Valuers demand review of charge rates, reliefs
Following the controversy trailing the Lagos new land use charge (LUC), especially the mode of valuation adopted for the exercise, the umbrella body of estate surveyors and valuers have formally articulated key suggestions and grey areas with contradictory provisions, which they are recommending to the government.
The body – the Nigerian Institution of Estate Surveyors and Valuers (NIESV) observed that the rise in the rates has significantly cut into the annual rental income, which could be generated from some property.
“This makes payment of the this annual charge difficult. This could also lead to increase in rents by landlords to meet up with the tax weight, while being a disincentive for new developments.”
It urged the government to have a mechanism to limit the amount payable within the highly percentage of the net annual rental income on assessed property as a benchmark.
In its submission signed by the Lagos State Chairman, Olurogba Orimalade, the institution recommended a holistic review of the charge rate to take account of the rental trend which in most locations is either stagnant or going southwards to accommodate most of the payers, who can only pay from the property income.
Expressing worries that property value for 2018 has been adjusted upwards without the valuation, NIESV appealed to government to conclude the valuation exercise before adjusting assessment figures based on valuation.
Similarly, to enhance engagement with the Lagos State Government on the issues, the institution called for an upward review of relief rates to accommodate provision for maintenance cost and other outgoings.
On the depreciation rate, NIESV stated, that the rates adopted for depreciation is most inappropriate as the rate could be as high as 40 per cent depending on the age and the repairs state of the property .
They called for the production and display of valuation list in each local council for all stakeholders to reduce perception of arbitrariness and increased compliance.
This, it said, makes it easier for stakeholders to compare their assessment with that of neighbouring property.
The institution made its presentation at a stakeholders’ forum organized by the Lagos Chamber of Commerce and Industry, LCCI, where the stakeholders included; the Organised Private Sector (OPS), estate developers and other stakeholders.
Orimalade stressed that need to use the depreciated replacement cost approach to valuation on the method proposed to arrive at the assessed value as clearly defined in the law.
While commending government’s efforts to commence the enumeration exercise in the state, NIESV said, through this process, it would help government obtain the real values of the property as well as provide the necessary data on the housing stock in the state.
Meanwhile, the Organised Private Sector (OPS), comprises of Manufacturers Association of Nigeria (MAN), Nigeria Employers’ Consultative Association (NECA), Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), National Association Small and Medium Scale Enterprises (NASME) and National Association of Small Scale Industries (NASSI), has expressed their grouse with the LUC.
NECA’s director of membership, Mr. Timothy Olawale, who presented the position of OPS, queried the process of reviewing the law, saying it does not meet the least practice in legislative procedure.
Although, there was a public hearing before the law was passed, however from what transpired at the event, the public, OPS said, was against the review given the effect it would have on the property owner going by the depreciation and devaluation of the Naira.
According to the body, it is shocking that the lawmakers failed to take into account the outcry of the citizenry against the then planned increase, even though, the whole process of the public hearing was for the legislators and the executive to gauge the feelings and dispositions of the public and residents to the review.
OPS stressed that while nobody ever contested the rights of government to exercise its right to review the applicable law every 5 years, as provided in the old law, if government has chosen over the years not to review, it has nobody to blame but itself.
OPS, said it did not agree with government’s enormous review based on the fact that the two basic variables for determining residents’ liability under the law, namely, the base wage of the property owner and the assessed value of the property have been reviewed upward.
According to the OPS, whereas the income of Nigerians in the past 5 years, salaries and rental income alike, has been bastardised by inflation rate, the assessed value of the property has been reviewed upwardly over 500 percent.
The action of reviewing these two variables upward at the same time, OPS said, is callous, insensitive and inconsiderate.
Also, the group said it couldn’t understand the rationale for the application of LUC to vacant lands that have no yielded income to the owners.
It also pointed out several abhorrent provisions in the law on penalties for default in paying the LUC within the period specified in the Demand Notice, which included the provision for government to appoint a temporary Receiver/Manager to administer the property where the LUC Demand Notice is not settled after 135 days of the Tax Payer’s receipt of the demand Notice until all the outstanding taxes, penalties and administrative charges are paid.
While advocating the retention of applicable base percentage, it called on government to use a stakeholders’ forum, which should include professionals in this field to determine the variables, which would be used in arriving at acceptable goal.
It also advised that government learn form the historical perspective, on how the uproar about the LUC was resolved in 2002, which was not resolved by government ‘s insistence on its position or ramming down its views on the throats of residents but through social dialogue and compromised outcome.
Also the LCCI through its president, Mr. Babatunde Ruwase requested that the implementation of the new land use charge be put on hold, while the grey areas are being sorted out.
According to him, some key provisions in the law need to be fine-tuned in the interest of fairness, equity and natural justice.
He stressed that the law stipulated that some conditions should occur before implementation which include that the commissioner may appoint property identification officers, professional valuers for the purpose of implementing the law, that the value of the annual charge rate will be set by the commissioner, subject to the approval of the House and published in the state official gazette.
Stressing that there is no evidence that these conditions have been complied with, Ruwase said, the spirit of this provision was to get the buy in of the stakeholders before implementation as well as to adequate disseminate information to critical stakeholders.
He noted that one of the key tenets of democracy is inclusiveness, participation and dialogue. He commended the Lagos state government for being receptive to dialogue.
“As business community, we appreciate what the state government has been doing, especially the investment in infrastructure and security. We are therefore willing and ready to pay our taxes. Indeed, over 90per cent of the current IGR of over N300 billion generated in the state is coming from the private sector,” he said.
Speaking at a stakeholders’ forum, the State’s Commissioner for Finance, Mr. Akinyemi Ashade said the Land Use Charge law is aimed at entrenching a regime of self-assessment, which would allow property owners to make their own calculation and know their rate with the help of professional valuers.
“The Land Use Charge law institutes the regime of self-assessment. The intent of the reviewed Law is for Lagosians to be able to compute the amount payable on their respective property by themselves.
“You don’t have to wait for demand notices before your pay your charges, you can calculate it yourself, and engage us. You can make your payments voluntarily. Do it yourself, let’s dialogue and let’s get the basis right.
“The Law does not tax the market value of properties. It gives a general discount rate of 40 per cent to all property owners in the state. The land use charge Law is holistic and fair to everybody. It is quite discriminatory. It is not one cap, fit all. Market value of properties in Ikorodu and Ikoyi can never be calculated as the same.”