By Chris Otaigbe
Lagos was greeted with some level of relief on August 5, 2020, when the Babajide Sanwo-Olu-led government decided to repeal his predecessor, Akinwunmi Ambode’s Land Use Charge (LUC) Law.
Itself, a repeal of the 2001 LUC, Ambode’s LUC, which was enacted on 29th January 2018, to provide for the consolidation of Property and Land-based charges and make provisions for the levying and collection of Land Use Charge In Lagos State; otherwise referred to as the Land Use Charge Law of Lagos State, 2018 (the “LUC Law”).
Similar to the 2001 law, the LUC Law provides for a unified ‘Land Use Charge’ which consolidates all property and land-based rates and charges payable under the Land Rates Law, Neighbourhood Improvement Charge and all Tenement Rates; and “provides that such other rates shall cease to apply to any property on which land use charge has been levied.”
Unlike the 2001 law, the LUC Law goes a step further to repeal the Land Rates Law and Neighbourhood Improvement Charge Law, as well as the Land Use Charge Law, 2001 thereby creating a clearer regulatory framework for land-based rates and charges within the state.
Some of the properties exempted from payment of that Land Use Charge included:
Property owned, occupied and registered in the name of the religious body and used exclusively as a place of worship or religious education;
Public cemeteries and burial grounds; unlike the 2001 law, which applied to both public and private cemeteries;
All palaces of recognized Obas and Chiefs of Lagos State; unlike the 2001 law, such property will lose its exempt status if it is leased to private entities for revenue generation.
What could be termed a radical and daring departure from the 2001 LUC, Ambode’s Law insisted that ‘Family compounds’, once exempted under the 2001 law, were not to be exempted from the properties list.
The LUC Law provides that ‘owners or occupiers of a lease’ are liable to pay Land Use Charge. The law also identifies both occupiers of leases of less than 10 years and occupiers of leases of 10 years or more as liable to pay Land Use Charge.
This was a notable change from the 2001 Land Use Charge Law, which made this an owner liability. ‘Occupier’ is defined to include both lawful and unlawful occupiers of the whole or part of property, and only excludes lodgers (being licensees).
Where Lagosians began to kick against Ambode’s LUC, at the time, was in the calculation of Land Use Charge.
Similar to the 2001 Law, the LUC Law calculated Land Use Charge by multiplying the market value of the property (i.e. the sum of land value and building development value) by the Annual Charge Rate.
Unlike the 2001 Law, market value under the 2018 LUC Law was to be determined by professional valuers appointed by the Commissioner of Finance. Of course, the fear by Residents and Property Owners, was that this could be subject to abuse and corruption since it is how much the Valuers say your is worth, is what would be recognized as its monetary value by the state under its LUC.
The, now repealed, LUC Law also included a new ‘Relief Rate’ which was applied to the market value and charge rate. A General Relief Rate of 40% was applied in calculation of Land Use Charge.
Specific Relief Rates were also available at various rates ranging from 5% (for long occupiers of property) to 100% (for pensioners). Specific Relief may be applied for by disabled persons, aged persons, owners/occupiers of old properties (25 years and above), Federal and State-owned property, non-profit making entities and for timely payment of Land Use Charge (within 15 days). Applications for Specific Relief are made to the Commissioner of Finance with any relevant supporting documentation.
Similar to the 2001 Law, failure to pay Land Use Charge within a specific period was to attract a penalty.
Thus, defaulters of that LUC risked liability and penalties that ranged from fines to some months in jail as penalty for non-compliance with the provisions of the LUC Law was increased from ₦100,000.00 to ₦250,000.00 or imprisonment for a period of three months.
Where Land Use Charge was not paid after 135 calendar days, the property was deemed liable to enforcement. Different from the 2001 law, the cancelled LUC Law, also granted Lagos State the right to file and maintain a civil action against the owner or occupier of property, or their agent.
These Provisions were what enraged Lagosians against Ambode, who up until then, had developed a soft spot for the immediate past Governor for his bold and aggressive infrastructural development of the State. At the time, his achievements had increased his rating to such a height; he was almost meeting his predecessor, Babatunde Fashola’s tall and enviably elite status as the best Governor of the State since 1999.
Barely 24 hours after the announcement, property owners in the state came out to criticize the new law, describing the timing as insensitive, according to the report published in the March 5, 2018 edition of Daily Trust online.
A resident who pleaded anonymity said he had just received the land use charge notification for that year and the value has gone up 450 per cent. According to him, the justification was that the Lagos State House of Assembly on January 28, re-enacted the land use law, which has necessitated an adjustment in the tariff.
