Strategic response to the new Lagos land use charge law

The Lagos State Government recently repealed its 2001 Land Use Charge Law, and replaced it with a new Land Use Charge Law, 2018. the Lagos State House of Assembly had passed the bill on 29th January 2018, while the Governor signed the bill into law on the 8th of February 2018. Based on this new law, new rates were sent to Lagosians as land use Charge from the same month.

Many Lagosians that have received their bills claim it’s an increase of between 150 and 300 percent over the 2017 rate. A dear friend who had paid N 7,860.3 in 2017 was recently served with a notice to pay N 24, 567.36 in 2018. That’s an increase of over 200 percent!  This huge increase for many Lagos residents is huge, unfair and difficult to pay.

It is very clear that the Lagos State Government is seeking for various means to raise money for its budget. Interestingly, this is not a recent occurrence because the Lagos State government has always acted like this. In Registered Trustees of Association of the Licensed Telecommunications Operators of Nigeria & Ors v. Lagos State Government & Ors some telecommunication companies challenged certain sections of the Lagos State Infrastructure Maintenance and Regulatory Agency Law, 2004 on the basis that the Law amounted to imposition of tax on their operations. Justice Auta of the Federal High Court said:

“The IMRA Law, from the name it looks very innocent… From the contents of the law, the driving force is just to make money for the State, as the State has numerous laws dealing with the issue of urban planning…. What the Lagos State is doing is to create an agency that will get its own share of the booty, as their counsel said that their operators are making billions of Naira.”

What is different in this new law however is that it has used a formula to ensure that valuation of properties increase radically and brought many properties into the land use tax net by removing some exempted properties. At the end, the aim is to increase the revenue generation base of the state. This itself is not bad because we need to pay taxes. That’s one of the price we must pay for development. However, taxes are supposed to be fair, clear and reasonable. Personally, I don’t think it’s fair for Lagos State to sign a law in February 2018 and use this law to demand for taxes in the same month.

The choice before we Lagos residents is what do we do about this new law.

Taxes are a different kettle of fish. Even if unfair, you may be liable for nonpayment. Taxes have to be paid including the Land Use Charge. If anyone is unsatisfied with the rate, what we must not do is to resort to self- help. As citizens, we are expected to be civil, professional and strategic in our responses .The most strategic response therefore is to approach the courts. In approaching the court, there may be several options and angles to address this.

For this article, I intend to review what happened in Rivers State and the court decision.

Rivers state passed the Rivers State Property Tax Law (5/1995). This law is similar to the Land Use Charge in several respects. One, it’s a law on taxation of properties. Two, it’s a law to harmonize property taxes in the State. Three, it’s a law that harmonized some taxes that the Nigerian constitution had granted the Local Governments.

Grinaker LTA Limited, a Rivers State- based an oil servicing company was served a demand notice of N70,871,850 payable as property tax. The company objected to this and approached the courts to seek a resolution. In the case Grinaker LTA Limited v Board of Internal Revenue (Suit PHC/2842/2010), they sought to challenge certain aspects of the Rivers State Property Tax Law and ascertain if Sections 1, 2(b), 3, 4 and 5(2) of the Law were constitutional. Their argument was that those sections of the law vested the power to assess, levy and collect property tax in respect of privately owned houses and tenements in the Rivers State government, the Rivers State Board Internal Revenue (RSBIR) or their agents, rather than to the local government councils as required by Section 7(5), Paragraphs 9 and 10 of Part II of Schedule 2 and Paragraph 1(j) of Schedule 4 of the Constitution. The Fourth Schedule of the Nigerian Constitution listed the Functions of a Local Government Council stating that the “assessment of privately owned houses or tenements for the purpose of levying such rates as may be prescribed by the House of Assembly of a State” is one of the main functions of a local government council. (Paragraph 1(j) of Schedule 4).

The court, in resolving the issues raised followed the Supreme Court’s decision in Knight Frank Rutley Nigeria v Attorney General of Kano State ([1998] 4 SC 251). In this case, the court held that by the provisions of Section 7(5) of the Constitution and paragraph 1(b) and (j) of the Fourth Schedule to the Constitution only Local Government Councils have the exclusive power to assess and impose rates on privately owned property. Therefore, it declared null and void a contract entered between the Kano State government and Knight Frank Rutley to prepare a valuation list of all ratable hereditaments for collection of property rates in some areas of Kano State for being outside the powers of the Kano State government and a usurpation of the powers conferred on local government councils by the Constitution.

The court therefore upheld Grinaker’s claim, and declared that Sections 1, 2(b), 3, 4 and 5(2) of the Rivers States Property Tax Law were unconstitutional, null and void because it’s in variance to the Nigerian constitution thereby restraining the Rivers State government and the RSBIR from enforcing the assessment and demand notice. The judgment however upheld the right of state houses of assembly to make laws establishing the chargeable rates and the procedure to be adopted in assessing and collecting the rates charged by each local government council. However, such laws cannot make the state government usurp the powers of Local Government in assessing, levying and collecting property tax on privately owned houses and tenements.

In summary, the combined effects of these two cases is that states have limited powers to charge rates for property taxes in Nigeria and where they intend to do this, it should not be by usurping the rights of local governments. The critical question therefore is, has the Lagos Land Use Charge Law usurped the powers of the Local Governments as the law is “to provide for the consolidation of property and land based rates and charges payable under the land rates law, the neighborhood improvement charge law and tenement rates law in Lagos State into a new Land Based Charge, to be called Land Use Charge, to make provision for the levying and collection of the charge and for connected purposes”?

I must state that Lagos seems to have found a clever way around this by stating that in the law that “For the purpose of this Law, each Local Government Area in the State shall be the collecting authority and it shall be the only body empowered to levy and collect Land Use Charge for its area of jurisdiction.” The fact however remains that the spirit and intendment of the law is that the commissioner for finance calls the shot. The word Commissioner was used about 26 times in the law and not once did it mention the term “Local government chairman “! So, another critical question is if any of the sections of the law has craftily transferred the powers of local government councils to the Commissioner of Finance.

The final question to be asked is:  can a local government council empowered by the Constitution to collect the Tenement rates and charges within its jurisdiction delegate this role to the State Government?  I don’t think so.

The courts remain the only hope for the people. And the people should not be timid to approach the courts on any issue. It was Thomas Jefferson that was reported to have said “When governments fear the people, there is liberty. When the people fear the government, there is tyranny”. We should not be afraid to approach the courts. I suspect some people may feel they may not win such cases in court or they may be frustrated or the case may be too long to decide. When Grinaker LTA Limited approached the courts, there was no assurance it would win. But the company did regardless and won.

I will be writing two additional articles in this series. My next article will review another angle on how you can reduce the rate you were charged using the courts and the third is why Local Governments should be the ones to solely collect tenement rates.

Fawehinmi is a human resources and education professional who trained as an estate surveyor.

@yomitheprof