Credits –
The World Travel and
Tourism Council, WTTC, has projected that the travel and tourism industry in
Nigeria would contribute 1.6 per cent directly to the Gross Domestic Product of
the country by 2024, which represents N1.366 billion. The Council also
projected that the travel and tourism industry would support direct employment
to the tune of 1,194,000 employees in the next decade, which represents 1.4 per
cent total employment in the country.
In the wake of the
fall of oil prices which is seriously hitting the country’s financial muscle,
the need to diversify the country’s income cannot be understated. The
enforcementand strict compliance of existing tax laws to generate larger
revenue also cannot be undermined; for example the Iranian government is
earning more from tax than oil as a result of its policy to shift its
traditional reliance on oil money to taxes in the face of plummeting oil prices,
thus the possibility of earning from taxes in Nigeria is important.

The consumption tax
anexisting law which needs to be explored , especially for a commercial state
like Lagos which has an average of 3,000 hotels, one can safely assume that
such a number is a marginal field, unfortunately this has not been thoroughly
explored by the government.
Lagos State Hotel
Licensing Law
Given the enormous
size and even bigger potential of the hospitality and tourism industry, it is
clear why the desire to regulate the industry can be seen as a big deal. For a
long time the industry has been regulated solely by the Nigerian Tourism
Development Corporation (“NTDC”). Lagos State challenged the status quo by
introducing laws to regulate the industry in theState leading to the debate on
the constitutionality of the Lagos State Hotel Licensing Law 2003 (and its
amendment) and the Hotel Occupancy and Restaurant Consumption Law 2009.
The Hotel Licensing
Law and the 2010 amendment established the Lagos State Hotel Licensing
Authority (“LSHLA”) and made other provisions for the licensing of hotels. It
further empowered Lagos State to make laws to regulate, make standardsand grade
tourism operations which was previously under the exclusive preserve of the NTDC.
In the exercise of
its powers to license and regulate hotels, the Lagos State House of Assembly
enacted the Hotel Occupancy and Restaurant Consumption Law. The law imposes a
5% tax on consumption of goods and services in hotels, hotel facilities, events
centres and restaurants.
What the court
The federal
government (before the Supreme Court) challenged the right of Lagos State to
make laws on tourism specifically where the National Assembly had already
legislated on the same issue through the NTDC Act.
The apex court
dismissed the federal government’s suit and delivered its judgment in favour of
Lagos state. It was the view of the court that the NTDC Act went beyond its
powers as stated in the Exclusive Legislative List of the Constitution which is
to regulate “tourist traffic”. This effectively challenged the
constitutionality of the NTDC’s powers to unilaterally regulate and control of
hotels and tourism in Nigeria. The court therefore validated the respective
laws of Lagos State.
However, the judgment
did not address the issue of the imposition of tax and whether or not Lagos
State has the constitutional right to impose consumption tax on hotels,
restaurants and event centres.
Who is liable to
consumption tax?
Section 1 a-b of the Hotel
Occupancy and Restaurant Consumption Law 2009 provides that the tax is imposed
on any consumer who pays for the use or possession of any hotel, hotel facility
or event centres or purchases goods or services in any restaurant whether or
not located within a hotel in Lagos state.
The operators are
therefore mere agents of the government for the purpose of tax remittance. The
Act further provides for penalties and distraining powers on defaulting agents.
Compliance Issues
According to the former
Commissioner for Tourism and Inter-governmental Relations, Mr. Disun Holloway
in early 2015 stated that no fewer than 1000 hotels operate in Lagos without
obtaining license from the Lagos State Licensing Authority.
He further stated
that 1,328 hotels, event centres, bars and restaurants are yet to comply with
the law as opposed to the 1,162 that have complied. This figure which is rising
daily represents more than 60 percent of tourism establishments domiciled
within Lagos.
It is pertinent to
note however, that most hotel operators have expressed complaints about multiple
taxes and charges imposed on them such as consumption tax, value added tax,
company income tax, withholding tax, health certificate, and waste operation
The Way Forward
The government needs an aggressive
approach towards registration of members with theThe Hotel and Personal
Services Employers Association of Nigeria (HOPESEA) to capture more operators into
the tax net.
Adequate and sufficient sensitization
to show that operators are mere government agents.
Tax credits and awards for compliant
Innovation of technology/software that
would automatically deduct  tax due from
the restaurant money machines accounts, which will aid the tax authorities in assessment.
A presumptive income tax system should
be introduced for operators that do not comply with the
systems in place.