THE Management Association of the Philippines (MAP) on Monday called for a 50% assessment level under the Department of Finance (DoF) Schedule of Market Values (SMV) for estates transferred to relatives ahead of the donor’s impending death and free transfers of property to relatives during the donor’s lifetime.
MAP also recommended that for national tax purposes, “assessment levels be likewise applied on the DoF’s valuation, as published in the SMV, to temper the impact of inflation in property values reflected when the SMVs are periodically upgraded to conform to current market values,” MAP said in a statement on Monday.
“Accordingly, the MAP recommends an assessment level of 50% of the DoF’s SMV for transfer mortis causa (ahead of the donor’s impending death) of estate property and gratuitous transfer inter vivos (during the donor’s lifetime) of property among members of the family up to the 4th degree consanguinity,” it added.
It said using full market value as the basis for such transfers will defeat the purpose of the 6% estate tax amnesty rate under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
“The benefits of such lower rate of 6% that encourages high level of compliance going forward will be eroded if the full market values, as appraised and periodically upgraded, will be used as the valuation base for non-commercial transactions among family members,” MAP said.
The group also hoped its proposal will be considered in the bills filed in the House of Representatives and the Senate that form part of the third package of the government’s tax reform program.
Asked for comment, Senator Juan Edgardo M. Angara, chair of the Senate ways and means committee, said the panel will take into consideration MAP’s proposal.
“We will study. Note however (that) rates have already gone down dramatically in the last year to 6% from much higher rates in the old law,” Mr. Angara said in a text message to BusinessWorld.
Also asked for comment, a DoF official who asked not to be identified said: “We oppose. We already lowered the national internal revenue taxes on TRAIN, estate and donors. Number 2, we’re following international standards, all valuations should apply equally.”
The DoF official also said that the MAP has not provided sufficient justification why assessment valuations should be halved.
Under current laws, the valuation of the national government is based on the property’s zonal value, while the valuation of the local government is based on fair market value. The assessment level of valuation percentage depends on the land use.
The House of Representatives passed on third and final reading House Bill No. 8453 or the proposed Real Property Valuation and Assessment Reform Act on Nov. 12. Its counterpart version, Senate Bill No. 44, remains pending in the committee level.
The proposed measure directs the DoF’s Bureau of Local Government and Finance (BLGF) to develop and maintain a uniform valuation standard that is in line with international standards. The uniform valuation standard will guide local government appraisers and assessors in preparing their SMV.
The SMV will then be used as basis to determine real property taxes of national and local governments.
Aside from their proposal to lower assessment levels, MAP also recommended that the actual selling price of low-cost or socialized housing units to the first buyer be deemed the market value and assessed value, which will also be the valuation basis for taxation.
It also called for public hearings to be conducted on the initial SMVs by government before its implementation. — Camille A. Aguinaldo
