Edo: Between NMW, development and revenue drive

The Edo State Government took the plunge as it announced a new minimum wage of N18,034 for the least paid worker in the state with effect from June 2011, just as it upped its revenue drive. JAMES AZANIA reports

When Edo State Governor Adams Oshiomhole announced his readiness to pay the new National Minimum Wage, even before the Federal Government, the initiator of the act, many political observers in the state that prides itself as the Heartbeat of the Nation, felt that was in the character of Nigeria’s former foremost labour leader, just as other discerning residents felt something must give way, if the government must meet its projected wage bill.

The announcement was, of course, music to the ears of the leadership of organised labour in Edo, workers and of course their dependants, even though there were pockets of dissenting voices from others not captured in the initial agreement reached between the government and the unions.

Not long after the cheery news, the state government, true to perceptions in some quarters, rolled out what would appear part of the ways of actualising its promises to the workers, which has ironically become a bitter pill forced down the throats of operators in the hospitality business.

This is a law that imposes tax on goods consumed and services rendered in hotels, restaurants, event centres and other facilities thereof in Edo State, otherwise known as the Hotels and Event Centres Occupancy and Restaurants Consumption Law of Edo State, recently assented to by Oshiomhole.

The introduction of the law has, however, not gone down well with some operators of small-scale businesses and other residents of Benin, the state capital, as many of them describe it as double taxation. Many of the small-scale business owners, including restaurateurs and operators of small eateries and other fast food outlets, expressed dissatisfaction with the new law, even as several others claimed ignorance of its enactment.

Benin, the state capital, including the Government Reservation Area, is strewn with all sorts of small and medium-scale eateries, pubs, hotels and other relaxation centres.

On Boundary Road, GRA, our correspondent counted no fewer than 40 of these premises, just 500 metres into the popular road. The same applies to Adesuwa Road, Off Sapele Road, where eateries, restaurants, hotels and other hangouts abound on the stretch of road.

The law “envisages the imposition of a consumption tax on any person, who pays for the use of any hotel, facility or events centre.” The tax will be paid by anyone, who purchases consumable goods or services in any restaurant, whether or not located within a hotel in Edo State.” Its wordings will no doubt affect hundreds of businesses in Benin and other parts of Edo, a state that boasts a sizeable number of eateries, pubs, relaxation centres, guest houses and hotels.

Section 2 of the law states, “The amount to which this tax applies shall be the total cost of facilities, consumables or personal services supplied to a consumer in, by and on behalf of the hotels, restaurants or events centres.”

It further states, “The rate of tax imposed by this law, which is five per cent of the total bill issued to the consumer, shall be under the care and management of the Edo State Board of Inland Revenue.”

The above is the heart of the matter that is generating uneasiness among the service operators in the hospitality business in Edo.

Frances Unonye, who runs a sharwarma/pizza outlet on Ebenezer Street, GRA, told our correspondent that she was ready to “fight it out.”

She said, “Yes, I have heard of it (Consumption Tax Act). There is a top government official with interests around here and I hear things said, but that is not to say I am for this. Business is becoming very costly here. I have had to relocate my shop several times, all owing to Oshiomhole’s policies. Or, am I going to be responsible for the new workers’ salary?

“Look at (pointing), that is demolition. Well and fine, some of the places are classified as illegal structures, but where is the alternative? I am sick and tired of all this. How do I announce to my customers that they should pay more? At between N700 and N900, many grumble that the sharwarma is expensive, and now this taxation.”

Section 5 of the law states, “A person owning, managing or controlling any business or supplying any goods or services chargeable under section 3 of this law (referred to in this law as the Collecting Agent) shall collect for and on behalf of the state, the tax imposed by this law based on the total amount charged or payable by the consumer in accordance with the provisions of section 4 of this law.”

Asked whether or not she has registered with the state revenue agency as required by the enactment, Unonye answered in the negative, saying, “I have not and I will not. I will fight this out. This to me is double taxation. We already have the value added tax, which to me has captured what the state government is asking for.”

Another respondent, with business on Ikpokpan Street, GRA, expressed unease over “such a law.”

The hotelier, admitted he was yet to see the new piece of legislation. He, however, expressed misgivings, saying, “Let us see how Comrade (Oshiomhole) will manage this.”

The almost three-year-old Oshiomhole-led administration, which many have been commending for making a headway in infrastructural improvement, had in the past, touted its ability to drive and improve on its internally-generated revenue and cited this as the basis for some of the successes achieved so far.

Records made available to our correspondent at the Board of Internal Revenue showed that the state generated about N300m monthly from internal sources as at 2009, when the new administration came on board. The figure has, however, increased considerably, with more recent records averaging N1.2bn of monthly IGR.

The chairman, BIR, Edo State, Chief Oseni Elamah, however, differed on the acceptance or otherwise of residents of the new act, saying that the state citizens were ever supportive of the government and had always demonstrated that in practical terms.

According to him, Edo citizens that are witnesses to the monumental development of the current administration have come out overwhelmingly in support of any means by which they can contribute their quota to the ongoing development. “It is not correct to say it is double taxation because if you read the tax law carefully, it is primarily focused on services or consumable goods that are offered or consumed in hotels, restaurants/eateries and event centres. As a matter of fact, the correct citation is, Hotels and Event Centres Occupancy and Restaurants Consumption Tax Law,” he said.

He added, “We have started public enlightenment and results we’ve got show that it is an avenue for contribution to the developmental projects of the state.”

Responding on the ability of his board to enforce the act, Elamah said the government had adequate and capable personnel for the purpose, adding, “In the last two years, the state government has embarked on the reform of the tax system. Central to this is the computerisation and automation of the operations of the BIR. We believe that IT can be put into effective use in optimising the IGR of Edo State. We are launching the new tax law with IT implementation as we have already started the enumeration and computation of hotels, restaurants/eateries and event centres so we can accurately identify the collecting agents and goods liable to the tax under this law.”

Yet another respondent, who operates an “expansive and popular joint” on Adesuwa Street, said he remained unperturbed by the development.

“This is news to me but I am of the opinion that we are already paying VAT to the Federal Government and there is no difference between this and VAT. This is simply killing businesses and the enthusiasm to invest, but I keep my fingers crossed,” the businessman said.

Ignorance or not, the law will be binding on all, more so with a section of the law stating that, “any hotel, restaurant or other business affected by this law shall, within 30 days of the commencement of this law or upon commencement of business, whichever is earlier, register with the board for the purpose of this law.”

A man identified simply as Alonso said, “It is the government’s law and there is hardly anything one can do about it. Whether I like it or do not like it is not the issue here, nor is whether I will comply or not comply important. My place (bar) is an all-night affair, but I obey all laws. For the government people, they will have to also open shop beyond their four o’clock official closing hours if they must enforce some of their laws. Anyway, we’ll cross the bridge when we get there.”

Whether Alonso crosses the bridge or not, agents under the new bill will definitely have their own bridge to cross, as provisions abound on imposing what may be considered stiff penalty for non-enforcement on their part or failure to “file a report or remit taxes collected within the time allowed.”

Section 13 says, “If a collecting agent fails to file a report and remit taxes collected within the time allowed by section 8(2) of this law, that agent shall, in addition to interest payable under section 12 of this law, pay a penalty of 10 per cent of the amount of tax due.”

Section 14 states, “Any director, manager, officer, agent or employee of the collecting agent, who fails to comply with the provisions of this law, shall be guilty of an offence and liable on conviction to a penalty of not more than six months imprisonment or a fine of N2m or both depending on the size of business.”

With all the variables that may attend the introduction of the new law, observers believe that the implementation might not eventually be a bed of roses.