism, Arts and Culture is further boosting the revenue drive of the state with the current move to regularise the hospitality sector, which is its statutory responsibility.
As at December 2016, the state had 767 registered hospitality outfits, it added additional 153 outfits since then making the total number of registered outfits in the state 920 as at May 2018.
According to Steve Ayorinde, the commissioner for Tourism, Arts and Culture, Lagos State, about 92 hospitality outfits, which have remained recalcitrant and failed to register with the ministry despite several persuasions and issuance notices have been served contravention and final notices.
Speaking on the final notices to the 92 hospitality outfits, Amanze said his hotelier friend is involved and is contemplating turning his 30-room hotel in Ikeja to a residential outfit or private school because of the multiple taxation and most importantly, the strict measures of collecting the taxes now.
“We are all in business to make profit, if the operation cost is far above the profit due to the many taxes, many hotels will be closed down. All we ask is the harmonisation of the taxes in a way that our businesses can survive. Government should bear in mind that it cannot absorb the many staff we will sack when it puts us under pressure to survive with many taxes”, Oni concluded.