Speeches

Stakeholders’ Conference On Hotel Occupancy And Restaurant Consumption Law

Jul 16, 2009 - I have always said that taxation is a vexed issue; no one wants to pay tax. But let me also say that we come here only because we mean well. We come here only because we think it can be better. But no matter the depth of plans we make, we need you to work with us.

We also owe you that explanation why this is in the enlightened interest of all of us. And that is why, as a Government, not only I have refused to sign laws in the privacy of my office, I have made sure that the assent to bills passed by the State House of Assembly are matters conducted in the open for the information of all of you who put us here. And where we think there are going to be twists and turns to navigate, we convene town hall meetings like this, to state our case before you; to explain the rationale behind what we do.

Although I do not believe in moaning about the past, but it is a matter of regret really that the people who caused all of the problems are not here; and at the time they made all those decrees and all those edicts that violated the essence and fundamentals of our Federalism, they did not consult you.

Some of the edicts you learnt about later long after they had left office. But I am here to work with you to find reasonable common grounds in order to make our life better. The question that is probably unspoken but clearly written on your faces is why another tax?

And from what Mr. Ade Ipaye has done by way of recap, all of the issues are germane. But I think it is important to preface my comments with a little history and to say that probably, in recent times, the only time Consumption Tax was ever levied in a democratic setting in the whole of this country was the one levied by the Law of the Lagos State House of Assembly in 1982 during the era of Governor Lateef Jakande when 5 per cent sales tax was imposed on specified goods and services within the State.

I believe that just about that period, the Aberuagba case was litigated and Supreme Court very clearly said that matters of domestic consumption were undoubtedly in the purview of the States to choose when, if and how to tax, that it had nothing with the Federal Government.

But as a way of making the case clearer, I believe that it is common knowledge that this State has a budget of N405 billion for this fiscal year. It is also common knowledge that in the State our revenues, internally generated revenue, are hovering around N14 billion.

The little problem there is that the money is not enough, not even to fund the current budget. And I would attempt to demonstrate that to you because if we took the high ends of the current monthly averages which is about N14 billion – sometimes it dips – at N14 billion in 12 months we may only have generated , N168 billion.

From the monthly statutory allocation that we get, the maximum we get is an average of N6 billion, sometimes it is N4.5 billion, sometimes it is N5 billion, sometimes it is N5.5 billion. But, even if you take the higher average which is N6 billion, that is N72 billion. If you sum it up, that will be around N240 billion, just a little over half or thereabouts of the proposed expenditure obligations of the State for the year.

Now, the only other place we can get money is to exercise the borrowing powers the State House of Assembly has given us to fund the deficit. And of course, if we borrow, we must re-pay. Now, all of the expenditures are for you and me. So, if we borrow, the people who will pay back are you and I.

And, therefore in answer to the question, ‘why another tax, has your revenue not increased?' We are still far away from it.

The truth is that given the infrastructure and social deficit that we have to deal with, this State can conveniently utilize an expenditure of N1 trillion annually. But the reality is that we can’t earn it, and that is why our budget has not grown to that size. We want security, we want pipe-borne water, we want efficient transportation, we want power, and we want so much.

There has been a deficit of 30 years or more when nothing has happened and that time, we were only about 5 (five) million people. Now, we are 18 (eighteen) million people struggling to use the same roads that have not increased; struggling to drink the same water that has not increased; struggling to get our children into the same schools that have not increased; struggling to use the same hospitals that have not increased; trying to get access to the same markets that have been there since 1975.

It will continue to remain like that if nothing is done about it. We have a plan, we have worked hard to articulate that plan to bridge the infrastructure gap. Now is the time that you the citizens who put us here must give us that helping hand. This is the simple logic of it.

Democracy is meaningless if the citizens do not participate. And participation does not start and end with just voting. It does not start and end with just asking us to account. Neither does it start and end with complaining. You must give us the resources.

Now, I will attempt to also explain to you that today, some of the States within this Federation; can barely function anymore because although the price of oil has taken a head for the North, the truth is that we can’t even meet our production quota as a country. And therefore projected revenues are derived from our allocation of about 2.5 million barrels per day at dollar value per barrel. So, even if the price of crude oil hits $150 per barrel, the truth is that we will not hit our projected revenues unless we produce that oil. The reason why that oil is not being produced in appropriate quantity is a matter in the public domain.

And, therefore, Lagos State is the only State or one of the few states that continues to thrive on the resources of her people, the resources of her leaders and on the resources of her entrepreneurs. And the truth is that in the enlightened self-interest, we must try to do a lot more.

One of the ways we think we can do this is to begin to develop the Tourism Industry. The initiatives that we put in place at the last Eyo Festival, was not because we wanted to have a celebration. It was because we want to make this place a destination for people all over the world. If people come in here every year in the same manner that we send our families and children on holidays abroad, you will be the ultimate beneficiaries.

In the enlightened self-interest, we must make this additional sacrifice. It is beyond debate today that Tourism is about a destination. If you cannot get there, there is no Tourism. You will not get there if there are no roads; you will not go there if it is not safe. It is not an attractive destination if it takes you five hours to travel a distance of 30 minutes.

These are the reasons that informed the projects we have conceived. For the expansion of the Lagos - Badagry Expressway, for the delivery of two light rail tracks out of seven. But they will only remain dreams unless they are funded. We have completed the designs. The contractors are ready to start work. Within the limits of our resources, we have paid some money to the contractors to start work. The choice is now for all of us whether we want to see this dream come true in our life time.

