OUTDATED land values prevent the government from properly taxing the wealthy, Department of Finance (DoF) Secretary Carlos Dominguez 3rd said Monday.
“The current land assessment for property tax purposes is outdated and very low compared to the actual market value,” he said in a statement.
“The market value of the main shopping areas on Ayala Avenue near San Lorenzo in Makati City is only about P40,000 per square meter (m²), based on the SMV (Market Value Table ) of the city), when in fact the actual market value ranges from 400,000 to 900,000 pesos per m²,” he added.
“[W]We are losing tens of billions of pesos because this type of wealth is not taxed properly,” Dominguez continued.
The SMV of 40,000 P/m² used by the town hall to determine property taxes (RPT) compares to the zonal value of 940,000 P/m² used by the Bureau of Internal Revenue (BIR) to calculate inheritance taxes, donations and capital gains, the finance ministry noted.
Estimating the total area of taxable commercial land from Ayala Avenue to Barangay San Lorenzo – covering the vicinity of Salcedo Street to Makati Avenue – at 52,640 m² will give an estimated total value of 842.24 million pesos based on the current SMV, the department continued. This means a TPR to be levied of 25.27 million pesos in total, including an additional levy on the special education fund, at a maximum combined tax rate of 3%.
“Using similar calculations for Barangay Bel-Air with an estimated area of 52,080 sq. finance.
Using zonal values, on the other hand, the estimated value of commercial land on Ayala Avenue in the vicinity of Barangay San Lorenzo is 19.79 billion pesos. It will be 19.58 billion pesos for Barangay Bel-Air.
Therefore, the TPR that could be collected annually would be P593.78 million for San Lorenzo and P587.46 million for Bel-Air, the finance department said.
“That kind of wealth can’t leak out to offshore accounts or anywhere else. That’s the wealth here. The other kind of wealth that they want to tax can go away,” Dominguez said, referring to the proposals. a “wealth” tax for the wealthiest Filipinos in the country.
Local government units (LGUs) are best placed to implement this using updated SMVs and a land valuation system aligned with international standards, the department said.
“LGU officials, however, are reluctant to impose the RPT based on updated VMS mainly due to political considerations, although the Local Government Code states that these should be updated every three years” , the department said.