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.