7,000% increase in some taxes still not enough to raise P50B

A MEMBER of the Cebu City Council believes that the proposed increase in taxes still won’t be sufficient to help achieve the P50 billion proposed budget of Mayor Michael Rama for 2023.

Councilor Noel Wenceslao, chairman of the committee on budget and finance, told SunStar Cebu Monday, Nov. 21, 2022, that the City Government should also look into other “windows of opportunity” to help raise its revenues and generate sources of funds for next year.

During the public hearing on Wenceslao’s proposed ordinance for the revision of the city’s tax code on Monday, some councilors expressed their concerns on what they called an “excessive and oppressive” increase in taxes.

Wenceslao said the new tax rates came from the recommendation of Rama’s executive department through the local finance committee.

The councilor previously explained that the increase in the real property tax is dependent on the fair market value wherein some properties may experience an up to 7,000 percent increase in their taxes.

Despite this increase, Wenceslao said the P50 billion proposed budget to help fund the vision of Rama for a Singapore-like Cebu City cannot be achieved.

“Kaning P50 billion nato nga target, kung ang increase (in taxes) lang nato maoy basihanan, dili gyud kaya nato na. It is extravagance. Dili nato ma achieve ang P50 billion,” said Wenceslao.

Wenceslao proposed that the City Government look into the principle called “situs of taxation” wherein a local government unit (LGU) can impose and collect taxes for transactions that happened within its jurisdiction but the “booking” of the transaction was reported in another LGU.

He used financial institutions as an example wherein an individual would take out a loan here in Cebu City but the one who released the loan would report that the transaction happened in their head office outside the city.

Under the law, 70 percent of the tax due for the transaction goes to the LGU where the transaction was consummated and only 30 percent will be given to the LGU where the head office is located, said Wenceslao.

Wenceslao was not able to provide an estimate on how much will be added to the city’s purse once this kind of tax will be collected, but he said this will provide huge revenues to the City Government.

Collection efficacy

Wenceslao further said the proposed increase in taxes will be useless if the City will not be effective in collecting the taxes through the City Treasurer’s Office (CTO).

During the previous public hearings, the CTO reported that their office has only 10 tax examiners while the ideal number should be 25 to 30 personnel.

Wenceslao also suggested that the CTO establish a collection division to maximize the collection of taxes.

SunStar Cebu reached out to the city treasurer Mare Vae Reyes to know the tax collection efficacy of their office in recent years, but the latter declined to be interviewed since she is in Manila for a seminar.

If Rama’s proposed a budget of P50 billion for 2023 is approved, it would be the biggest budget in the city’s history.

It is also more than 450 percent higher than this year’s budget of almost P9 billion.

Last October, the city’s local finance committee proposed measures to address the financial struggles of the city, including the sale or lease of government properties and an increase in taxes as the city’s tax code has not been updated since 2004.

If approved, the P50 billion would dwarf the current annual budgets of the three richest cities in the country by assets.

The budget of Quezon City in the National Capital Region is only P30.5 billion for 2022. Manila City’s 2022 budget is P22.2 billion, while Makati City’s budget is P17.8 billion.