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Lagos State Government Plans Hotel and Restaurant Tax to Boost Tourism

Monday, 31 December 2007

As part of efforts to ensure the realization of its 2008 revenue projection and develop the tourism industry, the Lagos State Government on Tuesday announced plans to replace the five percent sales tax with a new tax regime on hotels and restaurants.

Christened Hotels Occupancy and Restaurants Consumption Tax, the new regime imposes a five per cent charge on every bill recorded by those who patronize and use facilities of the hotels as a means to boost the state’s Tourism industry.

Announcing the plan of government while briefing Government House Correspondents yesterday, the Special Adviser to the Governor on Taxation and Revenue, Mr. Ade Ipaye, said as soon as the tax come into effect, hotels, restaurants and events centers operating in the state would be exempted from the usual Sales Tax currently operational in the state.

Accompanied by the Special Adviser on Information and Strategy, Mr. Segun Ayobolu, Mr. Ipaye explained that the idea of the new tax regime was borne out of the need to meet the Internally Generated Revenue (IGR) projection of the state and stimulate infrastructural development needs of the state, especially in the Tourism industry.

He explained, however, that the proposal which has been ratified by the State Executive Council was yet to be presented to the State House of Assembly for debate and endorsement, adding that as soon as this was done, the full details of the regime would be made public.

Ipaye, who said such tax regime was applicable in all major cities around the world, maintained that hotels, restaurants and events centers which fall within the purview of the new tax regime would merely act as tax collection agents for the state government, adding that those who would pay the tax would be foreign and local tourists who patronize the places while enjoying the facilities in the city.

According to him, the new tax regime, while ensuring that government gets more revenue for the maintenance and extension of facilities such as roads, drainages, educational and health facilities, would also make for redistribution of wealth as the tax paid by the wealthy who patronize the hotels would be used to maintain those facilities which are also enjoyed by the less privileged.

The Special Adviser said the fund from the tax would also be used to boost the security especially around the hotels and other tourism facilities to ensure safety of life and property.

Other advantages, Ipaye said, include employment generation and boosting of the night economy as people would be able to carry out their businesses at any time.

“Once we tackle and solve the security problem in the state, business can be conducted at any time of day or night and this will boost local economy.

“Once local economy is boosted, employment opportunities would emerge”, he said.

He explained that government’s decision to place the tax regime under a separate legal structure was to ensure that it does not lead to higher charges on Hotels and others concerned.

On enforcement, Ipaye said the proposal by the Executive Council contains instrumentality for enforcing the tax, adding that a monitoring team complete with auditors, would be put in place to carry out periodic audit checks on the hotels to ensure that government is not short-changed. “We are making every plan to ensure that the enforcement is done in a businesslike manner”, he said.

In his remarks, Ayobolu said government would embark on a massive public enlightenment programme in the New Year to enlighten the public on the need to pay tax, adding that this was necessary in order to meet the enormous developmental needs of the state as enunciated in the 2008 Budget.

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