A LARGE private developer has argued that the 2023 Revised Real Property Tax Code for the Taxing Jurisdiction of the City of Cebu leading to an “astronomical increase” in real property tax due, contravenes principles provided in the Local Government Code (LGC) of the Philippines, and urged the Cebu City Government to act with restraint in exercising its tax powers.
In a letter dated Oct. 12, 2023 addressed to Vice Mayor Raymond Alvin Garcia, Ayala Land Inc. vice president Jennylle Tupaz said the proposed ordinance, if passed into law, would result in “an unjust, excessive and confiscatory measure,” citing Sections 130 and 186 of the LGC.
According to Section 130, which provides the fundamental principles that govern the exercise of the taxing and other revenue-raising powers of local government units, taxes, fees, charges and other impositions shall (a) be equitable and based as far as practicable on the taxpayer’s ability to pay; (b) not be unjust, excessive, oppressive, or confiscatory; and (c) not be contrary to law, public policy, national economic policy, or in restraint of trade.
On the other hand, Section 186 gives LGUs the power to levy taxes, fees or charges, provided that these taxes, fees or charges “shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy” and that the ordinance levying such taxes, fees or charges is not enacted without a prior public hearing on the matter.
Tupaz said altering the current schedule of market values would result in higher real property tax payments, affecting buyers, investors and business owners in Cebu City, placing the burden of the negative financial consequences on them.
“If the City Government aims to further develop Cebu City to its full potential, passing the financial burden to business owners may not be the best solution, especially considering that business owners are still recovering from the severe impact of the pandemic and finding ways to keep up with the high inflation rate,” she said.
She added that the financial impact that the ordinance may impose on the land owners is unreasonable and excessive, saying that taxes should be both equitable and based on the ability of the taxpayers to pay.
“The proposed ordinance imposes an absolute standard disregarding the financial capacity of landowners,” she said.
According to Tupaz, the justification of the Cebu City Council, which is the longstanding benefits of lower market values enjoyed by landowners to the detriment of the local government which was deprived of appropriate taxes, is not based on certain proof of loss or tax leakage.
“Any perceived loss of revenue from previous assessment levels are, respectfully, entirely speculative. What is certain and tangible, however, is the financial burden each landowner will suffer in the event the ordinance is passed.”
She added that the blanket removal of exemptions in the proposed ordinance affects landowners who have allowed their private land to be used for public purposes, particularly, those relating to roads found within and surrounding city centers.
She said imposing a tax on these private roads used for public purposes would affect their availability as recoupment would now become a consideration.
Last October, Noel Wenceslao, chairman of the Cebu City committee on budget and finance, told SunStar Cebu that the impact of the passage of the revised RPT code would be significant since the City has not revised the RPT code in nearly 20 years.
Any revision in RPT taxes would be based on the present fair market value, which has shot up over the years, especially in commercial areas.
Among the properties of Ayala Land Inc. (ALI) and its subsidiaries in Cebu are the Cebu IT Park in Barangay Apas and Cebu Business Park in Barangay Hipodromo, which hosts the Ayala Center Cebu mall and residential developments.
In 2006, the land where Cebu IT Park sits had a fair market value (FMV) of P6,000 per square meter. But today, in the revised RPT code, its FMV will soar to P200,000 per square meter because it is now a highly commercialized area.
Similarly, a portion of Cebu Business Park under the jurisdiction of Barangay Hipodromo would see its FMV shoot up to P245,000 from P16,300 per square meter, significantly affecting the RPT that Ayala Land would now have to cough up if the measure is approved.
For land, the RPT due is computed by multiplying the FMV by the number of square meters of the land, and then by the assessment level to get the assessment value, which is then multiplied by the tax rate.
Public hearings on the measure were held on Oct. 13 and 19.