ENHANCED PROCEDURE FOR PROPERTY TAX ASSESMENT AND COLLECTION IN KADUNA NORTH LOCAL GOVERNMENT AREA OF KADUNA STATE NIGERIA. DAVID AYOCK ISHAYA DANIEL

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1 ENHANCED PROCEDURE FOR PROPERTY TAX ASSESMENT AND COLLECTION IN KADUNA NORTH LOCAL GOVERNMENT AREA OF KADUNA STATE NIGERIA. DAVID AYOCK ISHAYA DANIEL ISHAYA DABO

2 INTRODUCTION INTRODUCTION The Federal Board of Internal Revenue (FBIR), the State Boards of Internal Revenue (SBIR) and the Local Government revenue Committees are the bodies responsible for tax Administration in Nigeria.Anumnu (1988) defines property rate as a local tax imposed upon owners of property in Nigeria. Ozona (1989) pointed out that property rating has evolved from its historical root to become a major source of finance for the provision of local public services Offiong (1987) agrees that tenement rate is for the provision of social and economic infrastructure to the community. Property rating is a form of tax levied on real property (Oyegbile, 1996). It is normally charged at the local level for raising the required revenue to carry out specific developmental projects. This tax is aimed at promoting the total well being of inhabitants of the local community. In Nigeria, the third tier of government i.e. the local government is a rating unit within which property rates can be assessed, levied and collected. It is also accepted that property tax is for defraying all expenditures incurred in executing any special works or services of particular benefit to the whole or part of a local government area. Monies collected from property rating are expected to beuse for specific projects like water supply, refuse disposal, street lighting, building of community halls, roads and markets.e.t.c

3 Review of literature Britton et al (1980) noted that the rate paid is fixed periodically, usually, annually, by the rating authority and is determined by its own financial needs and those of the preceptive authority. This stresses that the rate nairage fixed by the local government is determine by her financial needs, the extent of urbanization and the ability of the ratepayers to contribute. The Local Governments in Nigeria lack the capacity to undertake tenement rating inspection and assessment exercise due to poor staffing (Kuye 2002). Eyoren (1992) opined that tenement rating should be imposed upon the local government at minimum cost by taking advantage of the services of valuation experts to benefit from this stable local source of revenue yet to be tapped fully. He advised local governments to take advantage of the tenement rating edict which permits them to generate revenue through tenement rating. Obuma (1988) opined that tenement rating if fully tapped, can generate about 50% of any local government s budget. In the words of Effiom (1995), ;local governments should strike to maintain their identity by being financially independent. This is easily achieved when local governments adopt property rating plan and organize resources aimed at raising enough revenue to meet the various responsibilities. One thing that needs to be emphasized is that the subject of taxation is property. It is a tax levied mainly on real property, i.e. building s, road etc. The law may also specify other properties that can be rated such as mineral sites, pipelines or oil depots.

4 Statement of problem Kaduna State has 23 Local Government Areas. Of these, only Kaduna North, Kaduna Sourth, Zaria, Sabon-Gari, Jema a and kachia Local Government Areas have tenement rating units. The possible reason why a large percentage of these L.G.As(Local Government Areas) are not collecting tenement rates is as a result of high expenditure in the collection of tenement rates vis-à-vis the low income to be generated from the exercise. A major problem in Kaduna North LGA is that the revenue staff have been alleged notto be honest enough in the collection of tenement rates. Neither has the consultant done better as there appears to be connivance between the staff and the consultant to defraud the LGA. Besides, a lot of properties had not been included in the rating while many property owners either hide their identity or connive with both the staff and the consultant to defraud the local government, also tenement rates are calculated manually. With all these problems, it is certain that Kaduna North LGA will not be able to adequately collect the needed revenue for development purposes.

5 Research questions 1. Which valuation methods do the rating officers/consultants adopt in the valuation and assessment of the hereditaments? 2. What percentage of the total expenditure of the local government is realized through rating annually? 3. What challenges can be observed from (i) above and how can GIS help in solving these challenges.

6 Justification for study All human activities, be it social, economic, political, end on land. It is therefore, relevant and rational that this source of wealth should 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 (buildings are part of the land). Local GovernmentCouncil s are supposed to have contributed immensely to the value of the properties within their jurisdiction by the provision of services and amenities. They have also made social interaction within the local governments jurisdiction possible which has led to high values of property. It is therefore reasonable to charge tenement rates on such properties to generate revenue for the L.G.C s.(local government councils)

7 Hedonic methods for assesing property tax Consumer Price Index (CPI) is commonly used in real estate economics, it is used to adjust for the problems associated with researching a good that is as heterogeneous as building. Because buildings are so different, it is difficult to estimate the demand for buildings generally instead, it is assumed that a house can be decomposed into characteristics such as number of bedrooms, size of plot, or distance to the city centre. A hedonic regression equation treats these attributes (or bundles of attributes separately and estimate prices (in the case of additive model) or elasticity (in the case of a log model) for each of them. This information can be used to construct a price index that can be used to compare the price of housing in different cities, or to do time series analysis. As with CPI calculations, hedonic pricing can be used to correct for quality changes in constructing a housing price index. It can also be used to assess the value of a property. In the absence of specific market transaction data, it can also be used to analyse the demand for various housing characteristics, and housing demand in general, it has also been used to test assumption in spatial economics.table 1 shows some of the attributes that be use in the hedonic method.

8 Research methodology Both primary and secondary data sources will be used for this study. The primary data will be obtained using random sampling technique to select commercial properties located in the study area. All the commercial properties in the 10 arterial roads using systematic random sampling technique. A total of 200 properties will form the study sample. Data on the facilities will be derived using a structured questionnaire based on the approved guidelines by the Nigeria Institution of Estate Surveyors and Valuers (NIESV). Secondary data will include the use of high resolution. Ikonos (2006) imagery that covers the study area. Global Position System (GPS) will be use to take the co-ordinate of the selected properties. Data generated from both primary and secondary sources will subsequently processed, integrated and analysed using ArcGIS 9.3 version software, the output will be further process to developed a system for the assessment and payment of tenement rate using Visual basic version (x) software. The result of this procedure will be compared with existing analog method to determine its relative efficiency.

9 results The initial results show that all the hereditaments both commercial and residential were captured against the over 40% captured using the analog system,figure 1 shows the ikonos satellite imagery of the study area that has been digitized,consisiting of both commercial and residential hereditaments,the attributes data consist of the following : number of the different hereditaments identified,actual number captured by the analog system and the ones captured by the digital system.percentage differentials between the identified and the captured hereditaments,the distance covered by each street.number of floors for each building,address of property,type of property,rateable value.visual basic(x) will be use to create an on-line real time programme to assess and collect property tax in the study area,base on the attributes of the hereditaments.vouchers in different denominations would be sold in the bank,each tax payer will purchase a voucher equivalent to the rate payable on his/her hereditament,the monies collected will be credited direct in to the Local Government Account.By so doing no cash is handle either by the consultants or the revenue officers in the Local Government Areas.

10 Ikonos imagery of the study area

11 Policy implications This study will develop a novel and improved way of αhereditament, the enhanced procedure for collection of tenement rates will also increase the revenue base of Kaduna North Local Government Area. Vouchers in different denominations would be sold in the bank,each tax payer will purchase a voucher equivalent to the rate payable on his/her hereditament,the monies collected will be credited direct in to the Local Government Account.By so doing no cash is handle either by the consultants or the revenue officers in the Local Government Areas