ABSTRACT

Government regards property taxation as a means of ensuring generation of revenue, curbing of property speculation and redistribution of income. Others are enforcement of conformity with town planning rules and regulation, maintenance of infrastructures and so on.

The tax payer on the other hand regards tax as a burden and unbearable, which led to high rate of default. Hence, the clam our  for discontinuation of same. Over the years, there have been series of legislation regarding taxation by various government. For instance, in 2001, Lagos State Government introduced land use charges which has been generating a lot of problems.

This study intends to examine critically the effects of property taxation on real estate investment in Nigeria with particular reference to Lagos State as a case study.

To achieve this, the effects of taxation will be considered on residential, commercial, industrial and other taxable properties within the case study and suggested solution shall be proffered to the identified problem.

TABLE OF CONTENTS

CHAPTER ONE

1.0      Introduction                                                             1

1.1   Statement of the problem                                        2

1.2   Aim and objectives                                                   2

1.3   Research hypothesis                                                        3

1.4   Scope of study                                                         3

1.5   Significance of study                                                        4

1.6   Limitation to the study

1.7      Definition of terms                                                   5

1.8      References                                                               7

CHAPTER TWO

2.0      Literature review and theoretical frame work           8

2.1      Literature review                                                      8

2.2      Historical back ground of property taxation in Nigeria9

2.3      Concept of taxation                                                  10

2.4      Principles of taxation                                               15

2.5      Types of taxation                                                     17

2.6      Need for property taxation                                               22

2.7      Effects of property taxation                                      24

2.8      References                                                               26

CHAPTER THREE

3.0      Research methodology and case study area             27

3.1      Introduction                                                             27

3.2      Restatement of research hypothesis                        27

3.3      Source of data                                                          27

3.3.1Primary data                                                                    28

3.3.2Secondary data                                                                28

3.4      Characteristics of the population of study                       28

3.5      Sampling techniques                                                       29

3.5.1Sampling design                                                      29

3.5.2Sampling procedure                                                 29

3.5.3Determination of sampling size                                        29

3.6      Questionnaire administration                                  30

3.6.1Questionnaire design                                               30

3.6.2Questionnaire distribution                                      30

3.6.3Collection of responses                                            30

3.7      Techniques for data analysis                                   30

3.8      Limitation of the research methodology                   31

3.9      Case study area                                                       31

        References                                                               31

CHAPTER FOUR

4.0   Data Presentation and Analysis                               39

4.1   Introduction                                                     39

4.2   Distribution of the Questionnaires                  39

4.3   Data Presentation                                            40

4.4   Effects of Property Taxation in Nigeria             45

4.5   Testing Of Hypothesis                                      55

4.6   Data Collected                                                 58

4.7   Identified Problems of Property Taxation in Lagos  58

CHAPTER FIVE

5.0   Summary of Finding, Recommendation, Implementation and Conclusion                              60

5.1   Introduction                                                     60

5.2   Summary of Findings                                      60

5.3   Recommendation                                             61

5.4 Implementation                                                 62

5.5     Conclusion                                                    63

5.6   Suggestion for Further Studies                                63

References                                                               65

CHAPTER ONE

1.0     INTRODUCTION

Government all over the world must necessarily source for revenue from various aspects or sectors of the economy to meet their spending property taxation represents one of the major sources of revenue. Society itself is dynamic where population is increasing on a rapid rate on daily basis and developmental activities are being carried out. The phenomenon equally demands that government should constantly seek to increase revenue derivable from all sources, either by widening tax bases or increment on rate of taxation.

In Great Britain for instance, property taxation is the second way to their income as a yield. It produces 15% of total national taxes in 1974 and 13% of local government revenue in the United Kingdom. Similarly, 25% of all local government revenue in the United States is derived from property taxation and second to the intergovernmental transfers, 37% in 1989.  OLAWALE  AJAGBE   [2002].

Samson Agboto (2003) stated that properly taxation is one of the fundamental tools to generate revenue by various government e.g. local government throughout the world realized money or fund from tenement rate while the state and Federal Government generate funds through capital gains tax or withholding tax (as applicable).

However, the effects of the imposition of these taxes on real estate investment are the area, which this study will examine.

1.1      STATEMENT OF THE PROBLEM

Over the years, the payment of tax or real estate investment in Nigeria has been a controversial issue between the tax payers and the government also, landlord and tenant each acting knowledgeably to avoid the responsibility of tax payment on the property they owned or occupied and the associated problems in apportionment and collection of these taxes are all the issue asking for solution.

