Lagos and the land use charge controversy

Recently, as part of measures to address infrastructure deficits and shore up its revenue base,  the Lagos State government came up with an amended Land Use Charge Law which imposes various charges on house owners in the state. No doubt, the ambitious plan of the government to make Lagos a mega city must come with a number of fundamental challenges. These challenges require pragmatic measures to tackle. The state has to create an enabling environment to boost local and foreign investments and generate funds for service delivery and good governance. As the nation’s economic hub, Lagos perhaps suffers most from the decades of inept political leadership in the country. Seamless rural-urban migration puts undue pressure on infrastructure, and any dislocation in its temperature tends to result in a societal disequilibrium in the country as a whole. However, in the quest to attain the ultimate goal of a mega-city, the government can ill-afford to discountenance the welfare of the majority of the citizens and other stakeholders who, right now, are up in arms against it over the new law.

To justify the amendment to the law which was first enacted in 2001, the government said it was meant to address some identified challenges and give fillip to its “passion for infrastructure development, urban renewal and employment drive, all of which require proper funding.” Consequently, it envisaged that the proceeds from the implementation of the law would be used to “tackle the $50 billion infrastructure deficit in Lagos within the next five years.” Dismissing insinuations of multiple taxations, the government explained that the LUC was a tax regime that combined three hitherto separate taxes: tenement rate, ground rent and neighbourhood improvement tax.

However, because of the outrageous charges imposed on home-owners, the move has been greeted with public outcry in the state. By any standards, the fact that critical stakeholders like the Manufacturing Association of Nigeria (MAN), the organised labour and professional bodies such as the Nigerian Bar Association (NBA) are currently remonstrating against the law means that there is a need for further engagement among all the interested parties in the state. This point was aptly captured by the Nigerian Institution of Estate Surveyors and Valuers (NIESV) in its reaction to the new law. According to the organisation, the lawshould havee been anchored on the basic principles of taxation, meaning that the government should have concluded the valuation exercise before adjusting assessment figures.

NIESV asked the government to undertake an upward review of the relief rates to accommodate provision for maintenance of cost and review the charge rate  to take cognisance of rental trends. It also asked the government to produce a Valuation List in each local government area for the public to see. Given the foregoing, there are valid grounds for believing that the opportunity for people to make meaningful inputs before the 2001 law was reviewed was not fully harnessed, thus giving leverage to those insinuating that the whole process was predetermined.

From the general complaints and objections to the law and the response of the state government, it is clear that the bone of contention remains the percentage of increase, which many perceive as arbitrary and anti-people. Some have also said the law undermines the 1999 Constitution (as amended) in seeking to deprive local governments of their primary role, especially in revenue generation for their upkeep and sustenance. Opposition to the law is also premised on time-tested economic theories on inflationary trends, as both property owners and tenants will bear the domino effects of the new law. Aggrieved stakeholders believe that the tax would lead to increase in the general cost of living, especially as it affects food, transportation and accommodation and could compound the existing challenge of job losses and general insecurity.

While the state government must not deviate from the social contract it signed with the electorate, those agitating against the LUC should accept the olive branch offered by it for dialogue. The law cannot be said to be cast in iron, and it is salutary that the government is willing and ready to engage all stakeholders on the grey areas in it. The government, we believe, appreciates the imperative of peace and stability in consolidating growth and development. It will thus be preposterous to create a climate capable of driving away investors and compounding the pains of the impoverished citizens, especially workers.  High net worth property owners and companies, in trying to evolve coping strategies, are bound to transfer the effects of a harsh tax policy to workers. The obvious communication gap that has resulted in the current impasse should be tackled. The issues should be resolved amicably and without further delay.