Nigerian Court Upholds Lagos State Consumption Tax

by Lorys Charalambous, Tax-News.com, Cyprus

05 January 2010

The high court in Lagos has, on appeal, upheld the legality of Lagos state’s hotel occupancy and restaurant consumption tax, which the state authorities had been stopped from collecting in October 2009 after they lost an action in the Nigerian federal high court.

The Lagos state government had started to collect consumption tax in August 2009. The new tax was meant to increase revenue to pay for the development of the state’s infrastructure, as well as maintain social services. It imposes a 5% levy on goods and services consumed in hotels, restaurants and events centres throughout the state.

The judgment of the federal court was that, although the court sympathised with the its aims, the implementation of the consumption tax under the law amounted to double taxation (as the sector was also subject, under federal law, to federal taxes).

However, the Lagos court has now overturned that judgement, being of the opinion that the law establishing the consumption tax was validly passed by the state parliament and, being limited in scope (that is, not generally applicable to income, profit or capital gains), it was distinct from taxes levied by the federal government.

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