RIGHT OF REPLY
The Lagos Land Use Charge is not meant to punish property owners but to facilitate the delivery of the greater good to all residents of the state, writes Kehinde Bamigbetan
Olusegun Adeniyi’s article, entitled “Between Ambode and Lagos Landlordsâ€, published in THISDAY of March 22, was interesting. For the most part, it echoed many of the same sentiments that have been expressed by some of the most vocal critics of the land use charge regime, sentiments that are for the most part, based on hearsay rather than a proper study and understanding of the issues on the ground.
First, Land Use Charge as Mr. Adeniyi clearly shows is not new in Lagos. Land Use Charge is in fact, the consolidation of three different taxes/levies, namely tenement rate, ground rent and neighbourhood improvement levy, respectively. So rather than pay three different taxes or levies, the property owner only has to pay one. In an operating environment where government and the people jointly agree that there is indeed an unhealthy multiplicity of taxes, tax consolidation is clearly a development in the right direction. Tenement rate and ground rent are both enshrined in the constitution. Neighbourhood improvement levy was sequel to a law passed by the state’s house of assembly. Land use charge has been sequel to a joint agreement by the state government and the various local government councils.
The Land Use Charge Law was first passed in 2001. Despite its good intentions, it was constructively criticised by the Organised Private Sector which raised objections to some of its provisions. It is laudable and a plus for our democracy that the government accommodated some of the objections of the private sector in eventually settling for a mutually acceptable law.
The reality, therefore, was that by 2017, rates that were set as far back as 2001 were still prevailing in Lagos. Of course, by this time, those rates had become obsolete.
Another contention with the 2001 law was the issue of property valuation. Instructively, Mr. Adeniyi raises the same subject in his article. Property valuation was carried out in the old law, based on yardsticks that were not very clear to all. What this meant was that property valuation tended to be arbitrary in some instances, ultimately manifesting in bills that were sometimes inequitable and unfair on property owners. So while some property owners got exceptionally low bills there were those whose bills were exceptionally high.
These shortcomings of the Land Use Charge Law of 2001 must be assessed against the backdrop of the need by government to fund development.
Lagos is today, Nigeria’s most populous state. It is a cosmopolitan state, a cultural melting pot in which every citizen feels welcome. Indeed, even though some other state may claim that it is “home for all,†it is Lagos that most accurately encapsulates that epithet. It is the one state that millions of Nigerians, regardless of “state of originâ€, lovingly regard as home. Not surprisingly, migration into Lagos is today estimated at 85 people per hour.
At its current rate of population growth, Lagos faces the arduous challenge of dearth, if not total collapse, of social and physical infrastructure. Many of the symptoms stare us in the face daily. We waste valuable man-hours in traffic jams which worsen by the day. And should the rains descend upon us for three straight hours this moment, it is no secret what will become of Lagos thereafter.
The fact is that in the face of decades of under-investment coupled with rapid population growth, overall transportation infrastructure for instance has steadily worsened in its inadequacy to cope with the demands of today’s Lagos. This is despite the efforts of all the administrations since the return of democracy in 1999. Today, roads are being constructed – 181 inner city roads are billed to be constructed in our 2018 budget for instance, up from the over 140 of 2017, but even this is like the tip of an iceberg given the number of roads crying for attention across the state. Elsewhere, major roads are being overhauled (the International Airport Road for instance), lay-byes (several across Lagos) and flyovers (Ajah, Abule-Egba, Agege) have either been constructed or are under construction. The rail projects are also under construction while the waterways need to be completely overhauled to make them amenable to reliable and efficient public transportation.
Housing is another area. In the face of our best efforts, Lagos continues to be burdened with a housing deficit in the region of two million homes. What about healthcare and education for instance? This year, Lagos will be deploying some 12 percent of the budget into education: building, refurbishment and equipping of educational institutions including vocational schools, teacher and instructor training among others. Yet we will continue to rely on the private sector to subsidize education for the state by way of provision of schools and facilities for our children.
I am sure that the improvement in security across Lagos is perceptible to many. Security ordinarily resides in the purview of the federal government, but it has been the lot of Lagos State Government to continuously drive efforts to enhance security across our state. We have made investments in ensuring that our streets are lit at night. In addition to enhancing security, this has helped to enhance economic activity, prolonging the commercial time-band across the state. Elsewhere the security trust fund, a joint investment of Lagos and the business community, is helping to provide equipment and manpower to complement the efforts of the federal government at providing security.
We are also investing heavily in our embedded power project, to help redress in a definitive manner our power problems in the state.
While the value of some of these investments may not be readily perceptible to some because of the seamless manner in which they have helped to resolve some of our day-to-day challenges, the fact remains that the infrastructure gap in Lagos is colossal.
To put matters in perspective, current physical infrastructure deficit in Lagos is put at some $50billion which is some fifteen times the value of our entire budget for 2018.
