SEVERAL business entities have expressed their concerns regarding the revision of the real property tax (RPT) code of Cebu City, which involves increasing the fair market values of properties.
They are asking for a discounted fair market value for the first three years, a staggered implementation of the increase, and a search for a more sustainable win-win solution.
During the open forum for the proposed ordinance of the revised RPT code on Thursday, Nov. 23, 2023, Samuel Chioson, former president of the Cebu Chamber of Commerce and Industry (CCCI), said the City should take into account how the new RPT will affect the business process outsourcing (BPO) industry.
He pointed out that BPO companies may opt not to establish new offices in the city, and instead set up shop in Iloilo City as there are more office space vacancies there.
Chioson said implementing higher fair market values will provide additional reasons for BPO companies not to establish an office in Cebu City.
“I am afraid that eventually this will be the case and it explains already that some BPOs are setting up in Iloilo,” Chioson said.
The total real property tax due is determined by multiplying the land area by the fair market value, and then multiplying the resulting market value by the assessment level to generate the assessed value. The assessed value will then be multiplied by the three percent tax rate.
Basis
Chioson also questioned the City’s imposition of higher fair market values on business parks.
“Why impose so much value in a business park? As you know, we spend P1.5 billion without City help. Right now, we spent more than P300 million already for road widening. This is spent by the lot owners, not from the City, and now you impose more value?” he said.
City Assessor Maria Theresa Ceballos-Rosell said the schedule of the fair market value is based on the Philippine Standard Valuation as promulgated by the Department of Finance under the Bureau of Local Government Finance.
She said it is a challenging task to strike a balance between what is required by the Philippine Financial Reporting Standard and growing concerns, which they have to take into consideration.
“In order to temper the impact of taxation, most especially in the real property taxes, this has to be a collaborative effort between the executive, legislative and the government’s partners — the business community, so that we could have a more comprehensive tax code, a schedule of fair market values that are within the parameter of a sound tax system,” Rosell said.
During the forum, Charles Kenneth Co, CCCI president, pointed out that businesses have thrived over the last 20 years due to the discounted market value, and urged the City to consider keeping this benefit.
He said failing to do so might “kill the goose that lays the golden eggs.”
Co appealed to the City Government not to enforce a 100 percent increase in the fair market value, and suggested a more moderate 70 percent increase over the next three years.
“I am sure businesses are more than happy to pay their taxes as long as there are continued businesses, nga dili lang ma-choke ang business (that their business won’t get choked),” Co said.
He said if the City wants its development plans to come to life, it has to implement a discounted fair market value so as not to drive away investors.
Not yet final
City Councilor Noel Wenceslao, chairman of the committee on budget and finance, said the proposal is not yet final, and will still be deliberated by the City Council to arrive at a collective decision.
Moreover, a representative of Ayala Land Inc., who preferred not to be identified, said they are one with the City Government in devising plans and initiatives aimed at raising the city to global standards, but emphasized the need for principles that promote “sustainable” increases in values, ensuring viability for all investors in Cebu City.
Meanwhile, the committee on budget and finance remains focused on clarifying any misconceptions or misunderstandings regarding the revision of the RPT.
“It is a misnomer to say that the real property tax revision is totally a tax increase,” Wenceslao said in a separate interview on Thursday.
Wenceslao said what the City primarily needs to update is the fair market value, which should have been done a long time ago since Section 219 of the Local Government Code requires the update to be done once
every three years. The official said he does not know why the fair market value has not been updated for 20 years.
He clarified that as far as the assessment level is concerned, there is no increase, saying it is still two percent for residential land and 10 percent for both commercial and industrial properties.
He said increasing the fair market value, particularly for land, will impact the RPT.
“If we update our fair market value, especially the land, barato raman kaayo ang fair market value sa una nya taas naman kaayo ang saka karon tungod sa development, mosaka jud ang iyang impact sa iyang increase,” Wenceslao said.
(If we update our fair market value, especially on the lands, the fair value was very low in the past but this has gone up considerably because of the development. This will have a major impact on the increase.)
He said there will be changes in the tax as the city updates the fair market value due to massive development.
Last Thursday’s forum held at the City Sports Club Cebu was attended by representatives from several key entities, including Cebu Holdings Inc., Ayala Land, Rockwell, Filinvest, Cebu Landmasters, and SM Holdings.