Coupled with the above is the clamoring by the tax payers that government has neither been able to provide necessary infrastructures in some areas nor maintain such infrastructures provided some years back which are reason for such levies.

1.2      AIM AND OBJECTIVES

The aim of this study to examine the effects of property taxation on real estate   investment   in Nigeria with Lagos as a case study. The following are the objectives aimed at achieving the above stated aim.

a.     To identity various types of property in the study area.

b.     To evaluate the various forms of property taxes imposed on real estate properties in the study area.

c.     To identity the relative effects of various types of property taxes on real estate investment in the area.

d.     To proffer possible solutions to identified effects.

1.3      RESEARCH HYPOTHESIS

Ho:   Property taxation has no significant effect on the choice of real estate investment.

Hi:   property taxation has significant effect on the choice of real estate investment.

Ho:   Taxes imposed has no significant effect on the choice of real estate investment.

Hi:    Taxes imposed has significant effect on the real estate investment.

1.4      SCOPE OF STUDY

Property taxation is a wider field of study, but this study will focus mainly on the effects of the property taxation on real estate investment n Nigeria. However, the scope is limited to Lagos as the study area.

The study will be narrowed down to Lagos State because 85% of the area is highly developed being the former federal Capital of Nigeria. Also the area contains different land uses a specially does that are taxable. This ranges from residential, commercial, and industrial to mixed uses. Data collected, we believe all correspondence regarding our research shall be ascertained following as intentions to carry out the research on effects of property taxation on real estate investment in Nigeria with Lagos State as a study area.

To know the land use pattern of the study area, the below various activities are being carried out:-

a.     To identity the various ratable properties in the study area e.g. commercial, residential and industrial properties.

b.     To identity the types of property taxation imposed on real estate investment in the study areas and

c.     To proffer necessary solutions to the identified problems and to know the effects of property taxation on real estate investment on the study area.

1.5   SIGNIFICANCE OF STUDY

        Real estate taxation has been a controversial issue in recent time. Various taxes imposed on real estate investment range from withholding tax, capital gain tax, capital transfer tax, and tenement rate tax, among the host of others. While it has been a source of income generation to the authority concerned, its payment as always been generating arguments among which is effective utilization of the tax collected by such body or government agent.

Closely related to the study, are the overall effects of these taxes on real estate investment. This ranges from not allowing the require return from such investment to adequate maintenance of such investment.

However the significance of this study lies in the fact that it will help the decision makers (tax authorities) to adjust various taxes as imposed on real estate properties.

Also it will enable individual to determine types of real estate investment to invest on. This is so because some types of property command higher taxes than others.

Moreover, the study will also contribute to the body of knowledge – academicians of various levels will find it useful for future references.

1.7      LIMITATION TO THE STUDY

The aim of this is to identity and analyzes the effects of property taxation on real estate investment in Nigeria with reference to Lagos State as a study area.

Narrowing down the study to Lagos itself is limitation because all the micro and macro effects of property taxation can not be obtained in Lagos alone. For instance, state laws and edicts as regards property taxation varies from one state to another.

a.       Relative inability to get the required information from

tax authority concerned and the owners of taxable properties in the study area.

b.      Some responses of the people to the questionnaire

      where satisfactory enough.

c.   Time constraint is also act as a limitation, this is so

because there is impositions of specific time when we are suppose to complete and submit the study.

1.8      DEFINITION OF TERMS

1.     PROPERTY: Property is a physical structure but it is also a compliable legal concept. Most people see it in the light of object that can be owned or possessed. In the legal sense however, property consists of not the object but rather of man’s right with respect to material objects, which can be described as an exclusive right of owing, enjoying and disposing of a thing. It produces income in the form of rent and peculiar in its characteristics.

2.     TAX: Tax is a compulsory levy by the government of any country through an appropriate unit of agency, usually the internal revenue department, against the income or wealth of an individual, partnership or a corporate body.

3.     TAXATION: Taxation is a prior charge on income from property. Depending on the country concerned, huge profits from capital gains or transfers is heavily taxed. Taxation can be, as the process by which government compulsory impose levy on individual, companies and properties to generate funds for the provision of basic need.

4.     REAL ESTATE: Real estate is the all things below, under or on the land permanently attached to land.

5.     INVESTMENT: Is the forgoing of a capita sum in return for a regular income over a period of time.  It is also a method rests on the theory that the capital value of an interest in landed property, freehold or leasehold, is directly related to the income or annual value of the property. An investment is the use of “indirect process” to obtain a higher output.