Qs7: What happens after Cebu City Council’s approval of Mayor Mike Rama’s increase of real estate taxes. Business taxes spared for now but will come next. Kons Noel Wenceslao, budget and finance head, defends move anew, conceding it’s ‘unpopular but necessary.’

BEFORE the year ended on December 30, 2022, the Cebu City Sanggunian approved an increase of real estate taxes, which Mayor Michael Rama’s administration plans to fund much of its P50 billion budget for 2023.

Councilor Mary Ann de los Santos had pleaded for people who own small parcels of land and are barely surviving the economic hardship. Minority Floor Leader Nestor Archival Sr. said the councilors were not given enough time to study the tax hike, the same line he used in his opposition to the budget.

The vote however on the tax increase was a majority “yes,” with three abstentions (curiously, not “no’s”), namely by the Councilors de los Santos and Archival and a third BOPK, Jose Lorenzo Abellanosa. Councilors Joy Young, Franklyn Ong, and Jessica Resch were absent. While Ong and Resch are in legal theory non-partisan, they have been identified with the minority.

Monday, January 9, 2023, I asked Councilor Noel Wenceslao, chairman of the committee on budget and finance, to tell the public what’s ahead:

[1] After the City Council approval and the mayor’s expected signature on the ordinance, what happens next?

The city assessor will prepare the new schedule, which will be published in a newspaper of general circulation and posted on bulletin boards in public places. In coordination with barangay officials, we expect the information to reach landowners who still don’t know about the tax increase.

[2] The rates on land tax, news reports say, will be 2 percent for residential and 10 percent for commercial and industrial and special levy and 4.50 percent for agricultural. On buildings and structures, the percentage ranges from 0 to 32 percent for residential, 20 to 35 percent for commercial and industrial, and 0 to 35 percent for agricultural. The range of increase, particularly on residential houses, seems to give wide discretion to the assessors. Doesn’t that cast some uncertainty on the actual tax imposed on the house owner?

It cannot be said there’s uncertainty about the rate for residential buildings. It’s based on fair market value and only the fair market value is increased.

(In a news report, Wenceslao said the fair market value is based on the “updated base unit value of the building and base unit construction cost.” Majority Floor Leader Jocelyn Pesquera reportedly also gave a tip on computing the tax due: “multiply land area by fair market value equals total market value, then multiply by assessment level equals assessed value, then multiply by tax rate.” If you don’t get any of that, ask a tax consultant or just accept the figure at the bottom of the assessor’s computation.)

[3] The increase will be more painful on people whose real property tax is not earning and the income from their job is barely enough for the family’s daily needs. What’s the relief for them?

We do understand that the real estate tax increase will hurt residents but the increase is necessary for the government and for the people. Everyone wants to reduce as much as possible the tax each has to pay. Paying the right amount is a social responsibility. The taxes will go to government funds that will be used in improving public facilities and the life of the everyone. We cannot relieve anyone from paying taxes except for a justifiable reason.

We need, Atty., to have political will to implement unpopular but necessary ordinances. But we adopt safeguards. On the P50 billion budget that the City Council approved, we have installed control measures on spending.

[Earlier, Wenceslao told news media the impact on property owners will be “cushioned” by implementing the revised schedule in two phases: the first half, starting this year (2023) and the full implementation, on January 1, 2026. He said the present market value has a very high increase, “taas man kaayo,” thus only 50 percent will be considered this year.]

[4] How does the City Council see to it that the collection mechanism of the executive department is implemented properly?

We have included a provision for the creation of an oversight committee composed of councilors, which will assure its proper implementation.

[Last December 30, 2022, he told SunStar Explainer the councilors will “give our executive the benefit of the doubt that it can raise the sources of funds.”]

[5] What do you say to opinion of one councilor, who’s with the majority, that the increase could’ve been staggered some more or spread further in phases, as the leap from 50% in 2023 to 100% in 2026 is still too high and its impact too heavy?

The increase followed the Local Government Code of 1991 and is allowed by the law. If we had strictly followed the law, the increase would’ve been higher than the rate we approved. The last increase was in 2006 yet.

(That has also been the argument of Atty. Jerone Castillo, the mayor’s special asst. on fiscal reforms, which in effect says they could’ve hurt taxpayers more with the allowable rate but have not.)

[6] The work of the assessors will be tremendously exacting. Does the office have the resource and efficiency to do a much bigger and heavier job?

True, the work of the assessor’s office has become more tedious. Revision of tax declarations and tax mapping will be huge and hefty. The office will need more people, for which we increased its annual budget.

[7] Can you see the political cost of this to you and your colleagues in the party, should the “unpopular” tax increase and enormous 2023 budget be complicated by possible inefficiency or even corruption?

We know the moves are unpopular but, as I said, they’re necessary.

[Councilor Wenceslao also clarified in an earlier interview that the budget is “not P51 billion plus but only P50 billion, since the (extra) P1 billion is part of the subsidy of the general fund to the special accounts.”]