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LGUs moving to hike real property tax take

Posted on December 12, 2011

LANDOWNERS should expect to pay more taxes as local government units (LGUs) are revising real property valuations in a bid to generate more revenues.

Ten cities and five provinces have already updated their schedule of market values (SMVs) this year while another 26 cities and 12 provinces will begin their revisions in 2012, Finance department data show.

This is in response to Joint Memorandum Circular 2010-01, issued last October by the Finance and Local Government departments, urging all LGUs to update their SMVs -- the basis for appraising real property taxes.

The following had complied with the directive as of November: the provinces of Pangasinan, Cavite, Rizal, Romblon and Compostela Valley, and the cities of Santiago, Palayan, Antipolo, Tagaytay, Trece Martires, Calapan, Kabankalan, Bayawan, Zamboanga and Davao.

Working to update their valuations by next year, meanwhile, are the provinces of Abra, Laguna, Camarines Norte, Masbate, Sorsogon, Aklan, Capiz, Guimaras, Iloilo, Negros Occidental, South Cotabato and Agusan del Sur, as well as the cities of Parañaque, Vigan, Laoag, Balanga, Tarlac, Sorsogon, Cavite, Bacolod, Bago, Cadiz, Escalante, Himamaylan, Iloilo, La Carlota, Passi, Roxas, Sagay, San Carlos, Silay, Victoria, Lapu-Lapu, Talisay, Zamboanga, Dapitan, Iligan and Digos.

“Using an updated SMV as basis in the assessment of real property tax increases the LGUs’ capacity to generate revenue from real properties so that they do not depend much on their share of internal revenue allotment (IRA),” said Salvador M. Del Castillo, officer in charge and executive director of the Finance department’s Bureau of Local Government Finance, in a statement issued during the weekend.

All local governments split the proceeds of national taxes through their assigned IRA. Real property taxes, meanwhile, are local taxes and go straight to LGU coffers.

“By making SMV current, [the] real property tax base expands ... [providing] LGUs the opportunity to generate additional income which can be used to finance various projects and improve delivery of basic services,” Mr. Del Castillo said.

The law requires LGUs to revise their property assessments every three years to reflect the latest market values. This, however, hasn’t been followed by most authorities. A total of 29 provinces and 84 cities have yet to revise their SMVs with base years 2006 or even older, Finance department data showed.

“There are even a number of LGUs whose real property tax collections are based on the SMVs going back to 1996 and even 1993 when [the law] was first implemented,” Mr. Del Castillo said.

This weakens LGU revenue generation since tax assessments do not reflect the appreciation in property values over time. Conversely, depreciated properties will still be taxed based on previous and higher values, penalizing property owners, he pointed out.

Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry tax committee, agreed with the policy move to have valuations adjusted.

“It is high time to adjust the SMVs since most properties have appreciated in value ... On the other hand, there are some properties which, due to some serious events like the typhoon Ondoy in 2009, could have also depreciated in value,” Ms. Lipana told BusinessWorld yesterday.

Government and private sector efforts have mainly focused on national revenue collections but there is a lot of room for improvement in local taxes, she added.

Mr. Del Castillo said potential tax hikes could be mitigated through staggered implementations and discounts for early tax payments.