November 20, 2016

Why Osun introduced Land Use Charge

In  Osun, the annual demand notice on Land Use Charge (LUC) is out there. Personal buildings classified for commercial use in the state are subject to the Osun land use charge mill rate, depending on the low–income and high-income zone of the buildings.

The classification into the traditional, cultural area and contemporary area is the design of LUC on dimensions that also include the value of the property, with a view to reinforcing both growth and equity in Osun, directly attuned to distributional objectives and persuasive resource allocation effects of the governing All Progressive Congress (APC) in the state, conducive to growth and development.

Land use charge in Osun, why? The state can no longer afford the luxury of perpetual dependence on the central government failing finances which either have dangerous political implications even in the face of shared party identity with the centre, or had in the past directly contributed to incoherence and retardation in economy elsewhere in Nigeria, especially during the erstwhile Peoples Democratic Party (PDP) government at the centre.

There must be a revolutionary overhaul of the tax collection machinery in Osun which Ogbeni Rauf Aregbesola actually did on assumption of office as state governor, to find ways of increasing additional tax revenue from the existing internal sources and possibly new sources. One of such sources to be intensively explored in the state drive to mobilize more revenues is the LUC, land use charge to evolve an equitable distribution of income.

Regrettably however, the past government of PDP in Osun failed abysmally to crate considerable equity between tax payers in different income groups as well as within the same income group that de-accelerated equitable distribution of income. The tax structure in the PDP days in the state was highly regressive if tax payments were related to the benefits received from government expenditures.

There was also massive corruption in the PDP days in Osun. Those who plundered the state vaults were invariably people in high income positions who transferred tax revenues from low income group to themselves with obvious regressive consequences.

Horizontal equity was also violated in the sense that fraudulent officials transferred income to themselves from honest tax payers in the same income group as themselves. In summation, instead of using the tax expenditure mechanism to redress income inequities, the PDP government in Osun actually deployed the paradigm to accentuate them.

Why LUC in Osun? Land use charge is the single most salient way of attaining equity between tax payers, but which PDP never thought of in its widest imagination, all its wasteful 8years in the governance of the state.

The PDP government in Osun never consolidated revenues from sources for assessment purposes. The state was considerably under taxed in the most effective terms. Worst still, the degree of tax evasion was so high; and mal-administration, so pronounced that many tax payers escaped tax net, the development that ebb the average effective tax rate in the state to the abyss.

Conversely, in the APC government of Aregbesola in Osun, the factors of equity and revenue loss heightened the case for drastic measures to increase the effectiveness of tax administration in the state. He is constantly aware that governance at all levels globally, is hindered or slowed down by acute shortages of financial resources.

The struggle with constraints of inadequate revenue for the continuously growing demands for public services is the in-thing in the art of governance and administration in the contemporary world. Development loan donors have become increasingly stingy in terms of loan appropriations, resulting from multiple, competitive pressures from loan seekers.

And to eliminate adverse effects of his development finance policy, Aregbesola has had to rely heavily on a greater mobilization of internal financing sources, including land use charge. To achieve increment in revenue, he’s constantly making efforts that cut down recurrent expenditures. He rather strives stoutly to match the growth of current expenditure with the growth of revenues.

Going by my analysis of the instrument of the land use charge, right there on my table in office, the Osun LUC, practically is a potentially useful tool, a single most important source of internally raised revenue that will help solve the problem of expanding urban service system at low cost, judging by the forces of rural-urban migration

By fiscal analysis, LUC in Osun is a source of financing public services in the state. It is one basic exchange, with the payment of the land use charge by building owners being traded for public goods or services for accelerated development of the state.

The land use charge in the state is progressive and on the right track, largely exempting substantial portions of low-value and squatter buildings. That is part of the Aregbesola many positive contributions, with considerably enchanting emphasis on greater social mobilization for sensitization and support for growth of the state while probable increase in the effective aggregate of tax burden is deliberately checkmated.

The Osun LUC is well drafted for administrative simplicity. Payment by property or building owners is made on Electronic Banking System of Revenue Cycle Management (EBSRCM) platform and automated revenue receipt and teller from bank obtained.

The LUC payment slip  carries annual demand notice number, identity number, revenue code, local government code as well as the amount payable or paid. What is ultimately required is that the payer drops the bank copy of the LUC payment slip at the bank; and the other copy, deposited at the LUC office, state Ministry of Finance, or LUC office on Gbongan/Ibadan road, Osogbo, state capital.

Good enough. The government of Aregbesola is a government of bio-metrics in all matters and in all circumstances. The government is not inhibited by inadequate availability of data and documented information on the extant buildings in the state. In fact, cadastral maps of personal buildings in Osun and necessary surveys are available, considered requisite for the administration of LUC, land use charge in the state.

Neither is Aregbesola stifled by inadequate manpower situation, germane to the operational efficiency of LUC. Rather, he’s brimful of emulsifiers for the evaluation of the effectiveness of LUC with no encumbrance to Osun economy or encroachment on businesses in the state.

The annual land use charge could be expanded to inaugurate site value taxation, vacant land taxation, and property transfer taxation on land development primarily to induce land use effect, and secondarily, as revenue raising measure. The expanded land use charge will publicly recover land value increases or land-betterment values and will influence better planning of land development in the state.

The Osun LUC is a must to pay.

By Olusesi Isaac

OLUSESI is Assistant Director, Directorate of Publicity, Research & Strategy, Office of the Governor, State of Osun