Kwara lawyer asks court to nulify VAT on food sold in hotels and restaurants

[Shekinah Brama]

A Senior Advocate of Nigeria, Chief R.O. Balogun, SAN, has filed a lawsuit at the Federal High Court in Ilorin, Kwara State, seeking to nullify a section of the 2020 Value Added Tax (VAT) Modification Order that mandates VAT collection on food items sold in restaurants, hotels, eateries, and similar establishments.

The VAT Controversy

The VAT Modification Order 2020 initially exempted basic food items—such as agro- and aqua-based staple foods—from VAT. However, a proviso was introduced stating that this exemption does not apply to food sold in restaurants, hotels, lounges, caterers, and by contractors. This has sparked legal opposition from Chief Balogun, who argues that such taxation is unconstitutional and contradicts the VAT Act.

Legal Challenge: Plaintiff’s Argument

Chief Balogun is urging the court to:

• Strike down the provision that subjects food sold in hospitality businesses to VAT.
• Declare that the provision contradicts the First Schedule of the VAT Act and other tax laws.
• Rule that the EFCC lacks jurisdiction in enforcing VAT compliance.

EFCC’s Alleged Overreach

The Economic and Financial Crimes Commission (EFCC) has reportedly been demanding VAT remittance records from Ibigbemi Oloruntobi, owner of Item 7 Go, under the guise of a money laundering investigation. The plaintiff argues that:

• Failure to collect VAT is not a criminal offense and does not amount to tax evasion.
• The EFCC has no legal authority to probe VAT compliance, as this responsibility falls under the Federal Inland Revenue Service (FIRS).
• The EFCC’s actions constitute harassment and an abuse of power.

The VAT Compliance Debate

Chief Balogun insists that, if there are concerns over uncollected VAT, the FIRS should pursue civil proceedings instead of the EFCC stepping in with criminal investigations. He further contends that his client has not been collecting VAT because basic food items are supposed to be VAT-exempt under the VAT Act.

What We Know So Far

• EFCC’s Special Control Unit Against Money Laundering (SCUML) is investigating Item 7 Go for alleged non-compliance with the Money Laundering (Prevention and Prohibition) Act.
• The business has been asked to submit banking records, statements of account, and BVN details as part of the probe.
• The legal battle is now set for hearing on March 3, 2025, with hearing notices served to all parties.

What’s Next?

As the court prepares to hear the case, legal experts and business owners in the hospitality sector await a landmark decision—one that could shape VAT policies on food sales in Nigeria. The ruling will determine whether restaurants and hotels should continue collecting VAT on food or if the exemption should be upheld.

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