Low valuation of LGU real estate – Manila bulletin

Local government unit (LGU) property valuations are not rising fast enough to track market values ​​of land in the country, the Asian Development Bank (AfDB) said.

During the Bureau of Local Government Finance (BLGF) virtual webinar on Thursday, October 21, Jose Antonio Tan III, Director of Public Management at the AfDB, said that LGU’s property tax efficiency was low.

Citing a recent study, Tan noted that property prices in the Philippines rose an average of 15% per year from 2009 to 2018, while property tax efficiency contracted by more than 8% per year. year during this period.

This low property tax efficiency has affected local finances and LGU’s fiscal sustainability, especially by protecting vulnerable people from the effects of the COVID-19 pandemic, the AfDB official said.

“Property taxes are the largest and most reliable source of LGU-specific revenue, making it vital funding for local utilities and infrastructure,” Tan said.

For this reason, Tan raised the need for the passage of the Real Estate Valuation and Valuation Act so that the valuation of land in the country is closer to market values.

He said the enactment of the property valuation reform would significantly increase the LGU’s real poverty tax collection.

“This enables LGU to mobilize national sources for much needed local public services, such as livelihood support, health care and education,” Tan said.

The share of property tax in local tax revenue has declined since the enactment of the Local Government Code and currently contributes only nine percent to corporate tax revenue which accounts for 13 percent of the total income of the city. UGL.

As of 2019, about 98 of the country’s 146 cities and 46 of the country’s 81 provinces fail to meet the requirement to reassess properties in their respective jurisdictions once every three years.

Last June, Niño Raymond Alvina, executive director of BLGF, said 64% of LGUs have outdated property assessments, with provincial and municipal property tax collection efficiency at 68% and 71%, respectively.

As a result, the Philippines lags behind its Asian counterparts in terms of the share of property tax revenues in gross domestic product (GDP), Alvina said.

The Philippine property tax rate has been declining since 2003, standing at just 0.5% in 2019, the same as Thailand’s, and well below the 2% average set by the United Nations. economic cooperation and development.

Singapore’s property tax-to-GDP ratio is 2%, Japan’s 2.5%, and South Korea’s 3%.


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