“This adjustment became effective on February 8. I have looked at the basis for calculation and not only has the percentage rate increased from 0.394 to 0.761000, they have valued the house far in excess of its market value to maximize revenue, who hikes taxes by 450 per cent with 11 days’ notice? To compound matters there’s a threat of penalty payments ranging from 125 per cent to 200 per cent of this bill if payment isn’t made between April and August. How on earth can we continue like this?” the resident asked.
His sentiments resonated with most of the complainants who spoke with Daily Trust on the new law. The organized private sector also appeared to share similar sentiments with the general public on the Law.
President of the Nigeria Employer Consultative Forum (NECA), Mr. Larry E. Ettah, at a press conference, said the recent amendment of the land use charge law was a classic case of insensitivity, alienation and gross disregard of the current state of wellbeing of both corporate entities and residents.
“In reality the new law expected property owners in Lagos State to pay at the very minimum a monstrous, appalling and callous increase of over 200 per cent, and in some instances over 500 per cent in Land Use Charge. It is not as if the income of a property owner has gone up significantly to justify this outrageous law. More so, the real estate sector continues to wallow in deep recession with high vacancy rates. To compound matters, there is a repugnant and odious penalty payment ranging between 125-200 per cent if payment is not made between April and August.” Ettah said.
NECA threatened, then, that the organized private sector (OPS) would do everything legal and legitimate; including social resistance, to challenge this “unfair and unjustifiable law.”
But top management personnel of the Lagos State Government told Daily Trust that the new law had succeeded in harmonizing tenement rate, the land use charge and the neighbourhood development levy. He said there were misconceptions and lack of understanding around the new law and the numerous inherent incentives that came with it.
He noted that whatever was the valuation of the property involved, 40 per cent was immediately discounted. “For instance, the official said if a property was valued at N10m, a discount of 40 per cent would bring the value to N6m. The ground rent would be 0.7m, which translated to N7.60k for every N1,000 worth of that property. Therefore, for the N10m property, it will come to N7,600 for an owner-occupier. If the property is a commercial property, the amount translates to N76,000, not more than 10 per cent of the value of the rent. Where the property owner stays in the same property with tenants, the rate is 0.25 per cent, which in the case of an N10m valuation, will translate to N25,000.” The State Official enlightened.
Civil society, Lawyers and the public protested and expressed their displeasure against the Law as its spiral effect would affect the price of every other products and service in the state. From the tenant, who will now be made to pay more for house rent, to the supermarket, the market woman, the Private School proprietor, even Public schools with their surreptitiously spurious charges, the commercial transporter and so on and so forth.
Some of the groups that cried out against the 2018 LUC were the Nigeria Bar Association (NBA), National Conscience Party (NCP), among others, protested, warning Ambode against implementing the Law.
Ikeja Branch of the Nigerian Bar Association (NBA), along with the National Conscience Party (NCP), Committee for the Defence of Human Rights and Joint Action Committee, among others protested against the implementation of the Lagos State Land Use Charge Law 2018 by the state government.
The groups stormed the Lagos State Government’s secretariat in Alausa, Ikeja, to protest against the new law, saying it had led to a hike in the levies charged by government on property.
Tagged ‘Hell Tax Must Go,’ the protest started from the Lagos State Magistrate’s Court in Ikeja, from where the protesters marched to the Government House and the Lagos State House of Assembly complex in Alausa.
The protesters displayed placards, some of which read, ‘We are not selling houses’, ‘Lagos is not only for the rich’, and ‘Land Use Charge increment is wicked and oppressive’.
Submitting a protest letter to the Assembly, the Chairman, NBA, Ikeja branch, Adesina Ogunlana, said lawyers and members of the civil society organizations were opposed to the law, which he described as a “Pharaohoic tax regime,” asking the government to reverse it.
Ogunlana said Governor Akinwunmi Ambode must not take Lagosians who voted for him for granted by imposing heavy taxes on them.
“Must Lagos become a so-called paradise at the expense of the lives and limbs of Lagosians? Ambode should not let people regret voting for him the first time and go on to reject him for a second term,” Ogunlana said.
The NBA branch chairman pointed out that that taxes introduced by Ambode’s administration would further lead to job losses. Under pressure to explain and possibly calm nerves in the state, the past governor called a forum where he met with big business Players in the State to state the government’s reasons for the new LUC.
Present at that event were heavyweights in Nigeria and global business concerns but whose foundation and fortune are anchored in Lagos.
