Proposed estate tax hike may deter investments

CEBU, Philippines - If the city government pursues its plan to increase property tax rates, industry players said the move may discourage existing and potential investors.

Two key city officials are now looking at revising the Schedule of Market Values for Cebu City to increase its revenues.

However, any increases in the local SMVs require a lot of "balancing-of-interest considerations", said Lawyer Dennis Quiokeles, executive vice president of Pacific Land Ventures & Property Development, Inc.

SMV determines how much real property tax property owners need to pay to the local government.

"But given that Cebu City SMVs are 11 years old," the lawyer said, "and Mandaue's haven't been revised since 22 years ago then by that metric, an increase may already be warranted." The city's SMV was only changed in 2003 so far.

While the planned hike means a "sure increase" in tax payments of real property owners, Quiokeles expressed support for "reasonable and equitable increases in property values" provided that the increased revenues would be used for good governance practices.

He emphasized that tax collections must be used for better delivery of basic services to the people.

Raising taxes will also increase the cost of doing business, thus discouraging investors to invest in the city, noted Ramero Espina, vice president for sales of Primary Homes, Inc.

He said, "I think they need to maximize collection first before raising taxes."

Espina though suggested that one way for the city government to increase revenue and taxes is to sell its remaining properties especially those located in the South Road Properties.

The goal, he added, is "for it to become a more developed and high yielding property."

The vice president also noted the city should instead encourage the private sector to develop the SRP land to increase its value "which would also mean increase in taxes ."

"The value of an undeveloped lot will automatically increase by more than 10 times once developed," he further said, adding that projects should be focused on improving the city's infrastructures such as road widening and a better drainage system.

Furthermore, a brokerage firm said that if the city's goal is to invite more investors, it should not raise property taxes, saying it is only applicable when the economy is not doing well.

Anthony Leuterio, president of Leuterio Realty & Brokerage, told The FREEMAN, "Well, they might increase revenues but they may also discourage investors for sure. Why are we increasing tax when we have increasing investments?"

He believed that the city is actually making money from investments, thus there really is no reason at this moment to increase real property taxes.

The poor rating given by the Department of Finance's Bureau of Local Government Finance for the city's 2012 fiscal performance has pushed for the general revision of SMV.

For his part, City Assessor's Office Officer-in-Charge Ferdinand Cañete told The FREEMAN yesterday the city's move will not affect investors' confidence, believing there is no factual basis that it will happen.

"Trend hinuon nato karon kay nagkadaghan ang investors and the economy is growing," Cañete also said.

When asked for details on the planned increase in property taxes, the OIC only said he still needs to talk with Mayor Mike Rama to ask for an update on the matter. He declined to explain further but said the mayor has already formed a committee to do the SMV general revision.

Rama and Vice Mayor Edgardo Labella are the ones eyeing for the revision. Before, the two opposed any revision, saying it would imply additional taxes to property owners.

The Local Government Code allows local government units to revise property assessments every three years.

Moreover, Leuterio advised the local government that instead of raising taxes, it should do more in promoting Cebu and telling investors to buy properties here.

He stressed it should not only focus on "taxing", but try to think outside of the box and find other ways to raise income -- and promoting the city is one.

Quiokeles also said that while any increase can already be considered a legal, demandable burden and obligation as it is to the property sector, but as long as the benefits are there, "they should more than make up for the added taxes".

He added, "that's why equitable and reasonable increases are key. In any case, in-depth study and informed discussions with the citizens and stakeholders are indispensable." (FREEMAN)