Lagos State Internal Revenue Service (LIRS) has implored owners of hotels, restaurants, and event centres in the state to ensure contribution to the development of Lagos through prioritization of the monthly collection and remittance of 5 percent consumption tax on personal services and all consumables. The Hotel Occupancy and Restaurant Consumption Law, also known as “Hotel Consumption Law”, was enacted by the Lagos government on June 22, 2009. It imposes a 5 percent consumption tax on the value of goods and services consumed in restaurants, hotels and event centres across the state.
The tax base is usually the aggregate cost of consumables, facilities or personal services by, in or on behalf of the restaurant, hotel or event centre. In a speech, the Director of New Growth, LIRS, Jimi Aina, said that the consumption tax is the major source of revenue for the government of Lagos. The funds gotten from the revenue is used for the provision of public amenities and services which include healthcare, transportation, education, and security.
Consumers who buy taxable goods and services pay the tax.
Therefore, owners of hotels, restaurants and event centres have an obligation to ensure registration with the LIRS as collecting agents. Aina added that in contrast to the belief of people concerning consumption tax, there have been no imposition of additional taxes on hotels, restaurants, and event centres by Lagos state. Instead of this, consumers who buy taxable goods and services in the state pay the tax as it has been included in the price of goods and services and is collected by collecting agents on behalf of the state government.
Several people do not understand the idea behind consumption tax as majority thinks it is an extra burden on restaurants and hotels. However, the reverse is the case as customers are the ones who are taxed when they attend events, dine out or even have drinks at a bar. Through payment of the tax rate of five percent, consumers are able to partake in the development and maintenance of the amenities and services they benefit from. Section 1 of the Lagos State Consumption Tax Law states that the tax is charged and payable by the consumer.
Collecting agents are responsible for collecting taxes from consumers.
Resultantly, consumers in Lagos State who purchase taxable goods and services within the state have the responsibility of paying the tax. It is added to the price of the goods and services and paid to the collecting agent for the government. Aina added that although the collecting agents are saddled with the responsibility of collecting taxes from consumers, to remit to the LIRS, the deadline for remittance is likewise important. He stated that the remittances have to be made on the 20th day of the month after the collection month, and not later.
Furthermore, Aina highlighted that there are legal implications attached to non-remittances by collecting agents who refuse to deliver the tax collected from consumers to the LIRS within the stipulated time. Any collecting agent that fails to remit collected tax within the given time will pay a 10 percent penalty of the amount that was not remitted and over 5 percent of the prevailing Monetary Policy Rate of the CBN of Nigeria. Additional penalties may also include prosecution and closure of business.
All collecting agents keep and maintain books on chargeable transactions.
Additionally, the LIRS ensures that the monthly filing of returns on sales is followed by a report that states the aggregate amount of payments of every chargeable transaction during the preceding reporting period. Through this, all collecting agents are expected to ensure safe-keeping, maintenance and preservation of books, records and accounts that concern all chargeable transactions under the Law as they — hotels, restaurants, event centres and other businesses — are affected by the law, and are expected to register with LIRS, keeping records of evidence of registration as collecting agents.