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ESV STEPHEN OLAJAGUN Explains
President Bola Tinubu’s Tax policy, which commenced a few days ago, has become the major topic both on the streets and in the social media space. Obviously, a lot of businesses will be made to pay more, and some will also pay less depending on their incomes. The real estate sector is not left behind, as players in the sector have expressed fear and uncertainty. City People’s ISAAC ABIMBADE (08155107955) spoke with one of the industry’s experts, Mr. Stephen Ola Jagun, who is the Principal Partner of Jagun Associates. He has almost three decades’ worth of experience in practice. He is the first African Fellow of the International Facility Management Association (IFMA) and a past president of the Nigerian Chapter of the International Facility Management Association (IFMA Nigeria). In this interview, he advised the government and industry players. Below are excerpts.
The new Tax law that started a few days ago, how is it going to affect real estate?
Taxes are compulsory. Even as a Christian, the Bible encourages us to pay our taxes. It is tax that the government uses to run the state. The application of that to run the state is another issue on its own. But see, on the question you have asked, the truth is that these things have been there, as the Chairman of the Tax Implementation Committee has been saying. The government has put several things together and they also now want to make sure that they implement them. They want to now make sure that they enforce them. They want to make it easy. The truth also is that Nigerians have not been used to paying tax. So there are people who pay, but many of them don’t pay the actual amount. And there are some people who even evade it completely. I mean, they have not even been captured in the tax net. You see, one of the things that the Lagos State government has done that is helping them is that, as much as possible, they use every loophole to try to catch many people into the tax net, they do. So when they catch people into the net, the next thing is to make sure they pay the real amount. So there are two different things. For example, I don’t have statistics, but I want to believe that 50% of Nigerians avoid tax. So with what they are doing now, I mean, linking your identification with your accounting system, it’s going to be difficult for people not to pay tax. And also linking your CAC registration with your accounting system. I mean, there’s no way you can run a business without running an account. So they are tying you together. For me, I believe that yes, implementation starts in January, but it’s going to take some time, a year or two for them to stabilise.
How many Nigerians do they want to chase?
The thing is, as professionals, have sat down and looked at, the way it is now, I believe that over time they may need to make some adjustments to the law. For example, as a real estate practitioner, I am paid a rent of 50 million. That’s not income to me. And you are saying that my tax is 50 million; thereafter, I will start paying tax. Meanwhile, companies have a waiver of almost 200 million. As a practitioner, not only real estate surveyors and valuers, even lawyers, you are not permitted to run as a limited liability company. That’s what we have done. If I have 500 million as rent on behalf of my client, it’s not income to me. What percentage of it remains with me? That’s what the question should be. Now, even the percentage that remains with me, I run an office, I pay staff, I have overheads that will make that work. So it is after deducting all those that I will have what I would want to term as income. So I believe those areas will be looked at. Even an accountant, one of the people who spoke to us from one of our Lagos branches, told us that even as an accountant, they realise that it’s going to have an impact on them. I believe professionals, if they can come together, should now look towards the government and explain the way we run because some of those who put these things together may not be considering our angle. So I want to appeal that people should not exercise any fear, as long as you do the right thing. All we need to do is explain ourselves, and we want to believe that the government will be truthful and that they want to make the tax system simpler and better. I believe if that’s their goal, they will listen.
Okay, what are your fears? In what ways will these things negatively impact you? And then they will go and make some little amendments. I know that because they are keen to quickly implement this law, which has been on for some time, the current government decided that this is a good way of making money, so let’s start implementing it.
The issue of subsidy, the President said, is gone from day one. And the government has worked on cushioning the effect on people. So I believe over time they too can sit down, look at it, and make money for the vulnerable. For me, I don’t know about you; I know that you are also a Christian. I don’t know how many church members you have seen that have gotten their 50,000 naira per month the government says they pay some Nigerians, and they claim that they have affected 20 million Nigerians. Do you get what I’m saying? But I believe over time they will be forced to, and then see how they can make it work. It’s a gradual thing. I believe it’s got to help the market and also generate revenue for the government. So our reliance on oil money will also reduce.
What is your assessment for real estate in the year 2025 and what should we be expecting in the year 2026?
Due to so many factors in the year 2025, taxes went up, the cost of materials went up. Rents almost doubled in some areas, if not more. And tenants are crying and shouting. The 5 thousand naira you paid me 5 years ago, can it buy the same thing in the market today? The answer is obviously no. So naturally, you should expect him (the landlord) to up his game. So I want to expect some stability next year, by the special grace of God, and also looking at the fact that people have adjusted to it, the market will try to stabilise itself.
It is the pride of everyone to own their own shelter, so that is helping the sector. Once it stabilises, I believe more people will cash in.
The only plug we also have, which has always been there, is that it’s a cash-and-carry industry. You virtually pay 100% if you want to own, not places where you pay for 20 years, 25 years. Our finance sector is afraid. They want to give you a maximum of four or five years, and the rate of interest also is not friendly. So if next year we can look at some of those things, I believe that, God helping us, we will make progress. We are growing gradually.
I want to encourage the government and also encourage practitioners that in any way we can assist the government to make some of these things work, let’s learn to be transparent with one another, the government transparent with us, we transparent with them, we make progress.
