LUCL Controversy and the Raging Storm

On 28 January 2018, the Lagos State House of Assembly passed the Land Use Charge Law 2018 to repeal and replace the Land Use Charge Law 2001. In this article, Lekan Olofinji reports and reviews the aftermath of the LCCI organized forum for the Government and private sector on the issue of the Land Use Charge.

Since the repeal and re-enactment into law of the Land Use Charge of Lagos state, all hell has been let loose. Stakeholders, private and public sector participants have not failed to air their views about what many have termed the astronomical rise in the Land Use Charge which was initiated in 2001 by the then governor of the state, Chief Bola Ahmed Tinubu.

The debate has continued to heighten and it seems the controversy it has generated thus far would not subside anytime soon

Lawyers, on the platform of the Ikeja Branch of the Nigerian Bar Association (NBA), last week fixed Tuesday, March 13, 2018 as protest date against what they term “excessive and arbitrary tax regime” in Lagos State, if after seven days Governor Akinwunmi Ambode failed to reverse new charges under the Land Use Charge Law 2018.

However, there was a positive angle to the drama created by the re-enacted law when Lagos Chambers of Commerce and Industry organized a robust forum to provide a medium of engagement between the Government and the organized private sector.

Akinyemi Ashade, Lagos State Commissioner, Economic Planning and Budget in his presentation at the forum hosted by the Lagos Chambers of Commerce and Industry (LCCI) and held at the commerce House on Idowu Taylor Street, Victoria Island said that the LUCL was a consolidation of three taxes; the tenement rate, the ground rent, and the neighbourhood improvement levy which should ordinarily be good for business.

According to the calculations, Owner-occupied property was put at 0.076% of the value of the assessed value of the property. Industrial premises of manufacturing concerns is at 0.256%, commercial property (used by owner for business purposes) – 0.760%, Residential property (Owner and third-party) – 0.256%.

Residential property (Owner and third party) invariably means an owner which invariably occupying a property and renting part of it out.

Ashade claims the Government is being fair to Lagosians and business owners alike since property taxes in other climes can be as high as 2%.

It has also been stated that Pensioners aged 60 years and above, who own properties they live in would not be charged as it was in the old law. Same applies to properties owned by Lagos state government

A 40% general relief is being handed to tax payers in the new law but it still doesn’t calm frayed nerves

Persons who have lived on a property for upwards of 12 years enjoy an additional 5% relief. Persons aged 60 years and above enjoy a further 10% for owner-occupied property

Persons living with disability enjoy a further 10% relief for owner-occupier property. In addition, paying the land use charge on time attracts additional 15% relief.

It is believed that 75% of property owners in Lagos will be paying 5,000 naira per annum on their property; and that’s for properties valued at 10 million and below. While early birds will enjoy 15% discount.

If Lagos has been good to your business, then it deserves something in return right?

I’ll bet a lot of people still don’t see the justification for this new Land Use Charge Law.

President of the LCCI, Babatunde Runsawe says government should create a tax-regime that is methodical, predictable, fair, equitable, inclusive and transparent

The representative of the organized private sector, Mr. Timothy Olawale as part of his recommendations at the LCCI says increase in LUC at more than 100%, which means a double of the old rate is unacceptable.

Of a truth, nobody is contesting the rights of the government to exercise the rights of review which ordinarily should come every 5 years as stipulated in the law enacted in 2001. Albeit, if Government has chosen no to review the law over the years as provided for, it has nobody to blame but itself.

The government’s negligence should therefore not be visited on the residence through astronomical review of the land use charge.

Speaking at the forum, Mr. Olawale vehemently kicked against the Lagos state government’s assertions about the Law based on the following reasons;

• Two basic variables for determining residence liabilities under this law has been reviewed upwards: 1. Base wage; salaries and other income alike which have been bastardized by inflation rate in the last 5 years. 2. Assessed value of the property which has also be reviewed upwardly by over 500%.

According to Olawale, the action of reviewing these two variables upward at the same time is callous, overly insensitive and very inconsiderate

Application of the land use charge to vacant land is also another insensitive issue. These are developmental lands that have not yielded income to the owner. The private sector still can’t fathom the rationale for levying land use charge on such property

Mr. Olawale also faulted the provision for government to appoint a temporary receiver or manager to administer the property, where the land use charge demand notice is not settled after 135 days of the tax payers receipt of the demand notice until all taxes, penalties and administrative charges are paid

Though provisions were made for appeal, however there is a clause that demands an outrageous 50% of the charge into Lagos state government account even when you have challenged the levy which could possibly be pre-emptive of the outcome of the arbitration and the tribunal because there is also the provision that the tribunal could annul the bill.

What then happens when the bill is annulled; what happens to the 50% charge?

Though the organized private sector (OPS) is not averse to an increment in LUC, because there is this realization that government has been negligent in the past by not following the provisions that allows a review every 5 years

Worse still, the representative of the Organised Private Sector at the forum cited an example with proof of a commercial property that paid 420,000 naira as annual LUC fee in 2017 yet billed 5.8 million naira in 2018; a mind-blowing increase of 1279%

One enormous question lingers for the Ambode-led Government; Must the vision of a smart or mega city not be synchronized with the comfort and the prosperity of the people?

The Organised Private Sector is not questioning the use of assessed value but the government should use a stakeholder’s forum which will include professionals in the field to determine the variables which will be used in arriving at an acceptable goal.

In a sane clime, confrontation precedes legislation, however the reverse is the case here.

Another issue raised is the fact that the government claimed to have consulted widely with stakeholders before arriving at a decision for implementation, but as it is we do not know the said stakeholders that were consulted

Though the Lagos State Government says the law cannot be put on hold. According to the Commissioner, Economic Planning and Budgeting, putting the law on hold is unconstitutional. Nonetheless, the Organised Private Sector insist that the law be put on hold until the gray areas are resolved

The implementation of the law to be put on hold until the gray areas are resolved though he didn’t fail to commend the government for their efforts

Only 300,000 properties are paying the land use charge yet the number of property identified for tax is in excess of 700.000, therefore the emphasis should be on getting more properties into the net rather than imposing more burden on the existing faithful tax payers; that is those currently in the data base

95% OF Internally Generated Revenue (IGR) generated in the state comes from the private sector. It is therefore the priority of the Lagos State Government to create a tax environment that is Investment-friendly. Already the enormous work done on infrastructure and security is a huge plus on the path of the Ambode-led administration

That notwithstanding, the land Use Charge which is payable in respect of all real estate in the state may just probably be the turning point of the Akinwunmi Ambode Adminstartion; whether for good or bad, the coming days will tell and just maybe the elections in 2019 would lay credence to how well Lagosians took the recent turn of events.

A similar uproar about land use charge in 2002 was not resolved by Government’s insistent on its position or imposing their views on the residents, it was resolved through social dialogue and compromised outcome.

We wait to see if the Ambode-led administration will take a cue from history.