FEF backs property valuation reforms

The Foundation for Economic Freedom has given its full support to the proposed reforms in the property valuation system under the Duterte administration’s comprehensive tax reform program (CTRP) as these will help upgrade the financial self-sufficiency of local government units (LGUs).

Such reforms, which comprise Package 3 of the CTRP, will help strengthen local autonomy, the FEF said.

Package 3, which is revenue neutral for the national government, will not create new taxes but would improve real property tax collection for the benefit of LGUs.

“The main objective of Package 3 is to develop and maintain an equitable and efficient real property valuation system,” the FEF said in a statement. “It will address the present problem of multiple, overlapping valuations through the adoption of a uniform valuation standard and establishment of a single valuation base for taxation purposes.”

Package 3 was approved by the House of Representatives last November 12, 2018 and is now transmitted to the Senate. In the Senate, the Ways and Means Committee has had one hearing on SB 44 authored by Senator Lacson, which reflects the DOF proposal

According to FEF, this CTRP package, which seeks to install a uniform land valuation standard nationwide, mandates “the Bureau of Local Government Finance (BLGF) to develop and maintain implementation of uniform valuation standards in compliance with international best practices, under the Department of Finance (DOF) oversight while assessment levels and tax setting will remain a function of the Sanggunian of the Local Government Units (LGUs).”

“Separating valuation from political bodies will also ensure that the practice is free from undue politicization,” it added.

The FEF pointed out that “conflicting land values set by LGUs has resulted in right-of-way (ROW) compensation problems, which, in turn, have delayed the implementation of infrastructure projects and padded their costs for the government.”

Package 3, it said, will also ensure timely updating of the Schedule of Market Values (SMVs).

Only 38.8% of LGUs and half of Regional Development Offices have updated SMVs, the FEF said.

“Outdated and below market valuation mean foregone government revenues from property ownership and conveyances,” it noted.

Another reform proposed in Package 3 is the setting up of an electronic database on real property, which will ensure transparency and accessibility of data, the FEF said.

According to FEF, real property taxes contribute, on average, around 31 percent of the LGUs local source of income.

“The proposed reform will increase government revenues and at the same time increase local autonomy as it will improve LGU financial self-sufficiency,” it said.

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