As the government has lowered personal and corporate tax rates, without a corresponding increase in tax compliance and without more robust economic activity, tax collection is sure to decline. Then add to that significant budget support for COVID-19 interventions, the rising cost of military and police pensions, and a Supreme Court ruling granting local governments a larger share of revenue collected by the national government.
These can still prove to be the elements of a fiscal disaster, especially with the economy in the doldrums until who knows when. In this line, one cannot blame the government for seeking to urgently rationalize the appraisals of real estate on a national scale and, thus, to increase the collection of property taxes. A larger share of local property taxes can help ease the pressure on the national government to financially support provinces, cities and municipalities.
The problem is the timing, however. With 11 months before the 2022 elections, I doubt that the Senate will urgently pass the bill on the reform of property valuation and valuation, which has already been adopted by the House at the end of 2019. We can still blame the pandemic for the one-and-a-half-year delay. But the political reality is that any national lawmaker running for re-election in 11 months will always hesitate to support any initiative that imposes a new tax or increases the old ones.
The thing is, if the Senate misses this Congress, which reopens next month for its third and final session, then the bill will have to be resubmitted in the next Congress, and under a new administration. It is not certain that such an initiative is still a priority in 2022. This is perhaps one of the reasons why the Ministry of Finance insisted on hiring a new publicist, to help defend the remaining priorities. of his list before the end of this administration.
The Ministry of Finance (DoF) is reportedly seeking to increase nationwide property tax collection to around 113 billion pesos by 2024. It has even asked for help from the Asian Development Bank (ADB) to this, through a reform of local governance of $ 31.49 million. Project that will help local governments improve their ability to raise their own finances.
NiÃ±o Raymond Alvina of the Bureau of Local Government Finance noted that local governments have the potential to increase their revenues by about 30%, but 64% of them maintain outdated property valuations. Additionally, in 2019, 98 of 146 cities and 46 of 81 provinces failed to meet their mandate to reassess properties every three years.
But the ADB project is only an administrative calibration. While it can help train municipal assessors on how to improve the efficiency of property tax collection, without the Senate approving the Assessment and Assessment Reform Bill , this effort will be unbalanced at best. Reform legislation is long overdue, but its passage carries the obvious and inevitable risk of further overburdening taxpayers with higher tax rates.
In a joint press release, the American Chamber of Commerce in the Philippines, Inc., the Australian New Zealand Chamber of Commerce in the Philippines, the Canadian Chamber of Commerce in the Philippines, the European Chamber of Commerce in the Philippines, the Japanese Chamber of Commerce and Industry of the Philippines, Inc., Korean Philippine Chamber of Commerce, Economic Freedom Foundation, Philippine Chamber of Commerce and Industry, Philippine Institute of Environmental Planners, Rural Bankers Association of the Philippines and Social Watch Philippines have all expressed strong support for the immediate Senate approval of the Land Valuation and Valuation Reform Act.
Their statement reads: âWe collectively agree with the intention of Package 3 to promote the development of a fair, equitable and efficient property valuation system through the introduction of the following reforms: adoption a uniform valuation standard based on international valuation practices; establishment of a single valuation basis for taxation and other purposes; establishment of a comprehensive database to support real estate appraisal functions; centralization of the approval of the Table of Market Values ââ(SMV); and strengthening of the evaluation functions of the local government finance office.
They support the call for a uniform appraisal standard and a single appraisal basis, to correct multiple and overlapping real estate appraisals that result in conflicting property values; and, the development of a central land transaction database to update the list of market values ââand to support land use planning and zoning. They believe that “broadening” the tax base will increase tax collection without imposing new taxes.
In a webinar at the end of April, Ma. Pamela P. Quizon also noted that the existing property tax system suffered from overlapping assessments, outdated rates, the lack of a single oversight body, and the lack of an electronic real estate database. âLGUs fail to update and revise VMS despite legal requirements because they are unpopular. There is a fear of political backlash. They lack technical capacity and [their budgets cannot cover] reassessment costs, âshe added.
Rail Transport Undersecretary Timothy John R. Batan told the same webinar that âthe measure of the country’s public wealth is largely in its land assets, and if we can unlock that, four to five more times. [infrastructure] the projects that we have to build can find their financing from the creation of land value generated internally (through) â.
There is no doubt that property valuation reform is urgent. However, my support for the initiative is limited to the establishment of a uniform, coherent, transparent and accountable system for establishing property values ââand appropriate property taxes. Again, the idea is to broaden the tax base of local governments and thereby improve their tax collection from landowners, rather than increasing property tax rates nationwide.
Marvin Tort is a former editor-in-chief of BusinessWorld and a former chairman of the Philippine Press Council