LGUs to hike property tax next year
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MANILA, Philippines -- In response to an order from the finance and local government departments, provinces and cities would be hiking their real property taxes by next year.
According to the Department of Finance (DOF), 5 provinces and 10 cities have updated their schedule of market values (SMV) used in by local assessors in appraising real property taxes. These local government units (LGUs) would be joined by 12 more provinces and 26 cities by 2012.
As of November this year, the provinces that already complied with the circular are Pangasinan, Cavite, Rizal, Romblon, and Compostela Valley. The cities of Santiago, Palayan, Antipolo, Tagaytay, Trece Martires, Calapan, Kabankalan, Bayawan, Zamboanga, and Davao have also updated their SMVs.
By next year, the provinces of Abra, Laguna, Camarines Norte, Masbate, Sorsogon, Aklan, Capiz, Guimaras, Iloilo, Negros Occidental, South Cotabato, and Agusan del Sur will also implement their new SMVs, as well as the cities of Parañaque, Vigan, Laoag, Balanga, Tarlac, Sorsogon, Cavite, Bacolod, Bago, Cadiz, Escalante, Himamaylan, Iloilo, La Carlota, Passi, Roxas, Sagay, San Carlos, Silay, Victoria, Lapu-Lapu, Talisay, Zamboanga, Dapitan, Iligan, and Digos.
LGUs were ordered to update their SMVs to raise more revenues as stated under Joint Memorandum Circular 2010-01 issued in October 2010.
Salvador M. Del Castillo, Bureau of Local Government Finance (BLGF) OIC-executive director said that updating the SMV would increase an LGUs' capacity to generate more revenue so they do not have to depend on their share of internal revenue allotment from the national government (IRA).
Under Section 284 of the Local Government Code, the national government is mandated to give LGUs their share of revenues, with provinces and cities receiving 23 percent of total while municipalities and barangays getting 34 percent and 20 percent, respectively.
Del Castillo said that under the law, LGUs should conduct a general revision of assessments and property classification every three years to reflect the true market values of properties.
Most LGUs, however, did not follow this directive as shown by data from the BLGF -- which supervises all LGU treasurers -- only 28 percent of the provinces and 22 percent of the cities in the country have updated their SMVs as of its last revision in 2008. To date, 29 provinces and 84 cities have yet to revise their SMVs with base years 2006 or even older.
Interaksyon’s earlier story found that politics is the main culprit for local governments’ non-compliance. Based on a 2002 report, the DOF said politics come in the form of pressure from groups, local property owners and the political influence placed on the assessors. Local councils have also been known to alter the assessors’ recommendations in adopting a revised SMV.
Since the powers of LGU heads, from the mayors of small towns to governors of large provinces, are all-encompassing under the Local Government Code, politicians have the authority to approve or amend the assessor’s recommended SMV, causing problems in the review and adoption of the market values.
“There are even a number of LGUs whose real property tax collections are based on the SMVs going back to 1996 and even 1993 when it was first implemented,” Del Castillo said.
“If the LGU uses outdated SMVs in real property tax collection, then properties which have appreciated in value over time would still be taxed based on the lower values, thus taxes imposed are lower than what they should really be,” he added.
Conversely, properties which have depreciated in value over time would still be taxed based on higher value and this penalizes property owners since they are taxed higher than they should be.
The BLGF official said that updating SMVs would not necessarily make property taxes shoot up since the assessment levels or tax rates -- two other factors used in computing real property tax -- may be adjusted by the LGUs to cushion the impact of the hike in real property taxes.
“Tax policy options such as phased or staggered implementation and discounts for early tax payments should also be optimized to mitigate potential tax hike,” Del Castillo added.
He said that the process of regular revision of SMVs is part of the Aquino administration’s effort to increase tax administration efficiency to collect more revenues for the government.