Many of us are raising children today, sending them to universities abroad. And the sad story that is beginning to emerge is that when they graduate, they don’t want to come home. They tell you, “Daddy it’s not safe. Daddy, there is no work”. The truth is that we are now breeding a new generation of refugees.

This is no longer a case where they took our children from us by force into slavery. It is now voluntary and self-inflicted. If we want a better life, it comes at a cost, it comes with forbearance. And all of those jurisdictions which this State and this country have been compared with, these taxes are a matter of routine on a daily basis. When you take your children abroad, when you take your families abroad, you pay these taxes when you lodge in hotels. Why can’t we pay it at home?

Distinguished Ladies and Gentlemen, without looking at the books of some organizations, I know that the investment that we made on Mobolaji Bank-Anthony Way has, in some way, helped to swing up the quality of business by the proprietor in that area.

I know that lighting up some parts of Victoria Island at night – we do it with diesel, if you care to know – has improved the night life from which all of you have benefited. If the diesel stops flowing, the light goes out, and that is why I say this is a matter of enlightened common interest.

We keep policemen on the beat to encourage people to feel safe to come out at night to patronize leisure and hospitality centres which you manage. They get paid. Running Police Patrol vehicles cost money. Several thousand litres of petrol and diesel are what it takes on a daily basis to run the street lights across the State and keep Police vehicles efficiently on patrol. This is why we called this meeting to explain to you what we are going through.

Let us re-appraise our situation. Let us be less emotional. What is the cost of security and insecurity? Can all of the taxes we complain about bring back one lost life?

Yes, it is a vexed question, why should I pay more? Most of the hospitality facilities in and around Onikan here host events. When they finish they go out. They leave their tools, paper, food, and broken bottles in the street. We pack them from Friday night till Monday morning. We need men and women to do this; we need trucks to remove them. These cost money.

The young men and women are boys and girls who used to be the unhappy faces of this part of the island (“the Area Boys”) they see you now, they wave and they go. They work at night to pack those refuse and we pay them. They are no longer the ‘Area Boys’, they have jobs. It is in the enlightened self and common interest that we keep them busy and employed. They become a security threat to you if they are unemployed. If the money stops, the payment will stop and the service will stop. This is the truth; this is the real frank talk.

Now, to some of the concerns that “well, the operators are over-taxed”, this is not a Tax for the operators. What we ask you to do is to help us collect and remit just like any employer of labour.

The limited liability company does not pay tax to the State Government because, the profits of his business are taxed by the Federal Government. It is his employees that pay tax in the State of operation and what the company does is to simply collect taxes due under the PAYEE system and remit it to the State Government and this is not different.

But we are saying collect it from those who use the services. And by whatever name you call it, this is a tax on luxuries. Many of the people who are likely to pay this are visitors and not residents who already have their own homes here. Many of them will also be sponsored persons. We pay a lot of it. We come to host retreats in all your facilities. We are simply saying all the millions that we pay for three-day and four-day retreats, give us some of them back. Is that not a fair deal? What if we don’t come for retreats? We can retreat in the State House. It is a conscious effort to stimulate your business, to bring awareness to the services that you run. And we have decided, my colleagues and I, it must be quid pro quo.

On the issue of multiple taxation; I am mindful of the difficult conditions under which you operate. But, as I said, this is not your tax. And it is not a tax levied on the poor because it is not a tax on garri or eba or elubo. And it is a tax that does not apply to our bukaterias.

The truth is that if things don’t get better, have we asked ourselves whether it will irrevocably get worse? What happens? If this is a cost for continuing to be in business, is it too much a price to pay?

Today the reality is that whether you get power or you don not get it, you get bills. And you still buy diesel and you still run generators; who do you complain to? And we are saying here, we want to give you a service and make it better and give you a little more. We do not conceive that it is double taxation. But we are saying that for the purpose of the argument, if you have to pay a little more so that all of us can benefit in a manner that is demonstrably visible, is it too much to ask?

These, Gentlemen and Ladies, are the issues. And again if you say why tax hotel accommodation, as Mr. Ipaye has said, there is nothing novel about what we are doing here and all of you know it deep down in your hearts that you pay these taxes once you leave this country. It is in the same way that a Government that feels that alcohol has been a matter that has had very adverse consequences on their human capital, have increased the taxation of alcohol. And, therefore, it is only you who wants to go and drink alcohol that will complain.

I asked someone who said the fine for driving against traffic was too much, would that be his problem unless he wanted to drive against traffic? This is not your tax. You don’t have to pay it. And for those who are to pay it, who are here, we are saying living in a hotel, patronizing a hotel, by whatever approach we proceed, it is a matter of convenience and it is somewhat a luxury and we are saying if you give us a little more, we will protect those who are truly under-privileged in this economy so that they do not become a risk to themselves and to all of us.

I think that the Special Adviser on Taxation, Mr. Ade Ipaye has done very detailed work, probably sharing with you the rates comparable in other jurisdictions as to demonstrate to you that we have been most sensitive and cautious in the rates that we have asked you to pay.

Distinguished Ladies and Gentlemen, I thank you for your time. That is our case.

Babatunde Raji Fashola, SAN
Governor of Lagos State