They included former governor of Cross River State, Mr. Donald Duke; founder, First City Monument Bank Group, Otunba Subomi Balogun; Chairman, Premier Lotto Limited, Chief Kessington Adebutu; Chairman, Eleganza Group of Companies, Alhaji Rasak Okoya; Chairman of Zenith Bank, Mr. Jim Ovia; founder United Bank for Africa (UBA), Mr. Tony Elumelu; Chairman Honeywell Group, Dr. Oba Otudeko; former Minister of Industry, Chief Nike Akande, Chairman, Channels Television, Mr. John Momoh, members of the diplomatic corps, top business owners, among others.
It was Ambode’s perfect opportunity to state his case and he did.
He began by assuring the well-attended forum with the Organized Private Sector tagged “Lagos Means Business”, that the review of the law was not a deliberate attempt by the government to overburden property owners but a decision taken in the overriding interest of the future of Lagos.
“The law was made in 2001. It provides that every five years, we should review it and also find a way to increase. 15 years after in 2017, the law has never been reviewed. Now, the question is this; those who are having commercial properties, the rental income they were getting in 2002 as against the rental income they are getting in 2017, is it the same? The level of infrastructure that existed in 2002 as against what has happened in the last 15 years, are they the same? Did it not come at a cost? So, why is the market value of the property that you built with one million naira, 15 years after, you are selling at N20million. Why do you think somebody who is a buyer will pay N20million for it? Is it not because of the facilities around the property? So, we have to sacrifice; that is how it works everywhere. So, somebody comes and say we have increased by 400 per cent. The question is the 400 per cent of what? You were paying N10,000 before, now we say you should pay N50,000 and you are calculating and turning statistics upside down by saying it is 400 per cent.” He said.
Asking who is the one that will take care of the ones that are free such as the Owner-occupier does not need to pay, Ambode explained that it is the commercial aspect that people were complaining about.
“Why have we increased the rate? We should have been doing this every five year but I am looking at it if I must sustain the level of my vision, I have to give something back to people. I don’t have to come and meet you if I continue to borrow money, but we are borrowing to punish you ultimately which is not what we want because it is even the taxes you pay that would pay the interest and the principal. Somebody needs to tell us the bitter truth for us to sacrifice together and that is what we have done,” former governor Ambode submitted.
When one considers that the state requires a minimum of $50billion over the next five years to bridge its infrastructural deficit, Ambode’s argument at the time may not be out of place.
Assuming the entire budget of N1.168 trillion for 2020 is spent only on infrastructure development, Lagos will be left with a deficit of over N13 trillion and also require an additional 19 years of similar expenditure to fill the gap.
One of the former Governor’s concerns, at the time, was that out of the eight million taxable adults in the state, only about two million submitted their tax returns while only 700,000 actually paid their taxes last year.
“We are 24 million; taxable adults in Lagos is 8 million. The number of people that actually submitted tax returns in 2017 is two million and then only 700,000 people paid their taxes,” he said.
He said the current tax returns were not enough to cater for the capital projects ongoing across the state, adding that major cities across the world with thriving economies are sustained by the taxes paid by residents. Here is where one may differ with the former State Chief of Executive: His predecessor, who made Lagosians proud and happy to pay Tax, did so much with their Tax in the area of infrastructural development and did not have to repeal his (Fashola’s) own predecessor’s Land Use Charge to generate more revenue to do the state’s infrastructure for the eight years, he steered the ship of the state.
What Ambode could have done at the time was to make even the two million that were not paying Tax to pay. In other words, widen the Tax net and the revenue needed to push the envelope for infrastructure development would be there.
If he could succeed in running the state on the Tax of active 700,000 Lagos Tax Payers, one can only imagine how much he would have raked in more money with three times that number paying tax.
Perhaps, this may have been the thinking of Sanwo-Olu, for him to have come to the conclusion that there was no need inflicting Lagosians with more levies in this already punishing Covid-19 pandemic world.
Except the current Governor is thinking of expanding the Tax base for the state, the revenue to bridge the infrastructure gap of the nation’s economic capital may have to come from some other sources, through Taxes or Levies.
Sanwo-Olu, anchored his administration of the state on 5-point development agenda designed towards realizing his mission of ‘greater Lagos’ over the next four years.
The development framework, captured in the acronym, ‘THEMES’, consists of six pillars that define core areas of focus by his administration, components of which he defined in his inauguration speech.
They include traffic management and transportation, health and the environment, education and technology, entertainment and tourism and security and governance.
While Lagosians may heave a sigh of relief for the repeal of the dreaded Ambode LUC, it is wise to interrogate Sanwo-Olu off LUC windows, where he hopes to raise the revenue that will make enough money to move Lagos onto the level where it can achieve his THEME agenda for the state.
Such sources had better not be worse than the Egypt the residents are being taken from, otherwise Lagosians may not take such levies or taxes lying low. For them, two years of Ambode’s LUC is bad enough.
