Rationale for Hike in Land Use Charge – LIRS Chairman, Subair, explains
• Says residents can appeal, Lagos targeting N720bn IGR in 2018
The Executive Chairman of the Lagos State Internal Revenue Service (LIRS), Mr. Ayodele Hamzat Subair, Monday hinged the recent decision by the state government to significantly increase the Land Use Charge (LUC) by between 200 and 500 per cent on the need to raise the state’s internally generated revenue (IGR), in order to bridge the wide infrastructure gap in Lagos.
Subair said this while speaking in an exclusive interview with THISDAY and its sister television network, Arise News Channel.
In a bid to increase the IGR and expand its tax base, the Lagos State Government recently repealed the Land Use Charge Law of 2001, and replaced it with a new Land Use Charge Law this year.
The government also extended the period for the payment of all annual LUC demand notices for 2018 to April 14, 2018.
This, it explained, would enable property owners and affected occupiers take the option of enjoying the discount available for prompt and early payment of LUC invoices.
However, the recent amendment of the LUC Law has been described by the organised private sector and residents in the state as draconian, alienating and a gross disregard by the state government for the well-being of both corporate and individual residents in Lagos State.
Several residents have vowed to challenge the enforcement of the new LUC law in the courts and have questioned if they are getting value for the high taxes, charges and levies imposed on businesses and residents in Lagos State.
They have also warned that the new LUC law would inevitably be transferred by landlords to their tenants who are already contending with job losses brought on by the economic downturn, dwindling disposable incomes, and an inflationary environment.
In reality, the new law will require property owners in Lagos State to pay at the very minimum over 200 per cent and in some instances over 500 per cent as LUC.
The law, which also contains penalties for payment default within the stipulated period, has continued to attract condemnation from stakeholders.
But the LIRS boss explained that Lagos has a huge infrastructure gap, pointing out that following the drop in oil prices as well as the reduction in the Federation Account allocation to the state, the only way the state could fund its massive infrastructure projects was to raise its IGR, the LUC inclusive.
“Basically, we have to try and raise our taxes within the state. The Land Use Charge is just one of the various types of charges that have been introduced.
“Now, if we start to catalogue what the state needs to expend in terms of developmental projects, it is huge. And already you can see that under the administration of Governor Akinwunmi Ambode, he is very eager to try and turn things around in Lagos.
“There has been a lot of neglect over the past and it has built up for so many years. There is serious under-investment in infrastructure projects,” Subair explained.
He, however, noted that a lot people in the state most times mistake levies for taxes, saying that taxes generally are compulsory payments that are made by residents and they don’t have to get a direct benefit from the taxes.
On the other hand, charges and levies are payments that they make, for which they have direct benefits.
According to Subair, the previous law on the LUC in the state was a bit defective in the way it was being computed.
He added: “You would see different buildings of similar description having wide-ranging disparities on the charges. So, there was the need for the increase and standardistion.
“Again, the Land Use Charge has not been renewed for about 16 years. So, the government deemed it fit to try and review the law. In the past, a lot of property were seriously undercharged.
“You could see a house on Queens Drive, Ikoyi, that is paying N18,000 and the house is worth probably hundreds of millions of naira or even billions.”
Subair revealed that currently, the formula for computing the LUC has been simplified, saying that it now comes with valuation of the property.
Property owners in the state, he further pointed out, are allowed to carry out a self-assessment on the LUC, adding that the formula is very easy to follow and the market value can be obtained from qualified real estate agents or surveyors.
He explained: “One can self-assess and pay ahead of the demand notice. And if you have self-assessed, you will qualify for the discount because you paid ahead of time.
“The good thing about this Land Use Charge Law again, is that everybody has the right to appeal. You can appeal it if you feel that it is an unjust amount. It is very easy.
“There is a help desk at the Lagos State Ministry of Finance and they are willing to listen to everybody. At the same time, there is going to be an appeal tribunal. So, anybody who feels aggrieved can write to the tribunal and get justice.
“Nobody will seal off your premises within that period. The tribunal almost acts as a court of competent jurisdiction. So, the moment that you file an appeal, everything is put on hold.
“Again, it is not always good to look at percentages because if something had been very low for many years and then you try to increase it, if you look at the percentage, you might say it is a 400 per cent hike.
“But if you look at the quantum itself, it might not really be that great. So, lets us not look at it in terms of percentages.”
Also, while responding to a question on the implication of the astronomical increase on households and firms, especially in an economy that is just emerging out from recession, Subair said: “Generally, if you look at the profiling of our IGR and take it down to what is generated by LIRS, the salaried workers are the ones that are really paying taxes.
“Seventy to 75 per cent of our numbers (as a percentage of LIRS’ generated revenue) come from Pay-As-You-Earn (PAYE) and direct assessment.
“PAYE alone is between 70 and 75 per cent, while direct assessment which is usually what high networth individuals pay, is about five per cent of our total collection.
“So, we can see that it is a bit lopsided and really and truly, there has to be other means of this type of taxation.
“You mentioned that the Land Use Charge has gone up and will be transferred to tenants. Yes, at the end of the day, the ultimate person who bears the brunt could be the tenant, but it is really the property owners that we are looking at.”
He added: “We are not just raising revenue to put up infrastructure, there is also provision for social services. There are all sorts of social services that need to be overhauled.
“It is a total regeneration as far as the administration is concerned over this issue of infrastructure. Really, if you look at the performance of this administration in the past two years, there have been a lot of investments in infrastructure.
“If you go to Lagos East and Lagos West, there is a big impact on the lives of people. If you go to Alimosho, Iju, and several other areas, lot of streets are now opening up.”
He further disclosed that the Lagos State Government was targeting an IGR of N720 billion this year, while the target for the LIRS in 2018 was put at N440 billion.
According to Subair, in 2017, LIRS alone generated about N285 billion, while the state generated a total of N340 billion in the same year.