THE THIRD tax reform package which the Department of Finance (DoF) plans to submit to Congress by “midyear” will seek to ensure that real property tax assessment levels are adjusted promptly and are insulated from local political concerns.

While Republic Act No. 7160, or the Local Government Code of 1991, requires provincial, city or municipal assessors “to undertake a general revision of real property assessments… every three years,” many local government units (LGUs) have failed to observe this requirement.

taxpayers
Besides shifting the burden on those who can pay more, the administration’s comprehensive tax reform plan hopes to further reduce local authorities’ dependence on their units’ annual share in national government tax collections. — BW FILE PHOTO

That omission, in turn, has left LGUs — the country’s 81 provinces, 145 cities and 1,489 municipalities — heavily dependent on their annual share in national government tax collections, called internal revenue allotment.

“The problem is most local governments are very hesitant to increase their assessments kasi constituents might get mad,” Finance Secretary Carlos G. Dominguez III told reporters on Thursday last week.

LGU officials are elected every three years and can be reelected up to a third straight term.

“So what we are going to suggest in the law is the national government provides the assessment on the values,” Mr. Dominguez said, adding that his department aims to submit the proposal to Congress by “midyear.”

A Bureau of Local Government Finance (BLGF) official, who declined to be identified, said in an interview yesterday, that the tax reform proposal will, among others, form a committee consisting of representatives of BLGF, the Bureau of Internal Revenue (BIR) and LGUs to regularly review local assessor’s property valuations before recommending new levels to the Finance secretary for final approval.

The proposal will seek to harmonize fair market values used to compute local real property taxes and zonal values used by the BIR to compute taxes on the sale and transfer of such properties.

“There will be a proposed committee to review, there will be a single valuation. Right now, we have the zonal values prepared by the BIR and then the schedule of market values prepared by the local (government). So dalawang (two) values and we’re planning to make it a single valuation,” said the BLGF official.

“The committee will be the one to recommend to the Secretary of Finance. We are trying to strengthen them (LGUs) and separate the political side. Natatakot sila (Local officials are afraid) because of the political backlash since it (adjustments in assessments currently) will be through an ordinance.”

Mr. Dominguez said that, unlike RA 10963, or the Tax Reform for Acceleration and Inclusion that was enacted last month and which took effect on Jan. 1, the third package will be “revenue neutral.”

“…[F]or the local government it might be revenue-positive, but it really depends on them — how they will use that tool.”

Mr. Dominguez said LGUs will still exercise autonomy by deciding assessment levels, expressed in terms of percent of excess over valuation brackets.

“If they want to apply it high, or they want to apply it zero it’s up to them. So the principle of local autonomy is still maintained,” said Mr. Dominguez.

“So that’s what we will do, we will propose to the legislation where the national government will provide it (land values) and they (LGUs) impose the tax. Right now they do both.”

The BLGF official said the envisioned committee will cover only cities and provinces, since municipalities follow valuation set by provincial assessors. — Elijah Joseph C. Tubayan

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