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Federal High Court suspends Lagos State Consumption Tax and Fiscalisation Laws

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Introduction

The Federal High Court (FHC) recently issued an Order restraining Lagos State Government (LASG) from enforcing both the Hotel Occupancy and Restaurant Consumption Law (Law) and the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulation (Regulations) pending the hearing and determination of the case.

Background Facts

In January 2018, Lagos State Internal Revenue Service (”LIRS”) issued the Regulations introducing Electronic Fiscal Devices (EFD) to effectively administer Consumption Tax. See our alert here. However, the Registered Trustees of Hotel Owners and Managers challenged the legality of both the Law and Regulations.

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The substance of the suit is that since the Value Added Tax (VAT) contains provisions relating to consumption it had ‘covered the field’ and as such, no State law can impose any similar tax. The questions before the FHC are summarized below:

  1. Whether the VAT Act has not ‘covered the field’ on taxation of goods and services including those consumed in hotels, restaurants and event centres in Lagos State?
  2. Whether the Regulations are valid in view of the VAT Act?
  3. Whether by s. 7(1) of the VAT Act, the Federal Inland Revenue Service (FIRS) is the only agency to administer consumption tax in hotels, restaurants and event centres in Lagos State?

Doctrine of Covering the Field

The Doctrine of ‘Covering the Field’ operates in a federal system like Nigeria where legislative power is shared between the Federal and State governments. It requires that where a federal law regulates an item over which both the Federal and States have shared competence to legislate, then a State cannot introduce any other law inconsistent with the federal law.

Other decisions and legislation

In 2013, the Supreme Court (“SC”) in Attorney General Federation v Attorney General Lagos, when asked to determine who had powers to regulate hotel registration and licensing, held that only States could regulate licensing of hotels (see our alert here.) Though the SC decision was silent on whether Consumption Tax was inconsistent with VAT, it could be inferred that since States can regulate hotels and event centres, they can also impose Consumption Tax in such places.

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In 2015, the Taxes and Levies (Approved List for Collection) Act was amended to include ‘Hotel, Restaurant or Event Centre Consumption Tax’ as one of the taxes which States can impose and collect. Consequently, some States introduced Consumption Taxes to operate alongside VAT.

In December 2017, the Supreme Court in Attorney General of Lagos State v. Eko Hotels Limited & Federal Board of Inland Revenue held that the VAT Act had covered the field of consumption tax as such any similar tax such as Sales Tax would be invalid. The Court also held that Sales Tax would result in double taxation.

Takeaway

The current suit provides an opportunity for the court to determine the constitutionality of Consumption Tax given that, like VAT, it also imposes 5% on some taxable goods and services. Under a federal system, States may claim a right to impose Consumption Tax since the Nigerian Constitution does not give the Federal government exclusive powers to legislate on taxes imposed on hotels, restaurants and event centres.

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It is expected that the dispute would go all the way to the SC given that the Constitution does not vest either the State or Federal Government any exclusive or concurrent power to legislate on consumption tax.

A much earlier decision of the SC in Attorney General of Ogun State v. Aberuagba and Others alluded to the fact that States could be allowed to regulate intra-State trade and commerce provided such regulations do not conflict or interfere with interState trade and commerce.

The implication would be that goods and services consumed within a State would be liable to a State Consumption Tax Law whereas any inter-State consumption or sales should be liable to VAT. Alternatively, VAT could be centrally legislated but administered by states similar to personal income tax. This would address the concerns of double taxation and unfairness in the horizontal distribution of VAT amongst States (currently 50% Equality, 30% Population and 20% Derivation).

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Pending when the FHC Order is reversed or vacated, Lagos state may not impose or enforce the tax.

 

This article was sent in by PwC

Patricia

NM Partners represent articles published in paid partnerships with corporate organisations. They include press releases, targeted content, and other forms of corporate communications on behalf of our Paid Partners.

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Companies

Lafarge Africa Plc. announces its board meeting and closed period for Q2 2020 

The notification which was duly signed by General Counsel & Company Secretary.

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Lafarge Africa

Lafarge Africa Plc. notified the Nigerian Stock Exchange and the investing public that he closed period will commence on Wednesday, 8th July 2020 until the unaudited financial statement for the second quarter ended 30th June 2020, is released to the Nigerian Stock Exchange. 

In a disclosure on the Nigerian Stock Exchange, it wrote: “We hereby notify the Nigerian Stock Exchange and the investing public that a meeting of the Board of Directors of Lafarge Africa Plc has been scheduled to hold on Thursday, 23rd July 2020 to consider the second quarter financial results of the Company for the quarter ended 30th June 2020.”  

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The notification which was duly signed by General Counsel & Company Secretary, Mrs. Adewunmi Alode explained further stating that “Accordingly, no Director, employee, persons discharging managerial responsibility and Advisers of the Company and their connected persons may directly or indirectly deal in the shares of the Company in any manner during the closed period.” 

