NECA: New Lagos 2018 land use charge insensitive, with no human face

Director General of Nigeria Employers’ Consultative Association (NECA), Mr. OLUSEGUN OSHINOWO, says failure of the Lagos State government to reconsider the controversial new land use law would be tyrannical, and capable of stifling entrepreneurship and inhibit small businesses. He spoke to VICTOR GBONEGUN.

The Nigeria Employers’ Consultative Association (NECA) is of the view that the Land Use Charge Law (LUCL) 2018 is “a bad law for a good state.” Why such a description?

The Land Use Charge Law (LUCL) came into existence during the tenure of former Governor Bola Tinubu.

When the first law came out, it had quite a number of obnoxious provisions, the totality of which had to do with very high rate, which residents, whether individual or corporate were to pay.

This was completely unrealistic and ran counter to the reality of the economy of the state.

The organised private sector came out to say that the law would not only stifle businesses, but was also anti-development.

The government on its part argued that it needed to raise revenue to develop the state. It was really a protracted diatribe between the organised private sector and the government.

But at the end of the day, common sense prevailed, and government came to the table and worked out an arrangement, which did not necessarily undermine the objective of the law, but ensured that government realised its objective and the private sector not unnecessarily strangulated. That was how the LUCL took off in 2012.

In fact, the Manufacturers Association of Nigeria (MAN) was already in court and part of the settlement was that the case should be withdrawn from the court.

Through dialogue, the government and the organised private sector were able to come up with rates that were supportive of economic development.

One lesson from that is that the government at that time recognised the fact that you cannot talk about developing Lagos in isolation of other sectors.

We are surprised that nobody has taken note of the history and lessons from that experience. We now have to pass through that bus stop again.

The unfortunate thing is that the reverse law, as we have it today, is far worse than what we had before. It has no human face at all and quite insensitive.

What does NECA also make of the varying penalties that failure to respond to demand notices attract?

The issues at stake go beyond the penalties. We need to look at the law in its entirety. Taking cognisance of the penalties simply amounts to a conscious action to actually force, compel residents of Lagos State to part with funds, which they really do not have. Government is just trying to put a loaded gun on the heads of its residents. The penalty is the back-end of it.

For instance, how would you explain a situation where the owner of a property, who is asked to pay just N427, 000 as LUC in 2017 is being asked to pay N5.3m in 2018.

Some of the publications you have seen indicate that 200 per cent increase is actually mild, even 500 per cent. But now we are now talking about more than 1, 000 per cent increase.

The enlightenment campaign currently carried on by the state government, which it says the amount that property owners have been asked to pay is a token simply amounts to complete falsehood, and a complete disconnection from the heavy bills slammed on residents.

One of the arguments government is advancing is that since the introduction of the land use charge in 2002, the rate has not been reviewed till 2018. Government cannot reap from its negligence.

The law that was reversed has clear provisions as to when government should review the land use charge, which has a five-year period. It was a statutory right granted to the government.

The explanation that the government should give to residents of the state is why it failed to invoke its right under the law to review the LUC.

It would have been much easier for residents to go by a gradual increase, rather than the humongous overnight increase. Government cannot be taking benefits from its negligence.

But Governor Akinwunmi Ambode has declared that there is no going back on the introduction of the new law. What step(s) would you be taking in this regard?

We thank God that we still have the judiciary; if the worse gets to the worst, we will challenge this in the court. We are an organisation that believes in social dialogue and if social dialogue worked in 2002, we don’t see any reason why it should not work now. We have all our facts and the truth about this.

It appears many are yet to come to terms with impact that implementing the land use charge law would have on the formal and informal sectors of the state’s economy. Can you give details?

The real estate sector, for instance, is still in recession, as we have high vacancy rate in property and the owners of the property will still be expected to pay the land use charge at a much higher level. Nobody saves money to pay tax, particularly the ones who do not even anticipate. It will throw so many residents into penury.

The second issue is that the new land use charge will stifle growth of entrepreneurship and small businesses. It will also affect the take-off of so many new businesses that want to spring up in this environment because people will want to factor in the implication of the LUC into their costs.

The charge will also stifle entrepreneurship at a time, where there is a high rate of unemployment, as well as, stifle the growth of small and micro-businesses. Furthermore, it will affect developers and builders, especially in a situation where the circumstances of the customers have not improved in a recessed economy like ours.

Would NECA be taking advantage of the government’s disposition that it is open for dialogue?

