Why the Rich are Getting Richer and the Poor Poorer

I read some time ago that the City Council is currently upgrading the Schedule of Market Values (SMV) of Iloilo City upon the initiative of Councilor Perla Zulueta. Councilor Zulueta, who is currently the Chair of the Committee on Ways and Means in the Sanggunian Panglungsod, has proposed to adjust the SMV from its current 2006 rate to its more accurate 2012 values so that real property in Iloilo City would reflect their “true and current fair market values.” To the uninitiated, the SMV forms the basis for the computation of the RPT (Real Property Tax), more familiarly known as the amellar, and if approved the said ordinance would have effectively raised the city’s amellar by 300%, implemented on a staggered basis, beginning 2012.

Not surprisingly, Councilor Zulueta’s proposal has raised howls of protest from various local businessmen and has been met by stiff resistance from the local landowners who will be affected by the said increase. This, despite the fact that the city’s property owners were already granted a tax reprieve in 2008-2009 owing to the devastation of Typhoon Frank. So, bowing to pressure from these local elites, Mayor Jed Patrick Mabilog “requested” his allies in the Sanggunian to defer approval of the Zulueta Proposal. Instead, the Sanggunian members last week opted to enact Tax Ordinance 2011-065 which adopted the 2006 values instead of the 2012 values proposed earlier by Inday Perla.

Well, all I can say is – Councilor Perla Zulueta has more balls that our city mayor!

I do not know whether Mayor Mabilog is aware of this, but the Local Government Code (RA 7160) specifically states that the Schedule of Market Values (SMV) must be upgraded once every three years to reflect their true and current fair market values. By “requesting” his Sanggunian allies to adopt the 2006 instead of the 2012 SMV, Mayor Mabilog has in effect asked his councilors to violate the law.

During the term of Mayor Treñas, the SMV was regularly updated to reflect its current values and was deferred only in 2009 owing to Typhoon Frank. But now that Iloilo City has fully recovered from the devastation of Typhoon Frank, Councilor Zulueta thought it only fair for the SMV to be put back on track by proposing that property values be amended to its current 2012 values. But in one fell swoop, Mayor Mabilog and his allies in the City Council brought us back to the “dark ages” through Tax Ordinance 2011-065 which effectively made all real property in Iloilo City to be less that their actual market values. Today, the value of land in Iloilo City reflects not its true 2012 value but its old 2006 rates. In other words, the local landholding elites have once again escaped paying the “correct” taxes.

But has anyone stopped to consider the long-term fiscal implications of such a move to Iloilo City? Low property valuation rates will mean low tax collection rates, and low tax collection rates will necessarily result to inadequate services for the poor and disadvantaged sectors of Iloilo City who have come to rely on City Hall for their jobs, livelihood, education, health care and virtually everything that they need. Diin naton subong kuhaon ang kwarta? Where will City Hall now source the funds needed to provide the necessary services for Iloilo City’s burgeoning indigent population?

Taxing the real property of moneyed Ilonggos is the closest thing you can legally get towards attaining Robin Hood’s adage of “taking from the rich and giving to the poor.” While everyone agrees that the rich should be taxed more than the poor and not the other way around, in reality that is not really the case. In fact, government today collects more money taxing income (e.g. income tax) and consumption (e.g. VAT) than property (e.g. amellar, capital gains tax). In 2009 for example, government collected a total of 520 billion pesos in income taxes and 354 billion in VAT and excise taxes, but only 21 billion pesos in property taxes. In other words, the burden of financing the public expenditure programs of government is inordinately borne by the salaried worker and the ordinary consumer, and not by the property owner in this country. It has always been this way.

Thus, to answer the question “Why the rich are getting richer and the poor poorer” which I used as the title of this column, I would like to say that maybe it is because local officials like Mabilog are so easily swayed and cowed by local elites since they are their main sources of campaign financing. Because of our inequitable tax system, it is no wonder that the poor are unable to rise out from poverty while the working middle class find it increasingly hard to make ends meet today. Besides, the political experience of Mayor Mabilog reveals that one can win elections merely through clever PR gimmicks, media projection and “tokenism” (e.g. distributing tsinelas sa mga nasunugan, etc.). People are fickle and voters are fools come election time – so there is really no compelling need for politicians like Mabilog and his ilk to generate enough tax revenues to sufficiently address the needs of Ilonggos in between elections.