Hefty realty tax hike to greet QC in 2017

OWNERS of homes and other real property in Quezon City face a hefty tax hike next month if the local government were to have its way.

Councilor Allan Benedict S. Reyes (third district), chairman of the council’s Ways and Means committee, told Business World in a telephone interview last night that he expects the ordinance to be signed into law by Quezon City Mayor Herbert M. Bautista by mid-next week.

“The target date ( for implementation) is January 2017, effective immediately,” Sherry R. Gonzalvo-Amaranto, chief legal officer of the Office of the City Assessor, told Business World in an interview on the sidelines of a press conference yesterday at the city hall.

Proposed Ordinance No. 20CC-141 seeks to raise the fair market values of lands, buildings and other structures in the city that were last adjusted in December 1995, even if Republic Act No. 7160, or the Local Government Code of 1991, requires adjustment every three years.

A summary of planned changes shows the proposed local law will increase fair market values (FMV) of residential, commercial and industrial properties by 400733.33%, leading to a 39-131% increase in tax due.

“It was passed on second reading,” Mr. Reyes said after yesterday’s council session, adding that “Monday next week ang final” reading approval by the council.

The approved bill, he said, will be sent to the mayor’s office on Tuesday next week, adding: “I think Mayor ( Bautista) will sign that Wednesday… basta next week, for sure.”

“We expect to implement (it in) January 2017,” Mr. Reyes had said in the press conference.

Rodolfo M. Odañez, city assessor, said in the same briefing that the adjustments are estimated to yield some P700 million in additional collections in the first year of implementation. This, he explained, will go to the city’s General Fund, barangays and a special education fund.

Data from the city treasurer’s office show real property tax ( RPT) collection totaled some P3.796 billion last year, 7.89% in excess of a P3.519-billion target for 2015 and 8.75% more than 2014’s actual P3.491-billion take.

RPT was the city’s second-biggest revenue source, accounting for about a fifth of some P17.919billion gross collections last year that, in turn, were 9.43% in excess of a P16.374-billion goal for 2015 and 15.52% more than 2014’s P15.512-billion take.

“For years now, the general revision of real property in the city has not been undertaken such that the fair market values for purposes of assessment, classification and subsequently the collection of realty taxes has not been attuned to the changing times,” read an Oct. 7 Commission on Audit (COA) letter to Mayor Bautista.

“While the provisions of the Local Government Code require the general revision to be done two years after its effectivity in 1992 and three years thereafter, the City had come up with only two major general revision ordinances in 1995 for land, buildings and structures and adjustment in assessment levels in 2005,” COA noted.

“[ W] e recommend that the city assessor initiate the preparation of the schedule of fair market values for the different classes of real property for the enactment of ordinance by the Sangguniang Panglunsod (city council) which is necessary in the undertaking of the general revision of real property assessments,” COA said.

In order to cushion vulnerable sectors from the impending tax hike, the city council has also filed two separate bills that seek to grant tax discounts of up to 10% to senior citizens and solo parents who are legitimate property owners.

‘UNREASONABLE’ AND ‘UNJUST’

But various affected sectors voiced their reservation with or outright opposition to the proposal, with some homeowner groups arguing that the city does not need the additional collections since it has a budget surplus, while businesses said they would have to pass the additional tax cost to customers.

In a Nov. 23 position paper, SM Group asked the city council “to re-examine the adjustment of base unit values in the proposed revision since the same will lead to an increase in RPT payments that may be considered unreasonable and burdensome.”

“[ A] n increase in RPT due does not necessarily guarantee an equivalent increase in RPT collections because taxpayers may not be able to afford the substantial and very sudden increase in RPT due,” according to the paper to the city council that was signed by Cecilia Reyes-Patricio, SM Investments Corp. senior vice-president for Corporate Tax Services.

The company also called for “staggered implementation” of the increase, “for example, applying 25% increase for the first year of implementation, 50% on the second year, 75% on the third year and full implementation of the increase on the fourth year…”

Phased implementation, SM argued, “will work to cushion the impact of the increase in base unit market values on RPT payments of individuals and juridical persons alike, and will give taxpayers a chance to prepare for the inevitable increase.

In a Nov. 24 position paper, the Association of Filipino Franchisers, Inc. (AFFI) warned that “the FMV resulting in increased real property taxes, especially for commercial establishments, will most likely, if not definitely, be passed on to the tenants of commercial spaces in commercial centers and malls.”

“Our membership, all part of the SME ( small- and mediumscale enterprise) category, who are tenants in these establishments are concerned that the currently high rental rates will be even higher and thus pose a challenge to the viability to the expansion of their businesses,” AFFI said.

“We propose that the council study the possible incentives (tax or otherwise) that can be extended to SMEs who will help the city by employing Quezon City residents, employing PWDs (persons with disability), senior citizens, women with special cases of abuse et al., brands who started and grew in Quezon City.”

The Philippines Retailers Association (PRA) said in its Nov. 29 position paper that the proposal “will… lead to an unfair and unreasonable increase in real property taxes.”

“Such a huge tax increase, during a period where the 2016 average inflation rate is pegged at 1.6%, will certainly result in higher costs for city businesses, residents and real property owners alike,” PRA cautioned, adding that “those with the means to pass on the increase will inevitably do so in the form of higher charges to their tenants.”

The group then submitted its own proposed schedule of adjustments that “will deliver a result that is both fair and reasonable to all concerned.”

In a Nov. 25 position paper, the Quezon City Association of Filipino- Chinese Businessmen, Inc. said the proposal’s “resulting increase of 39-131% may be too big a burden for the city’s residents, many of whom are simple employees, retirees and small business owners who have planned budgets that did not account for such a significant increase in their respective real property tax liability.”

“[T]he financial burden of the council’s current proposal on real property taxes may be too extreme for the city’s residents,” the group said.

“For business owners in the city, a drastic increase in real property tax may result in the closure of several businesses as well as a general increase in prices to reflect the added cost of business.”

The Alliance of Quezon City Homeowners Association, Inc. (AQCHAI) said in its Nov. 12 paper that “the proposed rates are unjust and excessive and… will unduly burden landowners in Quezon City.”

AQCHAI then batted for smaller increases, acknowledging that “there is indeed a need to increase property valuation in the city to correct the disparity” from RA 7160, as well as “a staggered increase… as… a better proposition.”

Noting that Quezon City ended last year with an P8.2-billion operating surplus and “is practically debt-free”, the LGV (Loyola Grand Villas) Homeowners Association, Inc. and the La Vista Association, Inc. argued in a joint Nov. 29 position paper that “there is no need for the real estate tax increase at all.” —