EFFECT OF PROPERTY RATING ON RESIDENTIAL INVESTMENT IN UYO LOCAL GOVERNMENT
CHAPTER 1: Introduction
Property tax is generally a tax imposed by municipalities upon owners of real property within their jurisdiction based on the value of such property. This form of tax is reported to be one of the most stable sources of revenue to governments however most state and local governments in Nigeria are yet to tap revenue from this form of tax. In developed countries, revenue generated from this tax is used to provide basic amenities to the people. Throughout the world property taxes are commonly employed as the main source of locally generated revenue for the good reason that there is no other major source of taxation revenue that is exactly geographically defined. It is possible to use local income taxes and/or local sales taxes for generating local government revenue but both have difficult administrative problems. Local revenue may be generated from other sources, particularly rents from local government owned properties. In some cases, local income taxes are an important source of revenue. In many cases, however, property tax is the main source of revenue (and even when local income taxes exist, it may be easier for a local government to modify the property tax rate than to adjust the income tax rate).
1.1 Background of the Study
Real estate development can be regarded as the most significant aspect of national development as it forms the physical structure of a nation on which the standard of a nation’s development is based. In one way or another, land provides the shelter, privacy, and services that are essential in sustaining modern life, thus the basic need to occupy land has led all organized societies to control the use of land and property either by taxation or legislation (Olusegun, 2003). In actual fact, wealth cannot be generated without reference to land and buildings. It is therefore relevant and rational that this source of wealth be taxed for social and economic reasons in order to raise revenue for the government who takes care of the physical environment of landed properties and also create the enabling environment for the citizens to create wealth (Ismail, 1986). As observed by Tsoodle and Turner (2008), Property taxes are a fundamental source of wealth for Local Governments in the United States, and they make up to 73% of Local Government tax revenue. Similarly, almost all local governments worldwide rely to some extent on property taxes to pay for local services (Slack, 2010). As observed by England, Zhao and Huang (2013), a substantial portion of property taxes in the United States were levied on residential property owners, and these property owners in turn benefited from the municipal services that those property taxes helped to finance. The fact that the total supply of land in a country is fixed, and the view that the income derived from the ownership of land is a kind of “unearned” surplus, continues to lend support for measures to tax economic rent. Conceptually, land as a factor of production and a source of wealth should be subject to taxation. According to Ogbuefi (2004), the suitability of land as a source of taxable revenue however depends on physical economic, legal, political, and socio-cultural factors. Many countries have introduced a development tax which is levied on any increase in the market value of land. www.ccsenet.org/jsd Journal of Sustainable Development Vol. 7, No. 4; 2014 207. Much of the increased value of land arises from the efforts and expenditures of the community as a whole. Public expenditures on infrastructure such as that on roads, water, gas and electricity services will dramatically increase the values of land which is adjacent to such services. Taxation is therefore an important factor in economic planning and development and also an agent of social change. The research therefore seeks to investigate the effect of property rating on residential investment in uyo local government area of Akwa Ibom State.
1.2 Statement of the Problem
Majority of people don’t even see the justification or the rationale for its promulgation, a lot more also feel it’s only another avenue to milk the masses dry. Also, it was perceived in some quarters that the amount of charge payable which is considered to be inappropriate would be a major setback to the fulfillment of the law. There have even been arguments that the high charge and the penalties involved would discourage investment in new housing and maintenance of existing stock. This is the reason why it becomes paramount that the issue of the full implementation of property tax in the country needs a surgical procedure. The residential property tax is a good tax for local governments, yet it is not a major source of revenue for local governments in many developing countries. The services and amenities enjoyed by residential property owners and occupiers are usually provided by the Government, thus it is paramount that residential property owners are properly taxed by the government to generate revenue to effectively finance facilities and utilities, and also manage and maintain existing ones within the locality. How well property taxes are administered not only impacts on how much revenue is collected, but also affects the equity and efficiency of the tax. The problem confronting this research therefore is to investigate the effect of property rating on residential investment in uyo local government area of Akwa Ibom State.
1.3 Objective of the Study
1 To determine the nature of property rate on residential investment
2 To determine the effect of property rate on residential investment
3 To determine the effect of property rate on residential investment in Uyo LGA
1.4 Research Questions
1 What is the nature of property rate on residential investment?
2 What is the effect of property rate on residential investment?
3 What is the effect of property rate on residential investment in Uyo LGA?
1.5 Significance of the Study
The study proffers an understanding of the basis for property rate and its effect on residential investment.
It also serves as a reference source of information for issues concerning property rates and its effects on residential investments
1.6 Statement of Hypothesis
1 Ho Residential investment in uyo LGA is low
Hi Residential investment in Uyo LGA is high
2 Ho Property rate in Uyo LGA is low
Hi Property rate in Uyo LGA is high
3 Ho The effect of Property rate on residential investment is low
Hi The effect of Property rate on residential investment is high
1.7 Scope of the Study
The study is focused on the appraisal of the effect of property rate on residential investment in Uyo LGA
1.8 Definition of Terms
PROPERTY RATING: Also known as local government value of property paid to local government coffer as an amount per naira of the dateable value of the property. It is a local government tax based in rates, which are levied on the basis of ratable values of properties.
RATE: Payment for the ownership or occupation of something valuable, that is, rate is payment for the benefit derived or derivable from services.
RATEPAYERS: Ratepayers are the property owners whose properties are ratable. The word may refer to occupiers of the property or agents of the property owners especially where the property owners is an absence landlord.
RATING AUTHORITY: Means a rating area or a local government charged with the powers to administer property rating. Where used in this write-up, it applies to Enugu north local government.
LOCAL GOVERNMENT FINANCE: Is the management of inflows of money by the government, that is the obtaining (of income) and using (or expenditure) of fund.