Abstract
This study develops a land value capture property tax rates schedule for use in Lagos state, Nigeria, in order to aid sustainability in municipal infrastructure financing. With the poor state of infrastructure in Lagos, the LVC property tax is advanced as a sustainable means of infrastructure reform through equitable rates. Using a sample from Alimosho - the largest local government area in Lagos - a hedonic regression model is used to determine the financial contributions of municipal infrastructure in property values to show their varying influences. From the regression analysis, the schedule is then derived, which is broadly premised on a quid pro quo basis. This stems from the fair notion that the pecuniary influences of municipal infrastructure should be recovered in the form of property taxes for public gains. Not previously done in the region, the schedule determines rates payable on property taxes and are reflective of the monetary influences that municipal infrastructure confer on property values. The proposed rates schedule also take into account varying distances of locational infrastructure and their impacts on property values. The use of Geographic Positioning System (GPS) in the study represents an advancement of previous Nigerian studies on infrastructure and property values where fewer infrastructure types have been considered or less precise measurement indices have been used. The study concludes that this LVC property tax approach will engender a sustainable, equitable, and efficient source of local financing for infrastructure delivery and operations. This is because it builds a veritable rates base and it enables ratepayers to face the actual costs of benefits received from infrastructure services.
Highlights
Whilst increased urbanisation provides economic opportunities such as jobs and increased livelihoods, it comes with planning and development challenges such as traffic congestion and poor access to public facilities
This study aims to demonstrate how the Land Value Capture’ (LVC) property tax can be applied in Lagos state, Nigeria using Alimosho local government area
The study argues that there are varying influences of municipal infrastructure on property values, and this should be reflected in property tax rates
Summary
Whilst increased urbanisation provides economic opportunities such as jobs and increased livelihoods, it comes with planning and development challenges such as traffic congestion and poor access to public facilities. The accuracy of the estimated incremental value is often challenged, and the calculation methods are not well defined This causes low resource mobilisation (Babawale & Nubi, 2011), where appreciable returns are not yielded when compared to potentials. McGaffin et al (2016) point out that the viability and success of this income generating mechanism, depends to a large degree on the ability to directly link the tax to the benefits received This is of particular relevance in Nigeria where there is no evidence found that the revenue raised from the Lagos state Land use Charge was used to finance infrastructure (UKAid, 2015)
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