THE FINANCE department (DoF) estimates that local government units (LGUs) have been foregoing about P30.5 billion in collections a year under the current system for updating schedules of market values (SMV) for real property tax, which has proven impractical for political reasons.
Republic Act No. 7160, or the Local Government Code of 1991, requires SMV updates every three years. This requirement is largely ignored, however, as local officials are elected very three years as well.
There is also a wide disparity between LGUs’ SMVs and zonal values of the Bureau of Internal Revenue’s (BIR) regional district offices that are used to compute estate, donor’s and capital gains taxes which are national levies.
The statement quoted Bureau of Local Government Finance (BLGF) Acting Deputy Executive Director Jose Arnold M. Tan as saying that cities could have collected as much as P23.077 billion in incremental revenues from real property taxes, while provinces could have gotten up to P7.379 billion with updated SMVs.
According to Mr. Tan, the amount that could have been collected by cities could have been used to build 513 transport terminals, 339 landfills, 1,154 satellite health centers or 3,330 low-cost resettlement projects.
For provinces, the revenues foregone could have been used for building 551 public markets, 771 kilometers of road, 7,542 classrooms or 2,155 day care centers.
Mr. Tan noted that only 36% of LGUs have updated SMVs, while the remaining 64% — composed of 97 cities and 48 provinces — have been non-compliant.
Moreover, 60% of BIR regional district offices have updated zonal values.
According to Mr. Tan, 23 national government agencies are involved in valuations using their own systems, leading to SMV-zonal value disparities amounting to 13-94%, while disparities between government and private real estate valuations range from 187% to 7,474%.
In order to fix this situation, the DoF has proposed as part of its tax reform program the establishment of a single valuation base for taxation and benchmarking that LGUs and the BIR will use, while still leaving with local governments the task of setting tax rates and assessment levels. The DoF has also proposed that LGUs that fail to update SMVs or implement new schedules after the Finance chief approves them be barred from getting “conditional or performance-based grants or any form of credit financing from the national government.”