THE Philippines targets to ramp up the real property tax collection of local government units (LGUs) by 30.85 percent to P113.4 billion by the end of 2024.
Revenue collection of LGUs from real property tax is seen to rise by P26.7 billion from what they collected in 2017 following the four-year implementation of Asian Development Bank (ADB)-Local Governance Reform Project (LGRP), which aims to adopt digital tools in strengthening local property valuation and tax collection nationwide.
Finance Secretary Carlos G. Dominguez III, who chairs the Interagency Governing Board (IGB) tasked to implement the project, stressed the importance of the LGRP in boosting revenue-raising capacities of LGUs.
“This project is quite important. We should put our attention to it because in the end it will help the local governments improve their capacity to raise their own finances,” Dominguez told the IGB board during its first virtual meeting on May 18.
The IGB is now set to meet every two months until LGRP gets off the ground. This, after Dominguez increased the frequency of the meeting from the recommended schedule of twice a year. It is set to meet again on July 19.
Bureau of Local Government Finance (BLGF) Executive Director Niño Raymond Alvina said during the meeting that they target to have 1,372 LGUs, or at least 80 percent of the total number of LGUs, achieve 100-percent efficiency in real property tax collection and valuation by 2024, triggering a 30-percent increase in LGUs’ total own-source revenues.
The share of real property taxes to local tax revenues has been decreasing since the enactment of the Local Government Code, Alvina said, adding that real property taxes currently contribute 9 percent to the total LGUs aggregate income, lower than the 13-percent share of business tax collections.
As of 2019, around 98 out of 146 cities and 46 out of 81 provinces in the country are noncompliant with the requirement to revalue properties in their respective jurisdictions once every three years, he said. Sixty-four percent of LGUs have outdated property valuations, while the real property tax collection efficiency of provinces and municipalities are at only 68 percent and 71 percent, respectively.
Compared to its Asian peers, the Philippines lags behind in terms of share of real property tax collections to Gross Domestic Product (GDP), according to Alvina.
The Philippines’s property tax-to-GDP ratio has been decreasing since 2003, settling at only 0.5 percent as of 2019, which is the same as Thailand’s, and way lower than the 2-percent average set by the Organization for Economic Co-operation and Development (OECD). Singapore’s property tax-to-GDP ratio is at 2 percent, while Japan is at 2.5 percent and South Korea at 3 percent.
System weakness
Alvina said the LGRP aims to correct the following infirmities in the property valuation system of LGUs: absence of an integrated and reliable property information and valuation database for transactions to capture the true market value of real properties; poor record keeping and outdated reporting systems; weak capacity of local valuation staff; and political considerations in approving and implementing updated Schedule of Market Values (SMVs).
Under the LGRP, a Property Valuation Office will also be established this year in the BLGF.
Apart from updating the existing real property tax guidelines with international valuation standards, Valuation Training Centers and training hubs will be set up to improve the competency and professional skills of local assessors. At least 858 or 50 percent of the country’s 1,715 local assessors will also be trained on the use of learning management systems and develop formal valuation education programs with partner academic institutions.
Alvina said LGRP will also develop and roll out a Real Property Valuation Information System (RPVIS), and implement and operationalize computer-assisted valuation, billing and collection tools for real property taxes in 20 participating LGUs.
Updating the property assessment records of participating LGUs; assisting LGUs in updating their SMVs; and capacitating them on tax compliance are also among the expected outputs of the project.
In July last year, the Philippines and the ADB signed a US$26.53-million loan agreement to implement the LGRP. The government’s counterpart funding for the project is US$4.96 million.
The IGB will have Finance Undersecretary Antonette Tionko of the DOF-Revenue Operations Group (ROG) as alternate chairperson.
During the meeting, the following officials were also named as IGB members: Director General Karl Kendrick Chua of the National Economic and Development Authority, Interior and Local Government Undersecretary Marlo Iringan, Information and Communications Technology Undersecretary Jose Arturo de Castro, Budget and Management Undersecretary Herman Jumilla, Alvina, and Bureau of Internal Revenue Deputy Commissioner Celia King.
Marinduque Gov. Presbitero Velasco Jr., the national president of the League of Provinces of the Philippines; Bacolod City Mayor Evelio Leonardia, national president of the League of Cities of the Philippines; and Barcelona, Sorsogon Mayor Cynthia Falcotelo-Fortes, secretary-general of the League of Municipalities of the Philippines, were also named IGB members.
Image credits: AP