Tax Hike PR Spin Can’t Hide the Pain

The Iloilo City government is scrambling to control the fallout from its steep real property tax (RPT) hike.

In a carefully crafted PR campaign, City Hall claims it was “forced” to implement the increase due to a Commission on Audit (COA) finding that land values had remained unchanged for nearly two decades.

While the city administration claims the “forced” this dramatic adjustment, a closer examination reveals a more nuanced reality.

Indeed, the city’s failure to update its Schedule of Fair Market Values (SFMV) since 2006 needed addressing. Property values in prime locations like Iloilo Business Park have skyrocketed to PHP 54,500 per square meter, while the city’s tax valuations remained frozen in time. This 17-year gap between assessments has undoubtedly led to significant revenue losses for the local government.

However, the administration’s narrative of being compelled by COA to implement such a steep increase appears misleading. The audit findings merely recommended that the city “endeavor to materialize” a revision of the SFMV, without prescribing the magnitude of the increase. The choice to raise rates by 300% was entirely the city’s decision.

This distinction matters because reassessing property values does not automatically mean RPT should rise at the same rate. The city had the discretion to adjust taxes in a way that would be fair to both the local government and taxpayers.

The city’s subsequent reliance on heavy discounts – including a 40% reduction extended until 2026 – suggests the administration recognizes the increase may be too aggressive. While these discounts provide temporary relief, they also indicate poor planning and implementation of what should have been a more gradual adjustment.

Most concerning is the city’s attempt to deflect responsibility by citing COA’s audit findings, rather than acknowledging its own role in allowing valuations to stagnate for nearly two decades. Regular, smaller adjustments would have been far less disruptive to taxpayers than the current shock treatment.

While updating property valuations is necessary and legally required, the manner and scale of Iloilo City’s increase appears poorly conceived and executed. Moving forward, the city must develop a more sustainable approach to property tax assessments that balances revenue needs with taxpayer capacity.

Iloilo City need not look far for a more effective approach. In June 2024, Makati Mayor Abby Binay announced plans to reduce real property tax rates, citing the city’s strong financial position and robust revenue generation. Instead of increasing RPT, Makati opted to expand its tax base by making the city more attractive to businesses and investors.

This strategy encourages investment, creates more jobs, and leads to higher overall tax collections without burdening existing taxpayers. By fostering a business-friendly environment, Makati ensures steady and sustainable revenue growth rather than relying on sudden and hefty tax hikes.

Iloilo City could learn from this example. Instead of implementing abrupt and substantial tax increases, the city might consider policies that stimulate economic activity and expand the tax base. Such an approach could enhance revenue generation while maintaining public trust and supporting economic stability.

The current situation serves as a cautionary tale for other local governments—regular, reasonable adjustments are far preferable to dramatic increases that require extensive damage control.

Iloilo City deserves a sustainable revenue strategy, but that requires a fair, consultative approach—not a heavy-handed imposition followed by desperate attempts at damage control. The city government must acknowledge that tax hikes, no matter how necessary, should not come at the cost of economic stability and public trust.

Taxpayers deserve better than this feast-or-famine approach to tax policy.