Decoding Service Charges and Taxes in Lagos Restaurants
POV: You’ve decided to treat yourself to an expensive meal at one of the city’s countless upscale restaurants because Nigeria is hard enough and you can’t come and kill yourself. You’re very aware that a lot of virtue is leaving your bank account after this, but at least you know what’s about to hit you since you’ve seen the prices on the menu—you may have even added the 7.5% VAT and 5% consumption tax because as a wise man named Asake said, “O logbon ju” (you're too wise). Ready to face your fate, you call the waiter to bring in your bill, but when they present it, the maths is very much not “mathing”. You’re about to tell them that a serious mistake has been made when you see the dreaded line; a 10% service charge has added an unsettling number of thousands to your bill.
If you’ve dined at a fancy restaurant in Lagos, chances are this has happened to you and that whole scenario has triggered some serious PTSD but also stirred up some pressing questions in your head: What really is this service charge anyway? Just another form of daylight robbery? A compulsory tip for the waiters? Will I serve myself before, so why am I still paying for that?
No worries, we’re here to answer all your questions.
To Tip or Not to Tip?
According to Investopedia, ‘a service charge is a fee collected to pay for expenses linked to the primary product or service being purchased.’ In restaurants, it can cover part of the administrative or processing costs involved in delivering your meal to your table. And in Lagos, it can range from as low as 2.5% of your bill to as high as 10%.
Service charges are different from tips as the latter are entirely voluntary and go directly to the waiter. However, in countries such as the US, tipping is expected and those who choose not to are often looked down on, while service charges are not as common in the restaurant space. There’s a huge recurring argument about how the almost compulsory American tipping culture is as a result of the notoriously low wages paid to service industry workers. This is because there’s an expectation that tips will supplement the wages since tipped employees’ minimum wages are set lower by the government. Au contraire, many restaurant patrons believe that the onus lies on restaurants to pay their staff well, rather than drop the burden on them.
Some would say this tipping culture doesn’t concern us as it’s an entirely imported concept, but I think we do have a local tipping culture. If you’ve ever given ‘anything for the boys’ to a security man or any other service staff when leaving an establishment, you have partaken in Nigerian tipping culture. Still, ours is not one that’s compulsory and it’s hard to see why it should be when good customer service is so hard to come by in these parts.
However, it’s because good customer service is so rare that I always feel compelled to tip good waiters. You know, the ones who actually pay attention to your needs and demonstrate the standard level of warmth and courteousness. I think it’s important to encourage them since many of their peers are not delivering in that regard.
Anyway, service charges in the Lagos dining scene are essentially an alternative to the American tipping culture. From my conversations with a few wait staff in Lagos, I’ve gathered that service charges are usually pooled together at a certain time of the month and shared equally among the staff. In that way, service charges are similar to tips in that they provide some extra incentivisation for waiters. But I think the extent of that is limited by the equal split; it doesn’t matter who waited more tables or worked harder as everyone gets the same cake slice at the end of the day. Apparently, the idea behind this in some restaurants is to discourage unhealthy competition.
Moreso, the service charges don’t always entirely go to the waiters. In one restaurant in VI, I was told that half of the service charge pool would usually go to damages such as missing cutlery and so on, while the other half would be shared. In another restaurant in Lekki, a waiter explained that “office politics” usually meant he didn’t get much from the split. “I could even get as low as N2,000, so I just prefer direct tipping abeg,” he shared. And then there’s the issue of the service charge remittances being delayed or withheld for some months.
The truth is the baseline salaries for waiters at many of these “big” Lagos restaurants are on the low side, so the extra income, especially from tipping, goes a long way. It’s direct, untaxed and drama-free. I know tipping, especially in addition to service charges, is a luxury in this economy, but please do it if you can afford to.
Why the Extra Charges?
Sure, seeing those extra unanticipated charges — taxes and service charges — on your bill at the end of the meal can be shocking, but the truth is you never really get out of paying the taxes when you dine at restaurants. Since 2009, Lagos State has mandated a 5% ‘consumption tax’ on all purchases of goods and services in restaurants as well as hotels and various entertainment venues. Additionally, the Federal Government imposes a 7.5% Value Added Tax (VAT) on all goods and services purchased—the VAT used to be 5% before February 2020.
Hence, any Lagos-based business that doesn’t include these in your bill has simply absorbed the cost in their pricing. For restaurant owners (especially the high-end ones), I reckon it’s mainly a psychology thing because absorbing those costs in the listed menu prices can shoot them up to the point where you’re even discouraged from visiting. So, it’s much easier for them to just bamboozle you with the prices on your final bill. I personally prefer to have the prices include the taxes upfront (let’s know what we’re here to do from the jump 🙏🏽), but I see how others might prefer the aftershock.
What might be best practice though, is mentioning that the taxes, as well as service charge, are not included in the menu prices. I’m always thankful when I see that single clarifying line at the bottom of restaurant menus. Some people may not go as far as making the calculations right away, but at least the extent of bamboozlement is reduced. I also think it could be helpful if restaurants briefly explained the allocation of their service charges via their social media or websites. This would help patrons feel more trusting of restaurants and better inform their decision to tip directly.