FHC Upholds the Imposition of Consumption Tax in Lagos State

The Federal High Court (FHC or “the Court”), on 3 October 2019, delivered judgement in the case between The Registered Trustees of Hotel Owners and Managers Association of Lagos (RTHMAL) and the Attorney-General of Lagos State and Federal Inland Revenue Service (“the Defendants”). The primary issue for determination was whether the Hotel Occupancy and Restaurant Consumption (HORC) Law and Regulations issued by Lagos State is legal and valid.
The Court ruled that Lagos State has statutory authority to impose consumption tax on hotels and restaurants. Accordingly, the HORC Law and Regulations issued by Lagos State is valid and must be complied with by RTHMAL.
The FHC, relying on the provisions of the Second Schedule to the Constitution of the Federal Republic of Nigeria, stated that consumption tax neither falls under the Exclusive Legislative List nor the Concurrent Legislative List. Rather, it is a residual matter on which States are empowered to legislate. The FHC supported this point by referring to the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015, which includes “Hotel, Restaurant or Event Centre Consumption Tax” as one of the taxes that may be collected by State Governments.
Lastly, the FHC issued an injunction restraining the FIRS from imposing Value Added Tax on goods and services consumed in hotels, restaurants and events centres in Lagos State. The injunction was issued on the premise that Lagos State is the appropriate authority, under the law, to assess such goods and services to consumption tax.