Daily Trust

ECONOMIC INSIGHT How heavy taxation kills hospitalit­y industry in Abia

- From Linus Effiong, Umuahia

The rate of growth in the hospitalit­y industry in Abia State is becoming alarming, thereby increasing the level of competitio­n.

Most hotels in Abia strive to meet up with standards in terms of good accommodat­ion, good services and good customer with the aim of increasing relations.

The hospitalit­y industry is everywhere in the state, which entails hotels, bars, restaurant­s, theme parks and a host of others.

In recent times, before the last recession that hit the country, Abia’s economy witnessed tremendous ‘growth’ in the hospitalit­y industry leading to the emergence of hotels, fast food restaurant­s, night clubs and cruise lines.

However, the hospitalit­y industry in Abia State is faced with a myriad of challenges, ranging from multiple taxation, outrageous electricit­y bills, state government’s refusal to interface with stakeholde­rs within the industry, high running cost, poor customer service, little or no standardis­ation in operations, inconsiste­nt regulatory environmen­t and skilled labour shortage caused by a few entreprene­urs with little knowledge of the workings of the industry who hijack the process to perpetuate plans for their own personal aggrandise­ment.

Daily Trust in a chat with some key stakeholde­rs in the hospitalit­y industry in the state gathered that owners of hotels paid through their nose to remain in business in an unfriendly business environmen­t.

Goodswill Ogbonna, the Manager of Pet-mobile Hotel in Umuahia, said he had been in the hospitalit­y industry for over a decade, and that the challenges he faced were biting harder following the recent recession. He dismissed the claim by some individual­s in the media that Nigeria was out of recession.

He said about four to five months ago it was very difficult and that people found it difficult to patronise any hotel because Abians were looking for how to take care of their families in terms of school fees, accommodat­ion and feeding. He said nobody had time for luxury: coming to a hotel to drink and relax, except those on transit.

“Before recession, we had 70 to 80 per cent occupancy but now patronage has dropped to 30 per cent and sometimes we sort for money to buy diesel. As much Even if you don’t have guests the generator must be on and you can’t afford to put it off. You have to sorurce for N20,000 daily to buy fuel.

In terms of power, Mr. Ogbonna said he spent close to N200,000 monthly on the purchase of fuel, salaries and other sundry charges to keep business moving.

He said most hotel operators were forced to bring down the prices of rooms, as a room of N5,000 was sometimes given for N3,000 in order to get money for fuel.

On taxation, Ogbonna said the level of taxation in Abia State was biting hard on operators of the hospitalit­y industry compared to the volume of business done.

According to him, “We pay tax to the state and local government­s and sometimes we pay to the Federal Government agents. Hoteliers pay property rate to the local government, state government and also pay the same property tax to the Federal Inland Revenue Service (FIRS). In environmen­t for instance, we pay the same tax to the Ministry of Environmen­t and also pay to the Abia State Environmen­tal Protection Agency.”

He maintained that though it was good to pay tax, but the multiplici­ty of the taxation in Abia was now unbearable.

Therefore, he appealed for harmonisat­ion of taxation.

Speaking on behalf of Umuahia Hotels Union, Chairman of the union, Prince Charles Ezeala, who is also the Managing Director of Shelton Hotels Limited, narrated how hotel business started in the early 90’s in Umuahia, how Abians were encouraged to invest in tourism so that the state could effectivel­y host national activities as there was no industry in Umuahia that attracted tourists.

Ezeala said his union was inaugurate­d to check the activities of members, unfriendly business environmen­t in the state and most importantl­y how taxes were being collected in the state .

“We had Umuahia Hotels Union before and now efforts have been concluded to join the national body of the union.

Hotel recession business

According to the hotel unions chairman, the union was facing hard time and needed some bailout.

“I am not aware that the hospitalit­y industry in Abia State is out of recession. We are not out of recession and the situation is worst with hoteliers now on daily basis. Abians, and by extension Nigerians, are looking for money to eat and pay bills like school fees and the rest. They hardly talk about going to hotels for relaxation. We are finding it difficult to pay salaries, the hospitalit­y industry is worst hit when there is recession.

On the running cost during

“The major expenses we make is on power, either through generating sets or the electricit­y gotten from public supplies,” one of the hoteliers said. H e continued, “A normal hotel in Umuahia, the least my members paid was about N100,000, as electricit­y bill per month.”

He said if a hotel ran a 100 KVA generator, it would consume 200 litres of fuel for 24 hours and 100 litres for a night.

He said there were bigger hotels with much more bigger generating sets.

“Multiply what we spend a day by 30, you will have an idea of what we spend in a month and guests always demand maximum satisfacti­on for their money, especially in the night, even when you don’t have many guest.

“The painful part of the business is that a room that goes for N5,000 which most times is the cheapest, we are forced to give it out at N3,000, because we won’t send the guest away, we have no choice, the rooms will be empty and you have to put on generator and we need money to pay bills and buy diesel. The cost of running the business is going high, maintenanc­e is high, building materials have gone high but the hospitalit­y industry is coming down. There is no hotel that increase its rate now, even when you are buying you consumable­s like soap, detergents, among other things, their prices are high but room rate is going down because of the peculiar nature of the business, he said.

On taxation

“In terms of taxation, we have taken it up with government agencies and we have written several letters to Governor Okezie Ikpeazu but up till now there is no response. However, we are hoping that one day the governor will see reason to discuss with us. The taxes are to much; we pay the same tax to the local government, they changed the nomenclatu­re and asked us to pay the same thing to the state government. For example, the VAT which is a consumptio­n tax which we pay five per cent to the federal inland revenue. The state came up with their own and called it consumptio­n tax and they gave every hotel in Umuahia N1.8m to pay yearly, the local government came out with their own and called it hotel licence which is 10 per cent of every consumptio­n.

“Aside from the ones I have mentioned,, we also pay business premises tax, hotel license to the state, local government asked us for operationa­l permit, when you look at the health aspect of the hospitalit­y industry in the state, the state has a sanitation outfit called ASEPA. In ASEPA, there are five distinctiv­e levies they force us to pay: sanitation tax, noise pollution tax, environmen­tal impact assessment tax, sanitation support fee, and the fifth one all in one department.

“We also have in Abia State environmen­tal mobile court where they come around, find fault and give you charges and the least you pay to the court is N100,000 if you are convicted.

“Also, we have food and safety committee establishe­d by the Abia State Government, they go round and inspect, they end up with one payment or the other.

“The Ministry of Environmen­t also has an inspection team that comes around for inspection, issues one permit or the other and also collects money from us. The local government health and environmen­tal department comes to ask for the same environmen­t fees and these local and state government­s will come with one certificat­e or the other,” Ezeala said.

On infrastruc­ture

“We have infrastruc­tural levy which is N200,000 and if you don’t pay you will be charged to the revenue court, and the judge will tell you “I am here for conviction.” So once you are arraigned you will be guilty as charged. Once you appear in the revenue court the magistrate will ask you where is your receipt, it’s either you pay inside the court or you will be sent to prison.

“In all, hoteliers in Abia State pay more than 30 revenue headings to the local and state government­s and all of them are big money,” Ezeala concluded.

The union adviced the state government to intervene in power generation to increase the quantum of electricit­y that came to the state. It said the governor should look into over taxation currently existing in the state.

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