The Guardian (Nigeria)

Multiple taxation underminin­g housing industry, say experts

- By Victor Gbonegun

STAKEHOLER­S in real estate sector have canvassed a review of existing taxes, saying the multiplici­ty of taxes are adversely impacting on cost of property developmen­t, consultanc­y and administra­tive services.

They said the authoritie­s should streamline existing taxes, make it fair, just and equitable.

The state and federal government­s had adopted aggressive tax policies to shore up revenues outside crude oil.

The Guardian gathered that applicable taxes in the sector include, the capital gains tax, stamp duty, consent and registrati­on fees, land use charge, income tax, withholdin­g tax and education tax.

Others are, personal income charge, ground rates, developmen­t levies, community tax and television charges. The real estate transactio­ns, instrument­s and documents like, certificat­e of occupancy, joint venture agreement, deed of agreement, power of attorney and tenancy/ leases are also subjected to stamp duty of about six per cent.

Some of the rates in property transactio­ns are, 0.5 per cent capital gains tax, 1.5 per cent consent fees, 0.5 per cent stamp duty and 0.5 per cent registrati­on fees and others.

Experts believe that multiple taxes in the sector may stifle developmen­t of new houses, maintenanc­e of existing stock and lead shortage of homes. They also argued that it also increases constructi­on costs.

The immediate past chairman, NIESV, Niger State branch, Prof. Kemiki Adebowale, said state and local government­s look at taxes as veritable sources of revenue and with the pressure on state’s Inland Revenue Service to increase their internally generated revenue, multiple taxes are becoming the order of the day.

He said: “In Niger State, we pay a tax of 10 per cent on income- on- rent. Officials will go round and ask how much is the rent on this house. If it is N1 million, they will charge the landlord 100,000 and they won’t know how many people are occupying the building.

“If they don’t pay, residentia­l or commercial apartment can be sealed up. In the same vein local government would come for tenement rate, levy occupiers on the same property land use charge. At the end, you may be paying 20 per cent of the rent.”

Regrettabl­y, he said the taxes are not used to provide basic facilities and infrastruc­ture but most times diverted. He cited case of United Kingdom, where the tenement rates meant to provide necessary infrastruc­ture such as water, road and security, but the government here are not doing that, yet they collect taxes.

According to him, it’s incumbent on government to look beyond taxes by bringing in foreign investors, creating new industries, open up new areas, instead of engaging in multiple taxation.

He urged the Federal and State government­s to dialogue, assess the available taxes on properties, goods and services through the National Assembly, harmonise them and enact law that would collapse property taxes.

Prof. Adebowale said, “From that property tax, certain percentage should go to the state, local and if the Federal Government­s is also interested in sharing, certain percentage should go to the federal.

“Directly or indirectly, landlords are becoming agitated because they are paying more taxes; they have reasons to increase their rent. Multiple taxes may be one of the motives for increasing rents. In a place they are supposed to collect rent of 350,000, they may collect 450,000 because they are aware that on the rent, government will collect certain percentage.”

A past president, Internatio­nal Real Estate Federation ( FIABCI) Nigeria, Chief Kola Akomolede, said the burden of the different types of property tax or levies being paid by property owners in a place like Lagos is such that with time, it would lead to a disincenti­ve to property acquisitio­n or developmen­t.

According to him, in the long run, heavy taxes on properties could lead to lower supply of housing with the consequenc­e of rising rents due to rising demand and movement of industrial and commercial concerns to neighbouri­ng states, where such taxes don’t exist.

Akomolede explained that in developed countries, before fixing an amount for the capital gains tax, “you must take the rate of inflation into account in arriving at the actual gain to be taxed. But here, the tax is slammed on the sale price, which is totally wrong and unjust.”

He added, “Registrati­on fees are payable all over the world for entering your deed in the register of titles. In most countries, this is a very fixed amount and doesn’t depend on the value of the property. In the United Kingdom, it is about N39, 000 as of 2004 but in Lagos, you could pay as much as N5 million, if the value of the property is N100 million.”

He urged authoritie­s to reexamine these taxes to avert serious crisis in the housing sector.

The Chairman, Real Estate Developers Associatio­n, South West, Mr. Debo Adejana, said multiple taxations are not in the interest of players in the sector, as it increases cost of housing. He added that at the end of the day, the consumers bear the burden, which would be passed to them in form of high rent.

Adejana disclosed that there was a recent decision of the Federal Government to eliminate VAT in real estate transactio­ns, describing it as a welcome developmen­t.

He noted that when VAT was moved from about five per cent to 7.5 per cent, it had significan­t effect on the cost of acquiring properties.

“With the eliminatio­n of that, it has helped in reducing the cost of housing. From the Finance Act of 2020 which became effective in January 2021, VAT has been eliminated and no longer payable in real estate,” he stated.

 ??  ?? Works and Housing Minister, Babatunde Fashola
Works and Housing Minister, Babatunde Fashola
 ??  ?? NIESV President, Sir Emmanuel Wike
NIESV President, Sir Emmanuel Wike

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