MANILA, Philippines – Passage of the long-overdue Land Valuation Reform Bill would allow local government units (LGUs) to tap property taxes as a more reliable source of revenue, the Department of Finance (DOF) Friday, April 8.
In an economic bulletin, DOF chief economist and former undersecretary of state Gil Beltran noted that government spending at the start of 2022 was increased by almost a quarter from local government units. (LGU), now called National Tax Allowances (NTA), in this year’s P5.02 trillion national budget.
The Department of Budget and Management (DBM) released 239.8 billion pesos in the first quarter LGU NTA last January. LGUs will receive a total of over 959 billion pesos in NTA this year, up from 695.5 billion pesos in their old Internal Revenue Allocation (IRA) last year. This was in line with the implementation of the Supreme Court’s Mandanas-Garcia decision, which required that LGU’s shares in the national budget be calculated on the basis of all taxes collected by the Bureau of Internal Revenue (BIR) and the Customs Office.
In the past, LGU IRAs only came from BIR collections.
With larger budgets, LGUs now deal with local programs and projects in infrastructure, agriculture, social protection, healthcare, as well as livelihoods, among other sectors listed in the Code. local communities.
“With greater resources, LGUs are now expected to take on greater fiscal responsibilities and perform the functions assigned to them by the 1991 LGU Code,” Beltran said.
For Beltran, “this is effectively fiscal federalism, and could be further enhanced by passing the Assessment Reform Act so that LGUs are empowered to leverage even more internally generated resources.”
Part of the Duterte administration’s overall tax reform program, property assessment reform aimed to develop a fair and efficient system while broadening the tax base used for state and local government property taxes, said Finance Secretary Carlos Dominguez III earlier this year. .
“Reforming the property assessment system to bring it into line with global standards and protect it from political influence will help LGUs generate more revenue without increasing existing tax rates or imposing new taxes,” Dominguez said.
Two pending tax reform bills – the valuation of real estate and the law on passive taxation of income and financial intermediaries (Pifita) – have already been passed by the lower house, but remained pending in the Senate.
After the national elections on May 9, Congress will have only two sessions from May 23 to June 3, before adjourning and clearing the way for the next batch of lawmakers in July.
Dominguez had said that in the event the pending property assessment and capital market taxation bills do not pass the current 18th Congress, they would be part of the fiscal consolidation proposal for consideration by the next administration. .
The DOF-led economic team will provide the next president with a fiscal consolidation plan, which may include new or higher taxes, spending cuts in non-priority sectors, and economic growth engines to bring the budget deficit down to pre-pandemic levels of around 3% of gross domestic product (GDP) while paying off debts that have ballooned amid the protracted COVID-19 pandemic.
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