Omodele Adigun, Bimbo Oyesola and Adewale Sanyaolu
As the public awaits measured response from the critical stakeholders to the Lagos State Land Use Charge (LUC) reduction by Governor Akinwunmi Ambode, investigation has shown that the failure of the state to put consultation ahead of the legislation as well as its opaque-cum-military style of integrating purposes of taxation may have again cost it the support of the bar and the Organised Private Sector (OPS).
Recall that last Thursday, following much pressure from the public, the state bowed to the popular demand by scaling down the LUC. This was announced by its Commissioner for Finance, Akinyemi Ashade, who stated that responses from the dialogue with various stakeholders on the amended LUC Law 2018 forced its rate cut.
He stated: “In line with this administration’s tradition of inclusive governance and civic engagement, and as a government that is committed to the welfare of its citizens and understands the importance of continuously engaging the populace, we undertook extensive dialogue with various stakeholders on the LUC revised law and its implementation.
“Consequently, we received a wide range of responses from our dialogue with various stakeholders on the amended LUC Law 2018. The stakeholders included the OPS, Nigerian Bar Association (NBA), real estate investors and developers, landlord and resident associations, Community Development Associations, Civil Society Organisations, Lagos Chamber of Commerce and Industry (LCCI), Nigeria Institute of Estate Surveyors and Valuers and several other professional groups.”
Explaining the new rate, Ashade said commercial property owners would now get 50 per cent discount; owner-occupiers, 25 per cent; while there would be a waiver for late payment and tax credit for those who are prompt in payment. Payment in instalment is also allowed.
Giving further analysis, he explained that a commercial property valued at N20 million, which was earlier billed N91,200, would now pay N45,600 per annum as a result of the 50 per cent discount, while property used for industrial and manufacturing purposes would now pay N23,040 per annum on a property valued at N20 million as against the earlier N30,720, based on the 25 per cent discount.
On owner-occupied property valued at N20 million, only N7,752 would now be paid per annum as against N9,120 earlier demanded based on 25 per cent discount.
He added: “Other rates and reliefs, apart from the ones stated above, will remain unchanged and will be implemented as stipulated by the law. These include 40 per cent general relief, 10 per cent for 70 years and above, 10 per cent for properties owned by persons living with disability and 10 per cent for properties that are 25 years old and so on and so forth. Owners of property across all categories will now be allowed to make payments by instalments. This will help to reduce the burden of taxation on our citizens.”
Although some concerns of the private sector seem to have been taken care of in the new regime, the OPS, nevertheless, rejected the reduction, saying it amounted to scratching the issue on the surface as the 50 per cent reduction amounts to nothing.
Speaking on an NTA programme, Wednesday morning, a day before the reduction, Mr. Timothy Olawale, the Director of Membership Services of the Nigeria Employers Consultative Association (NECA), had lampooned the law, describing the state policymakers as insensitive to the plight of business owners.
Hear him: “The OPS is not averse to a review. In other words, we agree that government could review. But that review must have human face; it must be sensitive to the situation and economic realities out there; businesses are struggling. That is a fact! Factories and businesses are closing down. Last year, hundreds of businesses shut down in this same Lagos and the government is aware of that. Do we continue to impoverish our citizens through humongous taxation? I am sure that that is not the essence of governance. I also want to say that one of the ways out is for the government to: one, review the base rate and also grant very generous discount of not less than 50 per cent on the assessed market value. Beyond that, we also suggested that there should be a total overhaul of these punitive penalties. Let me also say that the issue of assessed value for evaluation by professionals should be very transparent.
And finally, there is no alternative to dialogue. The government should be very receptive to dialogue with the OPS.”
However, despite the reduction, the Director General of NECA, Segun Oshinowo, warning the government of impending litigation on the issue, said the Lagos State government is still avoiding the fundamental questions raised by the OPS, which it needs to address.
Hear him: “The 50 per cent discount announced by the government is supposed to be half of what a resident has to pay, but what is being halved for a resident grappling with nothing less than 500 per cent, still represents over 350 per cent increase.”
According to him, the base rate, which is doubled, and the assessed market value, which has been raised astronomically, must be given prior consideration.
