Lagos is introducing a payment technology to ensure tax compliance within its hospitality industry

The tax collection body for Lagos state, Nigeria’s economic capital, has introduced an automated collection technology for consumption tax from hotels, restaurants, nightclubs and event centers in the state.

Chairman of Lagos Internal Revenue Service (LIRS), Ayodele Adebayo, shared that the agency introduced the Electronic Revenue Assurance System (ERAS) to ensure transparency and provoke automatic compliance with the revised Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State.

According to him, ERAS is “to protect consumers, payments and receipts generated will be tracked and monitored to verify the authenticity of receipts issued.

“We hereby implore owners of restaurants, hotels, nightclubs and event centers in Lagos State to embrace and comply with this new initiative not only because of the legal consequences of its violation but also for its mutual socio-economic benefits,” he furthered.

ERAS is a software application that issues invoices and receipts to consumers bearing a unique QR code, detailing the items and/or services ordered and an embedded automation of consumption tax remittance in real time, using an electronic fiscal device- promises financial accountability and efficiency for collecting agents, and automatic accurate deduction, transparent remittance of consumption tax for consumers.

The tax law in section 2 of the Hotel Occupancy and Restaurant Consumption Law of June 2009, as amended, imposes a 5% consumption tax on all expenses made on products and services at hospitality outlets in the economic capital of Nigeria.

Previously, the hospitality and tourism industry was regulated solely by the Nigerian Tourism Development Corporation (NTDC), however, given the huge revenue potential in the industry, Lagos state government to boost revenue, introduced laws to regulate the industry, leading to the debate on the constitutionality of the Lagos State Hotel Licensing Law 2003 (and its amendment) and the Hotel Occupancy and Restaurant Consumption Law 2009.

Section 1 a-b of the Hotel Occupancy and Restaurant Consumption Law 2009 states that consumption tax is imposed on any consumer who pays for the use or possession of any hotel, hotel facility or event centres or purchases goods or services in any restaurant regardless of its location.

Consumption tax collection which is implemented in National retail sales tax, Value-added tax and flat tax has been received various complaints from operators and stakeholders in the hospitality industry.

Majority complained that the Lagos State consumption tax constitutes double taxation, since they had already been charged twice in VAT remitted to the Federal Inland Revenue Service. Tax refund, Inability to prioritize tax efforts and Poor tax administration are also issues industry players complained about. Despite these, the Supreme Court on July 2013 ruled in favour of the Lagos State Government which complains of tax evasion.