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New Lagos Land Use Charge, a progressive taxation for development —Ashade

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Land Use Charge, which has dominated public discourse in the past weeks is a Lagos State property tax backed by the Land Use Charge Law of 2018. It is also a consolidation of ground rent, tenement rate, and neighbourhood improvement levy. Lagos State Commissioner in charge of the Ministry of Finance, Mr Akinyemi Ashade, explained the modality by which the new Land Use Charge regime would be implemented, including its advantages and purposes. Tunde Alao reports.

What is Land Use Charge based on?

LUC shall be payable in respect of all real estate property situated in Lagos State. The rationale for repealing and re-enacting the LUC Law was to address some identified challenges which include: Lack of clarity on the LUC formula to support self-assessment; Obsolete rates which had not been reviewed in over a decade; The need to improve LUC administration efficiency, among others. The new LUC Law also provides a robust legal and regulatory framework to support ongoing LUC administration reforms aimed at growing the state’s economy.hat is Land Use Charge based on?

 

Granted that property owners agreed to comply with the new LUC regime, what area of the economy does government plan to plough the gains?

Governor Akinwunmi Ambode’s passion for infrastructure development has never been in doubt. His urban renewal, infrastructure development and employment drive will require a huge amount of money, not to mention health care delivery, housing, education, or security. Therefore, to meet the infrastructural challenges, occasioned by the ever-growing population, we would channel the proceeds of new Land Use Charge to tackle  $50 billion infrastructure deficit in Lagos within the next five years. To continue to renew our infrastructure and build new ones, we would need to spend $50 billion. With this reality, if we have to spend all our budget without doing any other thing, it would take 19 years to be able to fix the deficit and if the state government borrows money to meet the need, it would be at high-interest rates. By the way, who will borrow us such money? Therefore, the new tax regime, which is property taxation system.

 

But there have been uproars from some sections of the society, like, the Manufacturers Association of Nigeria (MAN), calling for a return to the status-quo. What do you have to say on this?

Look, sincere residents, especially, property owners would agree with the government that increase in the LUC was progressive because it collapsed three previous taxes into one. Besides, the previous LUC which became obsolete was supposed to be reviewed every five years but was not updated for 16 years, hence the new LUC, which captures current economic realities. Also to reveal government’s consideration, openness and transparency of the new regime, it has different rates for property owners and relief of 40 percent across the board. The state government will implement the new tax regime with a human face. Lagosians must trust us with the tax, we are going to invest it in infrastructure judiciously.

 

Looking at the complaints here and there as regards how the new approach would affect businesses, what is your view?

The new LUC was factored to facilitate ease of doing business. Under the new Land Use Charge Law, owner-occupiers would be expected to pay 0.076 percentage of the value of the assessed property. For example, retirees and those with any disabilities would be exempted from any form of payment. There is also an assurance that the government would protect tenants whom landlords might want to exploit because of the LUC.

 

Some have raised fears of possible reduction of investments in real estate in Lagos. How plausible is the argument?

How will that happen? To start with, is tax payment a statutory obligation or punitive legislation? If it’s part of civic responsibility of citizens to pay tax, where is the error in paying land use charge? What I think people should be talking about is fairness of valuation, whether it’s arbitrary or just. And if you look at what we have been saying, you’ll see the sincerity of purpose on the part of this government as far as land use charge issue is concerned.

 

What is the formula for calculating LUC?

The formula that shall be used to determine the annual amount of LUC payable is for example,  LUC = (Land Value + Building Development Value) x Relief Rate x Charge Rate, and the interpretation is [(LA x LR) + (BA x BR x DR) x RR x CR], Where LA= area of the land parcel in square metres; LR= average Market Value of a land parcel in the neighbourhood, on a per square metrebasis in Naira based on Market Value property as determined by professional valuers appointed the Commissioner for Finance for that purpose

“To tell you how considerate government is on the issue, there is 40 percent relief for all property liable to LUC. Also, a 10 percent relief for owners and occupiers with persons with disabilities; a 10 percent relief for owners and occupiers of 70 years and above, a 10 percent  relief for properties above 25 years; a 5 percent relief for properties occupied by their owners for over 12 years, a 20 percent relief for non-revenue generating federal and state government property, and 20 percent partial relief for non-profit making organisations.

In addition, some properties are exempted from the LUC payment, such as properties used for public and religious activities, properties used as registered educational institutes and charitable activities, properties occupied and owned by pensioners of 60 years and above, public cemeteries and burial ground and all palaces of recognised Obas and Chiefs in the State. Apart from being a statutory responsibility to collect or pay tax, Governor Akinwunmi Ambode’s passion for infrastructure development has never being in doubt. His urban renewal, infrastructure development and employment drive will require humongous amount of money, not to mention health care delivery, housing, education, or security. Therefore, to meet the infrastructure challenges, occasioned by the ever-growing population, we would channel the proceeds of new Land Use Charge to tackle  $50 billion infrastructure deficit in Lagos within the next five years.

 

 

 

 

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