Over the past few months, it made a few board changes with the retirement of two of its Non-Executive Directors, as well as the appointment of three new DirectorsIt had also spun off its South African subsidiary, Lafarge South Africa Holdings (LSAH), last year. 

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READ MORE: NSE’s statement in reaction to the Visionscape Municipality Bond Default

Lafarge Africa’s Q1 2020 revenue was up 9.8% year-on-year to N63.7 billion, driven by higher Cement Sales (a figure up 11% year-on-year to N62.3 billion) which offset the weakness in Aggregate and Concrete (down 21% y/y to N1.4bn). Its EBITDA grew by 2.4% year-on-year to N19.3 billion as well. As at Tuesday the 7th of July, the share price of the company was N10.00 

 

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Companies

AXA Mansard Insurance Plc gives notice of Annual General Meeting 

The AGM will be live-streamed to enable shareholders and stakeholders participate.

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AXA Mansard Insurance Plc

Insurance firm, AXA Mansard Insurance Plc., has given notice of its board of its Annual General Meeting (AGM) scheduled for Wednesday, July 29, 2020, at 10:00 a.m.  

The announcement which was disclosed by Nigerian Stock Exchange (NSE) in a corporate disclosure on July 7th, 2020 and signed by Company Secretary, Omowunmi Mabel Adewusi read, “Notice is hereby given that the twenty-eighth annual general meeting of AXA Mansard Insurance Plc. will hold at the Oriental Hotel, no. 3, Lekki Road, Victoria Island, Lagos on Wednesday, July 29, 2020, at 10:00 a.m.” 

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READ ALSO: AXA Mansard divests from its pension and real estate ventures

As noted, the purpose of the AGM is to transact the following business: 

  1. To receive the Audited Financial Statements for the year ended December 31, 2019, and the Reports of the Directors, Auditors and Statutory Audit Committee thereon 
  2. To authorise Directors to fix the remuneration of the Auditors 
  3. To elect Directors and 
  4. To elect members of the Statutory Audit Committee.  

In order to ensure that all relevant stakeholders can be a part of the AGM, the company will also be streaming the AGM live. It noted that “This will enable shareholders and other stakeholders who will not be attending physically to follow the proceedings.” 

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The link for the live streaming of the Meeting will be made available on the Company’s website at www.axamansard.com. 

READ MORE: Sterling Bank’s earnings to remain pressured but valuations still attractive

Recall that a few months ago, in March, the company’s Board of Directors announced the appointment of John Dickson as the company’s new Non-Executive Director. A month earlier, it also disclosed its plan to sell its pension management subsidiary (AXA Mansard Pensions Ltd) and some undisclosed real estate investments. 

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Its unaudited financials for the period Q1 2020 reveal a growth across revenue and profit lines. Gross written premium grew by 21% from N17.4 billion earned in Q1 2019 to N21 billion in Q1 2020. Profit for the year for the group grew by a commendable 120% from N890 million in Q1 2019 to N1.9 billion in Q1 2020. 

As at Tuesday, the 7th of July when markets closed, the share price of the company was N1.59. The company’s EPS stood at 0.33 while its price to book ratio stood at 0.6082. 

 

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Companies

NSITF board to investigate suspended MD and others over financial misconduct

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NSITF, FG moves to scrap hazard allowances earned by State Governors

The board of directors of the Nigerian Social Insurance Trust Fund (NSITF) has revealed that it will investigate the activities of the suspended Managing Director, 3 Executive Directors, and 8 other senior management staff over financial breaches and gross misconduct.

This was disclosed by the Chairman of the board of NSITF, Mr. Austin Enajemo-Isire, in a statement in Enugu on Sunday July 5, 2020.

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Enajemo-Isire said that the Managing Director and other top management staff of the organization would have the opportunity to clear themselves of any wrongdoing with the probe panel which was being set up.

READ MORE: Ecobank appoints Aissatou Djiba Diallo to oversee its fintech initiatives 

While reacting to claims that the suspension did not follow due process as President Muhammadu Buhari did not approve it, Enajemo-Isire said that the approval for the suspension of the affected staff had been conveyed to the Labour Minister in a correspondence referenced SGF. 47/511/T/99 of June 30, 2020.

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According to the Chairman, “The minister has conveyed this approval and directives to me for necessary action in terms of setting up a board-driven investigative panel.

READ MORE: Nigeria’s debt rises to $79.5 billion, as debt to revenue ratio worsens

“This is to give the affected officers the opportunity to clear themselves of the financial and procurement breaches and acts of gross misconduct and other infractions that gave rise to their prima facie indictment.

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“It is in this light that I have decided to call a virtual meeting of the management board on Tuesday, July 7, 2020, to consider the modalities for our action.”

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He, therefore, appealed to staffers of NSITF and their social partners to keep calm and exercise restraint.

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A few days ago, Nairametrics reported the suspension of the Managing Director and some senior management staff over corruption allegations. However, the management in its reaction debunked that claim and said that the President did not approve their suspension but that rather, it was the sole decision of the Labour Minister, Chris Ngige, who they said was overreaching himself.

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