That is actually the statement that we are making to the Lagos State government, we are telling the government that we were around when the first law was enacted, and that there were issues and those issues were resolved on the platform of dialogue.

We are not saying that there should not be an increase; we all know the challenges of development that this government has been facing, and we give it to them that they have demonstrated good governance, but they are rubbishing that good governance on account of their insensitivity to the law. Government should not be carried away by its ego.

But the government is of the view that increment would provide more resources to the state to provide social services and infrastructure, to the benefit of the general public. Is this not laudable enough to douse opposition?

Government just simply assumes that people actually save to meet their obligations to government in terms of payment of taxes and levies. Government equally assumes that it is so easy to recoup cost by simply passing it to the consumers, but, those are fallacious assumptions.

First, people don’t save to pay tax or levies, and people cannot increase the prices of their products by 500 per cent overnight, nobody would buy their goods and services.

The ability and the capability of the economy to sustain this level of increase in such a way that it will not hurt the economy of Lagos is doubtful.

In any case, why should taxation be the only source of funding for the government? Has the income of residents increased by the quantum of the tolls and levies being imposed on them? And by what percentage has the income/salary increased in its generic form?

But what in your opinion could be responsible for government not engaging all critical stakeholders before coming up with the new law?

It is the arrogance of being sovereign and powerful. We have seen it time and time again in this clime. Government takes the citizens for granted. We were at the public hearing and preview to listen to what other stakeholders said. Nobody was in support of the law.

So does the extension of the period for the payment of all annual LUC demand notices for 2018, to Saturday April 14, 2018 not show some understanding?

Did anybody see this coming in four or five years? This means that nobody has been setting money aside apart from his/her income to meet a dispensation where he/she will suddenly be told to pay an increase in LUC.

So, of what usefulness is the extension of the period to the person that is going to pay? Most landlord/tenants relationships are based on agreements, so, would landlords now go back to their tenants to review the agreement they had?

In the real sense, what you are asking for is a reduction of the new charge or an out-right cancellation of the Law?

The issue is the ability of the residents to pay what you have slammed on them overnight. There are some fundamentals that should drive the increase.

The first is that the government must first accept the fact that it has erred in keeping the Land Use Charge rate stagnant for that period of time.

The government must be humble enough to come out and say we did not exercise our legal right and then ensure that it did not happen again. The second fundamental is that you don’t toil with the percentage base rate.

In other climes, the base rate in terms of percentage application remains constant. The variables in it, is the access market rate of the property. That is the second fundamental in moving forward because we don’t want a situation where from time to time we will be adding.

For us, it is simply not a question of saying; increase it by 100 per cent, but can we agree on some basic fundamentals that would drive this process going forward.

There is nowhere in the world where government will only go by the access market rate in determining taxability. The fact that my property is worth N800M does not mean that I am enjoying the full benefit of an N800m property.

You don’t just go by the access market price of property but by the discounted access value of the property. Once we have agreement on those fundamentals, whatever the fundamentals now produced as the tax payable on the property, we will live by it.

What is your reaction to the 50 per cent decrease, which government has offered?

Well, it hasn’t met our expectations. We are still studying the pronouncement and once we obtain the appropriate clarification from the government on it, we will make our position known to the public.

Courtesy will demand that we thank the governor for effecting a reduction in the rate by 50 per cent. But remember, this is a reduction of 50 per cent over the invoice rate.

We are not satisfied with this as the said reduction will not ameliorate the over 500 per cent increase in the new rate. We are not going to be cajoled by the figure 50, which in government’s eyes is a huge concession.

The truth is that the net effect of that on the payer is still negligible as he is grappling with an increase of over 500 per cent in the first instance.

The so-called reduction amounts to tokenism. Government has smartly ignored the fundamental issue of doubling of the base percentage rate and the unreasonable application of the assessed market values.

These are the crucial issues we are calling on it to review.

Government must realise the fact that this law is not litigation- poof and they must avoid the situation where residents, individual and corporate alike, will be compelled to approach the court to seek reversal of this pernicious law.

Is the reduction sufficient for the law to stay?

The reduction is not sufficient for the law to stay, as it is not commensurate with the actual percentage deduction, as it would amount to about 500 per cent increase in the land use charge.

When you translate the reduction to the actual percentage deduction, we will still be talking of almost about 500 per cent increase in the rate, which is still high and that is just the truth about it.

The 50 per cent is going to be on the invoice amount and when you look at it in terms of the impact, we are still talking about 500 per cent increase, which we still consider very high.