NTRC urges reforms by LGUs to improve property taxes

MANILA, Philippines — A government think tank has underscored the need for local government units (LGUs) to implement reforms to improve the collection of property related taxes and increase their revenues.

In a journal entitled, “Analysis of the Revenue Performance of Local taxes on Real Properties,” the National Tax Research Center (NTRC) said revenues from property taxes grew steadily from P42.01 billion in 2012 to P55.58 billion in 2016.

“On the average, property taxes grew by 7.28 percent during the period, slightly higher than the average growth rate of the country’s gross domestic product (GDP) which is 6.57 percent for the same period,” the NTRC said.

 “This means that property tax revenue was able to keep up with the changes in national income,” it said.

 However, the NTRC said LGUs continue to rely more heavily on external sources for their funding requirements.

“In spite of the substantial increments in locally-generated revenues, the data collected for 2012 to 2016 show that LGUs continued to rely heavily on externally generated comprising mainly of the internal revenue allotment (IRA), share from the utilization of national wealth, grants and aids, borrowings and others, as they contributed to an average of 66.93 percent to total revenue of LGUs,” the NTRC said.

One of the issues identified by the research center is the use of outdated schedule of market valuation (SMVs) by most LGUs. As of August 2018, NTRC said 50 out of 81 provinces are still using outdated SMVs.

“The outdated and inefficient revenue collection also pose a serious problem;  not enough technical assistance on real property appraisal matters, as well as the proper technology, and electronic database of the real property transactions from involved government agencies,” it said.

NTRC said some LGUs also lack experience on the collection of other property related taxes, such as the idle land tax, socialized housing tax and special assessments.

Some LGUs still have not imposed these taxes due to political decision and the overlapping of taxes, the think tank said.

“Overall, the implementation of property-related taxes in the Philippines still needs to be enhanced. While tax collection generally experienced growth during the years 2012 to 2016, the LGUs still have not harnessed the full potential of increasing their revenues, specifically property taxes, since these are their main sources of revenue,” the NTRC said.

 NTRC has, therefore, recommended reforms and innovations to improve collection of property taxes and increase their revenues.

For one, NTRC said LGUs should minimize political influence in the valuation process by removing from the LGUs the power to appoint local assessors and approve the schedule of market values.

It also called for the review of SMVs, the establishment of a real property database in LGUs, the digitization of property tax administration, and the synchronization of assessment records with collection records of individual taxpayers.

Local chief executives were also enjoined to enforce civil remedies and strengthen linkages with other officials, agencies, and real estate dealers who are sources of property transaction information.