There was euphoria when the town of Davao, originally founded in 1848, became a city in 1937. To the planners, becoming Mindanao’s second city was an added incentive that would further enhance the socio-economic progress of Davao. But this was not entirely the case.
In creating Davao as a city separated from the once undivided province of Davao, certain adjustments had to be considered. For instance, the taxable property assets, which are today’s real estates, had to be configured as well.
Under the old structure, Davao province’s taxable properties totaled around PhP47 million. This was reduced, however, to PhP22 million after a huge part of the province was placed under the new city. As a result, the province was demoted in classification.
The impact the partition was painful. The salaries of provincial officials had to be reduced, along with the compensation of teachers and other personnel. To address the conundrum, the officials decided to make “artificial property valuations” by raising the assessed values of taxable properties in hope of regaining its old classification and curing the salary deficiency.
But the plan to raise assessments came at a time when Davao copra was selling below actual cost. The cost of corn was only 15 cents or double for a bushel and abaca was also in the same dire straits. The huge tax burdens imposed on the farms was “surely not worth the candle.”
The Journal of American Chamber of Commerce, in its January 1941 issue, came out with a painful explanation about this economic distortion, in part aggravated by the predatory pricing imposed by foreign traders who had control of the copra trade.
“Plantation copra in Davao brings no more than P1.50 per picul. Planters don’t get P25 a ton for it, though the Commonwealth gets more than P85 ton from its oil content taxed 3 cents a pound in the American market, the proceeds being turned back to this government. Coconut farmers, Filipinos, in Davao, back from the gulf, selling to general-stores, usually Chinese establishments, get only about 1 peso per picul for their copra. The plantation may gross 45 piculs per hectare a year, or P67.50. This means actual loss. The mere farmer will not do nearly so well; his fields will not be so well kept, cleaned, and completely planted up; to him a hectare will bring less than P40 a year.”
During this time, data show, if an abaca farmer earned returns amounting to P2hP250 per hectare for selling his property, he was at a loss because he pays in form of tax PhP180 for the land and another PhP280 for the plants. For the most productive farms, the farmer grossed PhP67.50 for his copra but had to pay PhP9.90 for every hectare.
“In other words,” the report said, “the abaca grower gets a current gross price nearly 4 times the amount his neighbor gets for copra, but is taxed at valuations hardly more than half of those assessed against his neighbor who grows coconuts; that is to say, the crop that will not net actual cost is taxed about twice as much as the crop that makes considerable profit.”
In short, the small Filipino coconut grower had his holdings valued exorbitantly and comparably higher than the farms cultivated by the Japanese for abaca and ramie. In, retrospect, the journal was right in saying there was disparity created as a result of the cityhood initiative.
The report continued:
“We dare say that the temptation to impose those new valuations on Davao’s farmers would not have risen at this time, the least propitious time conceivable for upping agricultural taxes, had not the province lost so much revenue from the chartering of the capital as a city. Since the central government did this, surely it is [the agency] that the victims… have the privilege of looking for relief from impending misfortunes from it; first, for postponement of these new assessment values; second, for adjustment of these values to a fairer standard.”
With the passage of Republic Act 7160, the Local Government Code of 1991, these issues were considered, especially in the distribution of internal revenue allotment (IRAs). Cities with larger jurisdiction got huge tax appropriations from the national government, while smaller towns had to be content with smaller IRAs which were augmented by fiscal support from various funding sources within the government.
But the issue of fair distribution of IRA had its major hurdle when the Supreme Court allowed the elevation of 16 towns into cities despite failure to achieve the required PhP100 million annual income the law stipulates. The high tribunal correctly argued the tax condition was only approved after the wannabes had filed their cityhood bids.
The impact of this development, though, was hard. All the cities in the archipelago had to share their IRAs with the newly promoted settlements. Davao City, as a result, received only PhP69 in IRA in 2008 instead of the originally expected PhP263.5 million. For its part, Zamboanga, the first city in Mindanao, got only PhP35.87 million in internal revenue allotment, way below the expected IRA increase of PhP1150.84 million.
With new cities rising from many suburban settlements, certain adjustments will again be adopted in the future. Economists, however, warned that continuous subdivisions of areas into cities and towns can have long-term effect in the productivity level of certain communities with less sustainable sources of income.
