A Land Value Capture Property Tax Schedule for Municipal Infrastructure Financing in Lagos State, Nigeria

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.