The Philippines is targeting to increase revenue of local government units (LGUs) from the real property tax (RPT) to P113.4 billion by the end of the implementation in 2024 of an Asian Development Bank (ADB)-funded project that aims to adopt digital tools in strengthening local property valuation and tax collection nationwide.
This goal is expected to dramatically improve the RPT collections of LGUs by P26.7 billion from what they collected in 2017 or an increase of 30.85 percent through the implementation starting this year of the ADB-backed Local Governance Reform Project (LGRP).
Finance Secretary Carlos Dominguez III underscored the importance of the LGRP in boosting the revenue-raising capacities of LGUs during the virtual first meeting last May 18 of the Interagency Governing Board (IGB) tasked to implement this four-year project.
“This project is quite important. We should put our attention to it because in the end it will help the local governments improve their capacity to raise their own finances,” Dominguez told the IGB board during the meeting.
Dominguez, who chairs the IGB, increased the frequency of the IGB meetings from the recommended schedule of twice a year to every two months until the LGRP gets off the ground, and set the schedule of the next meeting on July 19.
According to Bureau of Local Government Finance (BLGF) Executive Director Niño Raymond Alvina, the LGRP’s goal is to have at least 80 percent or 1,372 LGUs achieve 100-percent efficiency in RPT collection and valuation by 2024, which is expected to increase by 30 percent the total own-source revenues of local governments.
The share of RPTs to local tax revenues has been decreasing since the enactment of the Local Government Code, and currently contribute only 9 percent as compared to business tax collections that account for 13 percent of total LGU aggregate income, Alvina said during his presentation at the meeting.
As of 2019, around 98 out of the 146 cities and 46 out of the 81 provinces in the country are non-compliant with the requirement to revalue properties in their respective jurisdictions once every three years, Alvina added.
Alvina informed the IGB that 64 percent of LGUs have outdated property valuations, with the RPT collection efficiency of provinces and municipalities at only 68 percent, and provinces, only 71 percent.
As a result, the Philippines lags behind its Asian peers in terms of the share of property tax collections to the Gross Domestic Product (GDP), Alvina said.
The Philippines’ property tax-to-GDP ratio has been decreasing since 2003, settling at only 0.5 percent as of 2019, which is the same as Thailand’s, and way lower than the 2-percent average set by the Organization for Economic Cooperation and Development (OECD).
Singapore’s property tax-to-GDP ratio is at 2 percent, while Japan is at 2.5 percent and South Korea, 3 percent.
Alvina said the LGRP aims to correct the following infirmities in the property valuation system of LGUs: 1) absence of an integrated and reliable property information and valuation database for transactions to capture the true market value of real properties; 2) poor record keeping and outdated reporting systems; 3) weak capacity of local valuation staff; and 4) political considerations in approving and implementing updated Schedule of Market Values (SMVs).
He said that under the LGRP, a Property Valuation Office will be established by this year in the BLGF, which is the Department of Finance (DOF)-attached agency executing the project.
Existing RPT guidelines will also be updated to align them with international valuation standards, and Valuation Training Centers and training hubs will be set up to improve the competency and professional skills of local assessors, Alvina said.
The goal is to capacitate at least 858 or 50 percent of the country’s 1,715 local assessors on the use of electronic learning management systems and develop formal valuation education programs with partner academic institutions to further professionalize their ranks, he said.
Alvina said the LGRP will develop and roll out a Real Property Valuation Information System (RPVIS), and implement and operationalize computer-assisted valuation, billing and collection tools for RPTs in twenty (20) participating LGUs.
Updating the property assessment records of participating LGUs; assisting LGUs in updating their SMVs; and capacitating them on tax compliance are also among the expected outputs of the project, Alvina said.
The IGB will have Finance Undersecretary Antonette Tionko of the DOF-Revenue Operations Group (ROG) as alternate chairperson.
During the meeting, the following officials were also named as IGB members: National Economic and Development Authority (NEDA) Secretary Karl Kendrick Chua, Department of the Interior and Local Government (DILG) Undersecretary Marlo Iringan, Department of Information and Communications Technology (DICT) Undersecretary Jose Arturo De Castro, Department of Budget and Management (DBM) Undersecretary Herman Jumilla, Alvina and Bureau of Internal Revenue (BIR) Deputy Commissioner Celia King.
Marinduque Gov. Presbitero Velasco Jr., the national president of the League of Provinces of the Philippines (LPP); Bacolod City Mayor Evelio Leonardia, national president of the League of Cities of the Philippines (LCP); and Barcelona, Sorsogon Mayor Cynthia Falcotelo-Fortes, secretary general of the League of Municipalities of the Philippines (LMP), were also named as IGB members.
The respective representatives from the private sector and non-government organization (NGO) have yet to be identified and submitted to the IGB chairman.
The agreement for the US$26.53-million loan to implement the LGRP was signed between the Philippines and ADB in July last year.
The government’s counterpart funding for the project is US$4.96 million.
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