[WATCH OUT] FG, States Approves Hotel & Restaurant Tax, Parking Permit and Other Levies


The Government in May without much fanfare gazette an approved list of taxes and levies collectible by the three tiers of Government. The Schedule to the Taxes and Levies (Approved List for Collection) Act was amended in an official gazette issued in May 2015 by the Finance Minister. The new Order amends the existing list of taxes and levies to be collected by the three tiers of government and seeks to harmonise tax collection between the state and local governments. The changes are effective from 26 May 2015.

A PWC Tax Alert obtained by Nairametrics details the entire amendments showing which taxes belongs to which tier of government attempting to eliminate confusion and cases of multiple taxation.

The key tax that catches our attention is the Consumption tax which the Federal Government has now ceded to States. The controversial hotel, restaurant or event center consumption tax that was introduced by Lagos State a few years back is perhaps now going to give other states latitude to charge similar taxes especially as they all look for means to drive revenue.

Here are the significant amendments.

  1. Inclusion of the National Information Technology Development (NITDA) Levy. This is collectable by the Federal Government.
  2. States can now fix urban and rural areas business premises registration fees
  3. Addition of 14 items to the list of taxes and levies that can be collected by state governments. This includes the controversial hotel, restaurant or event center consumption tax that was introduced by Lagos State (See Section 3(b) of the amendment Act). It is important to note that these additional taxes and levies give discerning States more latitude to increase tax revenue within the ambit of the amended act.
  4. LGAs can now collect Wharf Landing charge.
  5. The Joint Tax Board (JTB) is to advise the minister of finance on the amounts of taxes and levies payable and review of rates from time to time in accordance with prevailing economic circumstances.
  6. Harmonization among States and LGAs in respect of some taxes and levies.
  7. Single inter-state road sticker, haulage fees and parking permits. This should minimize the harassment of motorists and traders that ply interstate roads.
  8. States can collect Wharf Landing fee and share same with the LGAs.

According to PWC, There are constitutional and administrative issues arising from the amendment to the Schedule.

First, it is instructive to note that the minister’s power of amendment is limited to the Schedule. Consequently, the minister cannot by Order impose or enact tax laws. Therefore, taxes or levies introduced by the Amendment must be duly enacted by the relevant law making authorities in order for them to have effect.

Nigeria’s Constitution divides legislative powers among the three tiers of government. Items listed in the Exclusive Legislative List are reserved solely for the federal government. Although “mines and minerals”, “maritime shipping and navigation” are on the Exclusive Legislative List, the Amendment has included mining, milling and quarrying, and wharf landing charge under Part II and Part III of the Schedule which relate to taxes collected by the state and local governments respectively.

Also, the Fourth Schedule of the Constitution states the functions of the Local Government Councils to include: establishment, maintenance and regulation of slaughter houses, slaughter slabs, markets, motor parks and public convenience, control and regulation of regulation of restaurants, bakeries and other places for sale of food to the public.

The Amendment has however included taxes and levies related to some of these items as being collectible by the state governments leading to a duplication of taxes and levies such as “slaughter slab fees” and “domestic animal licence fees”. In a decided case1 the Nigerian Supreme Court held that items that are not in the Exclusive and Concurrent List are residual matters, which lie within the competence and ambit of the State House of Assembly.

Based on the principles laid down in the Supreme Court’s decision above, it is unclear whether an imposition of taxes, charges or levies by the state government on residual matters should override any imposition by the local government given that the Constitution grants certain legislative powers to the local governments.

Get the PWC Tax Alert here

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