Old property values cost LGUs P30B
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Mon, 03 Jun 2019 16:25:27 +0000
MORE than P30 billion in potential annual local government revenues are being lost due to obsolete real property values, according to the Department of Finance (DoF), which seeks to change this.
In a statement on Tuesday, the Finance department quoted Jose Arnold Tan, acting deputy executive director of the Bureau of Local Government Finance, as saying that cities could have collected as much as P23.077 billion in incremental revenues from real property taxes.
Provinces, he added, could have gotten as much as P7.379 billion more if their schedule of market values (SMVs) were updated and in sync with international standards.
According to Tan, only 36 percent of local governments have updated SMVs. The rest, made up of 97 cities and 48 provinces, are yet to do so.
Moreover, only 60 percent of the regional district offices of the Bureau of Internal Revenue have updated zonal values.
Tan explained that under this outdated system, overvaluation usually happens when the government pays for a piece of real property and undervaluation often occurs when it is the government’s turn to collect.
The system, he said, is also riddled with multiple overlapping functions as 23 national government agencies can or are required to do valuations, with each using its own system and methodology.
This has led to disparities between market and zonal values by between 13 percent and 94 percent. Between the SMVs and private valuation, the disparity is from 187 percent to 7,474 percent, Tan added.
The official also pointed out that local governments often overlook the requirement under the Local Government Code to update their SMVs and zonal values every three years because there are no existing sanctions against local officials that would compel them to comply.
The bureau official said that for provinces alone, the P7.4 billion in foregone real property taxes could have built 551 public markets, 771 kilometers of roads, 7,542 classrooms or 2,155 daycare centers.
The P23 billion in real property taxes that cities fail to collect could have built either 513 transport terminals, 339 landfills, 1,154 satellite health centers, or 3,330 low-cost resettlement projects, he added.
Valuation reforms
Because of this, the department stressed the need for valuation reforms in the real property sector.
For his part, Finance Secretary Carlos Dominguez 3rd was quoted as saying that reforms under the third package of the government’s Comprehensive Tax Reform Program would further invigorate the real-estate market, bring in more investments and generate additional revenues for local governments.
The reforms the department is proposing, Tan said, include the adoption of international standards in valuation; establishment of a single valuation base for taxation and benchmarking; the need to insulate valuation from politics, with local governments continuing to regulate tax rates and assessment levels; improvements in the oversight functions of the national government; and setting up of a comprehensive electronic database to support valuation functions.
It is also proposing that local governments that fail to update their SMVs and conduct a general revision of property assessments every time the Finance chief approves a new set of SMVs be barred from receiving any “conditional or performance-based grants or any form of credit financing from the national government,” he added.
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