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Is this tax on fax machines, printers and PCs for real?

(Article published in the January 14, 2002 issue of TODAY, Business Section)

The real- property tax, now being imposed by local governments, is as anachronistic as the documentary stamp tax that is collected by the national government. Both taxes are remnants of an age long gone, founded on premises and constructed by concepts that have become irrelevant, if not outright antithetical to the present.

The logic behind these taxes, like the Roman’s judgment in the wake of Ceasar’s death (at least according to Shakespeare’s rendition of Marc Anthony’s speech), has fled to brutish beast and men have lost sight of their reasons. What remains is a bone head excuse for collecting money.

Take for instance, the move in Makati City to assess the real-property tax on certain equipment of banks. Makati wants to collect real-property taxes on typewriters, passbook printers, microfilm machines, fax machines, personal computers, photocopiers and similar properties, presumably to raise money to pay for the construction and maintenance of its imposing city hall. That is some imposition, Jojo B.

The problem arises because the real-property tax segment in the Local Government Code does not contain a definition of what is "real property." Actually, neither did all the prior laws, all the way back to the Assessment Law, that sought to impose the real-property tax.

Nobody considered there was need to define the term, because the tax was from the very beginning an exaction for having some rights on what the king owned, thence "real" (not as in true but as in regal). In the day of King Arthur and his less noble ancestors and progenies, the king owned all the land and must be paid for permitting the lesser mortals to hold it. No need to define that.

Over the years, changes in the way people lived and made their living made it necessary to expand the concept of "real" property. It began to embrance, and rightly so, the items which were added to the land that enhanced its utility or that made it suitable for the use to which the owners or the possessors would like to devote it. Thus, the concept of "improvements." And in further recognition of the Industrial Revolution, "machinery" was also thrown into the content of the term "real property."

Now those terms, "improvement" and "machinery" needed, and were provided, definitions in the law because they did not have the benefit of real’s historical underpinnings.

But through all these accretion to the concept of real property, the fundamental principle remains: those to be subject of the tax must have such a natural connection to land that justifies subjecting them to the real-property tax.

On the specific issue of bank equipment, the Bureau of Local Government Finance, on December 6, 1999, ruled in an opinion addressed to the City Assessor of Manila that machinery which are generally used for the purpose of carrying out day to day general office activities, without hampering the flow of regular office transactions in a particular business or industry, such as computers, printers, CPUs (or central processing units), are not real property and therefore not subject to tax. This echoes the much earlier ruling of the Supreme Court declaring off-limits for the real-property tax those properties which are merely incidental to the conduct of one’s business (Mindanao Bus. Co. v. City Assessor, 6 SCRA 197). These include the cash registers and typewriters, among others.

There is no doubt, Jojo, that you need money. For your city hall, for the services you extend to the poor of Makati, for the sundry expenses of your metropolitan town. But collecting money through a convoluted interpretation of the real-property tax is both a desecration of the revered history of that ancient tax and a sign of unimaginative thinking. I know you know that there are many ways of getting money, Jojo. Surely, taxing the fax machine is not one of them.