Stakeholders divided over reduced Lagos Land Use Charge

…it doesn’t meet our expectations, says OPS

Maureen Ihua-Maduenyi

Rather than the succour that the review of the Land Use Charge by the Lagos State Government is expected to bring to taxpayers, stakeholders have expressed divergent views about the development.

While some applaud the government for considering a review of the rates, others have said that it is a mere scratch on the surface of the problem and that the concerns of residents have not been properly addressed.

Stakeholders had criticised the increase in the LUC rates, saying that because of the poor state of the economy, it was capable of crippling businesses and the financial wellbeing of Lagos residents with the attendant multiplier effects.

The Director-General, Nigeria Employers’ Consultative Association, Mr. Segun Osinowo, told The PUNCH that the reduction was only based on the invoice value of the charges, which he said were still 600 per cent above the old rates on the average.

The Lagos State Government had on Thursday announced the reduction in the LUC by cutting the commercial rates by 50 per cent; owner-occupier with third party by 25 per cent; and owner-occupier, by 15 per cent; it also waived penalties for late payment across board, gave tax credits for LUC charges already paid and introduced installment payment system.

Breaking the charges down, the state government noted that the owner of a commercial property valued at N20m for instance, earlier billed N91,200, would now pay N45,600 per annum; while properties occupied by the owner and third-party (tenants) and property used for industrial and manufacturing purposes valued at N20m would pay N23,040 per annum, down from the previous sum of N30,720.

For owner-occupied property valued at N20m, the charge was reviewed from the previous N9,120 to N7,752 per annum.

The review also included 40 per cent general relief; 10 per cent for properties owned by persons living with disabilities; and 10 per cent for properties up to 25 years old.

Osinowo, however, stated that the reviewed charges were unacceptable as they were unilaterally done by the government.

He said, “We want to thank the government for reducing the LUC by between 15 and 50 per cent but we want to point out that it was done unilaterally and that is not acceptable to us. The reduced rates will not address the concerns of residents, because they are based on invoice value, which is still about 600 per cent above the old rate. If you are giving relief predicated on the invoice value, it means that the effect of that on the residents is still very high; nothing less than 400 to 450 per cent.

“So as high as the 15 per cent to 50 per cent reduction might look, in real terms, they have not really addressed the situation. The Organised Private Sector rejects this token reduction; it doesn’t answer the questions and queries we raised. We expect the government to reduce the base percentage rates or review significantly the assessed market values. These are really the issues; any relief that fails to reduce these will not provide succour to the taxpayers.”

He added that the only way to address the issue was for the government to engage the OPS and other stakeholders in constructive dialogue.

“The government has been shying away from constructive dialogue with stakeholders; the only way to resolve this issue is for the government to convene a dialogue. We want to stress the fact that where the government fails to embrace constructive dialogue to resolve this issue, the OPS might be compelled to go to court on this matter and seek the suspension of the law as they did in 2002. As far as we are concerned, this issue has not been resolved at all,” he stated.

The Chairman, Nigerian Bar Association, Ikeja Branch, Mr. Adesina Ogunlana, said the reduction was not acceptable as the government had not explained how it arrived at the figures on which the charges were based.

He stated that the branch had fixed today (Monday) to review the issues and take action.

Ogunlana said, “Speaking for myself and as a leader of the branch, that reduction is unacceptable, because it is still fraudulent, illegal and undemocratic. It is fraudulent because they have not told us how they came about the figures and percentages.

“That law has to be reviewed and cannot be done by proclamation alone, which they have done. If they had announced the suspension of that law, it would have been a different thing; but to say they are announcing reduction is not acceptable to us and the struggle continues.”

According to the Building Collapse Prevention Guild, the reduction has not addressed the issues as the foundation of the assessment, which is the crux of the matter, has not been touched.

The BCPG said the government should explain how it arrived at the example of N20m base value, where it was situated and what constituted commercial or owner-occupied property.

“The whole exercise is faulty and the government should admit that and have a rethink,” the guild noted.

However, some stakeholders feel that it is a positive sign for the government to have considered a reduction of the rates following the outcry of residents.

The Chairman, Nigerian Institution of Estate Surveyors and Vauers, Lagos Branch, Mr. Rogba Orimalade, said the government should be commended for the reduction, while it worked on the grey areas.

“For us at NIESV, we applaud what the government has done; however, we have put up a technical committee to iron out certain grey areas, which we feel can still have an impact on the LUC in terms of asking for further review. We are aware that the state government is going back to the House of Assembly and we want to take advantage of that, but the review is a welcome development,” he stated.

Orimalade noted that the main outcry had been that the relief was not enough to reduce the impact on the capital value of the tax.

He said, “What the law offers is a reduction of the tax value overall by 40 per cent before the charges. The argument is that it is not right for the government to use this method and not really consider the annual rental approach to bring it down.

“While we understand the reason why the government is using that method, the impact of the capital value has to come down in such a way that when you are looking at the rent of a property, that figure should not be competing with it or even over it. Previously, that is what has been happening, which makes a mockery of investors who want to invest in real estate in Lagos.

“Majority of the people living in Lagos do not own their houses and there is no working mortgage in Nigeria yet. So, what has happened is that a lot of people pay rents and any spike in any other rate will make the landlords pass down the rate and it will have a multiplier effect, which is why we should leave out the argument of what is a suitable method, the bottom line is if the relief at the end of the day is enough to reduce the impact of the capital value. That is the analysis that must happen now.”

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, while commending the review, stated that stakeholders still had the opportunity to discuss with the state government.

“We should commend the government for the response and the fact that the law is going back to the House of Assembly is an indication that there will be further amendment on it. When in negotiation, you may not have your way 100 per cent, but since the government has shifted ground, we have to study the situation and if there are other things we need to do, we will; but the negotiation has to continue,” he added.

Orimalade advised stakeholders not to overreact but ensure that what the government had done would have a significant impact on taxpayers.

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