“Until the state government comes to terms with the base rate and assessed market value, we are advising that those fundamentals we have raised must be addressed,” he said.
Oshinowo warned that the state government should not force the residents to apply legal means to make the government suspend the increase, adding that the Act is not litigation-free.
“This law is not litigation- proof and we hope things would not get to that as we both seek to tread the path of caution as we jointly explore a meaningful outcome,” he stated.
The Director General of LCCI, Muda Yusuf, said the OPS would still meet to study the review and respond accordingly.
In rejecting the reduction, NBA, Ikeja Branch, said the reduction is arbitrary and lacks legal basis.
Its Chairman, Mr. Adeshina Ogunlana, told a news agency that due process should be followed and the law be repealed and amended.
“You cannot repeal a law by proclamation, we are not in the military era where laws are made by decrees and proclamation,” he said.
Advising the government to suspend the law for a while and integrate other purposes of taxation, rather than focusing mainly on revenue, a Tax Law expert at the Faculty of Law, Nassarawa State University, Lafia, Chukwuemeka Eze, who was also at the NTA Goodmorning Nigeria Show, urged Lagos State to ensure that the LUC does not lead to over-taxation.
“Basically, there is nothing wrong with government reviewing a law. You know the four purposes of taxation, mainly revenue, repricing, redistribution and representation. The government should not focus mainly on revenue. They should integrate other purposes of taxation too so that the citizenry can at the end of the day come to terms with the law.”
Addressing the controversial base rate, Eze noted that it is too high. He said, “the rate is the one that concerns people immediately. There is a wide curve in the rate. Theoretically speaking, Adam Smith taught about the cannons of good tax system. One of them is equity or fairness. And when you talk of equity, it must not be disproportionate. Disproportionate in the sense that by using prevailing market value, only you know that it is prevailing. The other party has not participated in this ‘prevailing market rate’. You got professionals to do the valuation, the property owners never participated in the valuation. If he should, he would be spending a lot of money to counter your valuation. You didn’t even give him the opportunity to query your valuation. Now, after few months, you started enforcement. If the government believes so much in the prevailing market rate, people would be ready to sell their properties to the government. They would say ‘just pay me the amount and take the property’.
“It is easy to propound some of these things but when it comes to applicability to implementation, people are going to resent it, and they are going to move from resentment to rebellion. We know in many climes what over-taxation has led to. In 1773 in the USA, it led to the formation of Bolton Tea Party when the British government made a certain tax law that would make only the British Indian tea company supply tea to the communists in the United States. It led to a revolt! If you look at the French Revolution, over-taxation played a key role. Before the Ikeja branch of NBA decided to embark on demonstration, it had debated it, sat down, did the analysis. This is a branch where you have people like Femi Falana, a Senior Advocate of Nigeria (SAN); Dele Adesina, also a SAN. Lawyers just don’t easily rise sweating. How many issues have you seen lawyers just rise up and take a position? They debated it (the LUC) in a congress; all manner of analyses were done. Some lawyers are also accountants; some are tax consultants. So after this analysis, they came to the point that the rates are suffocating. Definitely, it would drive prices overboard. So they should separate taxation from over-taxation or else it would drive investment underground.”
On the issue of interface with critical stakeholders, Olawale criticised the lopsided procedure that led to the enactment of the law at the Lagos State House of Assembly, even despite the assertion of the state Commissioner for Information, Kehinde Bamigbetan, that the public hearing on the LUC was robust.
“On the House of Assembly public hearing, we got wind of it two days to the event. We still mobilised ourselves to attend. I also dare say that it was a charade, and the process was intended to fulfill all righteousness. Besides the fact that we were boxed into a two-minute presentation, and despite the vociferous protests from stakeholders against most of the provisions of the law, what eventually became the outcome of the process was a pre-meditated law. Even both documented and oral submissions to the House of Assembly were never factored in. And as I speak, it was as if the government had made up its mind what it wanted to do and went ahead to do that. That was below the standard of best practices when it comes to legislative procedure,”Olawale said.
Bamigbetan had told pressmen at a media briefing recently that, “during the process of that law, when it was taken to the House of Assembly, it passed through the first reading, it passed through the second reading and it went into the Committee of the house.