Mayor proposes expansion of property tax exemption to the City Council.

Bahia 247

Mayor ACM Neto (DEM) and the municipal finance secretary, Mauro Ricardo, presented this Friday (30), in a press conference held at the Thomé de Souza Palace, proposals submitted to the City Council that modify criteria in the collection of IPTU (Property Tax on Urban Buildings and Land), expanding the number of exemptions, which can jump from 140 thousand to 235 thousand in the current base or up to 500 thousand if the City Hall reaches the goal of one million registered properties.

This measure is in accordance with Law No. 7.186/2006, which allows the Executive Branch to submit to the Chamber, in the first year of each Legislature and when necessary, a proposal for evaluation or realignment aimed at ensuring the determination of the market values ​​of properties.

Currently, 650 properties comprise the municipality's cadastral database. The City Hall expects to expand this database to approximately one million properties. Therefore, the municipal government has launched a registration and re-registration campaign, which will result in a 10% discount on the 2014 and 2015 property tax (IPTU) for those who complete the process, and will also expand the tax exemption base. The procedure can be done through the website www.recadastramento.salvador.ba.gov.br until September 30th.

One of the proposals detailed today by the mayor and the finance secretary involves updating the General Valuation Schedule (PGV), an instrument used in the calculation of the IPTU (Property Tax). Prepared by the Municipal Finance Secretariat (Sefaz), the proposed update is the result of a thorough study, whose main objective is to correct existing distortions in tax collection and promote greater fiscal fairness in the municipality, eliminating unconstitutional aspects and making the methodology more objective.

The PGV (Property Valuation Guideline) was last comprehensively revised in 1994, and had partial updates in 1997, 1999, and 2010, meaning it is 19 years out of date. This outdated PGV leads to an undervaluation of the market value of properties, which is the basis for calculating the IPTU (Property Tax). With this update, and by ensuring fiscal fairness, eliminating distortions, and combating tax evasion, the City Hall estimates an increase in revenue of R$ 480 million, with a commitment to invest 25% of this amount in Education and 15% in Health. The remainder will be invested in infrastructure projects for the municipality.

"These proposals are part of the City Hall's fiscal reform which, through a series of measures already taken, has allowed the beginning of the balancing of Salvador's accounts. This demonstrates an effort to create conditions for the City Hall to stand on its own two feet and cease being the capital with the worst per capita revenue in Brazil. I want to emphasize that, with these proposals, we will promote fiscal and social justice in the municipality, ensuring that those who have less do not pay or pay less, and those who have more pay more," the mayor stated during the press conference.

The number of exemptions will be expanded to include properties valued up to R$ 80.

Property owners with a market value of up to R$80 will be exempt from paying IPTU (Property Tax). Previously, this exemption applied to residential properties valued up to R$30. Since the market value calculated by the City Hall is 20% lower than the assessed value, those who own residential properties valued up to R$100 will be exempt from paying IPTU. "Therefore, it is important that people register and re-register to access this benefit. If they do not, in addition to paying a fine, they may lose the benefit," reminded ACM Neto.

The property tax rate, which currently ranges from 0,1 to 1 depending on property appreciation/depreciation criteria, will not be changed. What will change, if the proposal is approved by the City Council, is the calculation of the property tax, which would shift from the current "Construction Standard" criterion to "Market Value".

As with every year, the IPTU (Property Tax) adjustment is based on the inflation index. Under the new system, the real adjustment of the 2014 tax for residential properties should be, on average, around 8%, or approximately 15% if the estimated inflation for this year is considered. The mayor announced a 35% cap on the variation in the tax, which will be mitigated by 10% through mandatory registration/re-registration and by another 10% with payment of the IPTU in full. The option to pay in up to 11 installments will be maintained.

Tax relief - According to the municipal finance secretary, Mauro Ricardo, the population with the lowest income will benefit from the changes. "Even in this situation, the City Hall took care to develop a project that will bring relief to those who cannot pay, increasing the exemption bracket. We emphasize, in this sense, that the registration or re-registration is not for revenue collection purposes, but to identify who these people entitled to exemption are and to bring public policies to them," he explained.

The secretary also pointed out that, despite the 19-year lag in the PGV (Property Value Assessment), mechanisms (so-called safeguards) were created to limit the adjustment. Without these safeguards, the adjustment, in some cases, could be 1.000%. Thus, the City Hall will register a market value well below that practiced in the market, avoiding large variations in the amount charged for IPTU (Property Tax). There will also be no real increase in the value of the Collection, Removal and Disposal of Household Solid Waste Fee (TRSD). Only monetary updating will be carried out, as happens every year.

Property tax will have a differentiated adjustment.

In the case of land, the value will also be adjusted with a cap, but through a different system. Land plots up to 300 m² will have a 50% cap; for plots between 301 and 1 m², the cap will be 100%; for plots between 1001 and 2 m², the cap will be 200%; and for plots larger than 2 m², the adjustment will not have a cap. The objective is to combat real estate speculation, promoting fiscal fairness. Currently, for example, there are plots of land registered with the City Hall with a value of R$7 per square meter.

"We don't want undeveloped land in the city, and that's why we're applying a different way of implementing this update to encourage construction," stated Secretary Mauro Ricardo.

Examples of distortions that will be corrected

During the press conference, Secretary Mauro Ricardo cited several examples of distortions in the valuation of some real estate developments for tax calculation purposes. An apartment in the Edifício Morada dos Cardeais, for example, is being advertised for R$5,4 million. For the IPTU (property tax) calculation base, the value recorded by the City Hall is only R$720, representing an 84% discrepancy. If the projects are approved by the City Council, the assessed value will be approximately R$2 million. Despite this, it is still far below the market value of the development, thanks to the restrictions announced during the press conference.