OUTDATED real-estate market values caused provinces and cities to lose as much as P30.5 billion in revenues, according to the Department of Finance (DOF).
In a statement on Monday, DOF Acting Deputy Executive Director Jose Arnold Tan of the Bureau of Local Government Finance (BLGF) said cities lost P23.077 billion while provinces lost P7.379 billion due to an outdated Schedule of Market Values (SMVs).
Finance Assistant Secretary Antonio Lambino told the BusinessMirror that the amount was estimated using SMVs for 2018 and real property taxes (RPT) in 2017.
“It’s an estimate for 2018 using SMVs from that year, and using 2017 RPT collection data due to a one-year lag in reporting,” Lambino explained.
Finance Secretary Carlos G. Dominguez III said there is a need to introduce reforms to address this. These reforms are contained in the real property tax system embodied in Package 3 of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).
“Essentially, real estate is the most valuable asset and biggest financial resource. But its contribution to government revenues, particularly for local governments, has remained dismal due to outdated SMVs, poor collection efficiency and tax administration and lack of uniformity in the valuation of real property,” Dominguez said.
Tan said the DOF is proposing to adopt international standards in valuation; establish a single valuation base for taxation and benchmarking; and address the need to insulate valuation from politics, with LGUs continuing to regulate tax rates and assessment levels.
The list of reforms also included improvements in the oversight functions of the national government and setting up of a comprehensive electronic database to support valuation functions.
Sanctions for the noncompliant
He
said the DOF is also proposing that LGUs which fail to update their SMVs and
conduct a general revision of property assessments every time the secretary of
finance approves a new set of SMVs be barred from receiving any “conditional or
performance-based grants or any form of credit financing from the national
government.”
Tan noted that only 36 percent of LGUs have updated SMVs. The rest, which comprise 97 cities and 48 provinces, remain noncompliant with guidelines to update their SMVs, he said.
Moreover, only 60 percent of the regional district offices of the Bureau of Internal Revenue (BIR) have updated zonal values.
“Under this outdated system, overvaluation usually happens when the government pays for a piece of real property, but undervaluation often occurs when it is the government’s turn to collect,” Tan said.
Further, Tan said the system is also riddled with multiple overlapping functions as 23 national government agencies can or are required to do valuations, with each using its own system and methodology.
Gaps in valuation
He said this has led to disparities between market values and zonal values by 13 percent to as wide as 94 percent. Between the SMVs and private valuation, the disparity is from 187 percent to 7,474 percent.
The DOF official said LGUs often overlook the requirement under the Local Government Code to update their SMVs and zonal values every three years because there are no existing sanctions against local officials that would compel them to comply with the law.
Tan said that for provinces alone, the P7.4 billion in forgone real-property taxes could have built either of the following: 551 public markets, 771 kilometers of roads, 7,542 classrooms or 2,155 day-care centers. He also said the P23 billion in real-property taxes that cities failed to collect could have built either 513 transport terminals, 339 landfills, 1,154 satellite health centers, or 3,330 low-cost resettlement projects.