This scenario poses a dilemma for anyone in the role of governor of Lagos: Choosing between taking the leap that should enable the state commence the task of decisively redressing its infrastructure challenges once and for all or continuing in piecemeal palliative constructions and repair of infrastructure as we have done for many years in the face of our economic challenges. For the latter, while the risk to society is huge, the risk to the governor hardly exists. Infact, on the back of the several infrastructure projects so far executed in record time by His Excellency, Governor Ambode, he has received sundry endorsements so far. The former, instructively, portends a greater and better future for Lagos State and huge political risk for the governor. It is instructive and the hallmark of the statesmanship of the Ambode phenomenon, that he would subordinate all other considerations to his vision of the future prosperity and overall good of the state in opting for the former.
It is this imperative to fund growth and development anchored on massive infrastructure renewal that has motivated a review of the overall taxation regime in the state, for more efficiency. The goal is to bring obsolete taxes up-to-date, expand the tax net and ensure that the burden of taxation is shared by many more Lagosians than the relative few who currently do and to consolidate as much as possible, the taxes being paid into a more manageable form.
The state was never under any illusion that this task was going to be a walk in the park. Taxes are never willingly embraced anywhere in the world. When people talk about “deaths and taxes being the only certain things in the world,†they are only wittingly alluding to the morbidity with which the world in general views taxation. Afterall, night and day are also certain.
Contrary to Mr. Adeniyi’s assumptions, therefore, the repeal of the old land use charge law of 2001 and its replacement by the 2018 law has been underscored by considerable stakeholder engagement, a process that continues even this moment. Stakeholders from across the demographic spectrum have been engaged in the course of these developments. The process, which entailed a public hearing at the Lagos House of Assembly, continues to entail inputs from professional estate valuers, lawyers, taxation consultants, civil society groups, local government chairmen and administrators, community development associations and many more.
We take the point, however, that for an issue of this level of sensitivity, engagement can never be enough. We will therefore continue to engage our stakeholders in the full understanding that they recognise that we do not take their support and encouragement for granted.
We also take the point that despite all of the engagement that may have gone into repealing the old land use charge law and enacting the new one, the law is still far from perfect. But as Governor Ambode has amply demonstrated in capitulating to the demands of many people regarding a review of the charges, we are keen to see that it is as just and fair to as many Lagosians as is humanly possible.
This predilection to humaneness and fairness is exemplified even in the rates charged in the Land Use Charge regime.
Mr. Adeniyi seemed to base much of his argument on one Land Use Charge demand notice issued in 2001 but this is the exception and certainly not the rule. Majority of land use charge demand notices are accurate and a good number of property owners have long paid up.
75 out of every 100 properties in Lagos State are currently professionally valued at less than N10m. What this means therefore is that 75 out of every 100 hundred properties in Lagos will pay a Land Use Charge of N5,000 annually, equivalent to some N417 per month to the Lagos State Government. This is up from the N1,200 annually (equivalent of N100 monthly) which the old law stipulated.
Properties valued between N10m and just under N20m make up another 12 percent of the properties in Lagos, while those valued between N20m and just under N50m make up 9 percent. Collectively, therefore, 96 percent of properties in Lagos are valued below N50m.
By today’s rates, owners of properties valued at N45m for instance and who reside in such properties are required to pay a land use charge of N17,380 annually which translates to N1,454 monthly. Where the N45m property is partially owner-occupied while some other part of it is let out commercially, then the rate becomes N51,840 annually or N4,320 per month. And where the property is a fully commercial one, then the annual land use charge payable is N91,200 annually, the equivalent of N7,600 per month.
The rates for properties in the N10m to under N20m bracket are even much lower.
Only 2 percent of properties in Lagos are currently valued between N50m and N99million.
What this shows and what we encourage commentators like Mr. Adeniyi to investigate with more circumspection is that the Land Use Charge regime is nowhere as “punitive†as it has been depicted. Indeed, as we have repeatedly stated, it is a progressive form of taxation that affects the rich and the poor in an asymmetric fashion. Only a tiny fraction, less than one percent of the overall population of properties in Lagos for instance (0.3 percent actually), is currently valued at between N500m and N1billion or more.
We will continue to counsel that these bills are not cast in stone. Where property owners disagree with them, they can challenge them. And there are several avenues for doing so. We have a help desk at the Ministry of Finance dedicated to land use charge. Mediation is also an available option as is the tribunal where an agreement has been difficult to arrive at by either of the aforementioned approaches. A property owner may even choose to conduct the valuation of his property on his own, using professional estate valuers.
As may be inferred from all of the above, Lagos is steadily inching towards a future where citizens are empowered to pay their taxes on their volition without needing to receive demand notices or invoices first. This is one of the key objectives which the law seeks to achieve.
We apologize once again, for whatever pain we may have inflicted on Lagosians on account of the adjustments in the land use tax regime and trust that our dear citizens appreciate that this has certainly not been deliberate on our part. As His Excellency, Ambode has repeatedly stressed, the long run objective is to avert a collapse of infrastructure, while creating the foundation for a befitting future for all. We trust that the judgment of history will vindicate not only Ambode’s uncommon courage in the commitment to a vision of a better tomorrow for our offspring but also the treasured support in this regard, of the people of Lagos.
Bamigbetan is the Lagos State Commissioner for Information and Strategy
