Package 3 of the Comprehensive Tax Reform Program aims to introduce vital reforms to promote the development of a just, equitable, and efficient real property valuation system.
The reforms will broaden the tax base used for property and property-related taxes of the national and local governments, thereby increasing government revenues without increasing the existing tax rates or devising new tax impositions.
By improving the quality of valuation of local governments and making the revisions frequent, efficient, transparent, reliable and attuned to market developments, Package 3 impacts favorably on revenue generation and resource mobilization of local governments to fund their service delivery requirements. The reforms are also expected to foster private investors’ confidence, and build the public’s trust in the valuations of government.
- House of Representatives: Approved on third and final reading (12 Nov 2018)
- Senate: Pending with Committee (since 26 Jul 2016)
Package 3 of the Comprehensive Tax Reform Program proposes to:
- Adopt international standards and rationalize the process of valuation.
- Establish a single valuation base for taxation, through the adoption of the Schedule of Market Values (SMVs) of LGUs, and use the updated values as benchmark for other purposes, such as lease, rental, acquisition, ROW, etc.
- Insulate valuation at the local level from undue politicization. However, LGUs shall continue to set, adjust and regulate tax rates and assessment levels.
- Recentralize the approval of the SMVs by the local Sanggunian back to the Secretary of Finance – with review functions of the Bureau of Local Government Finance (BLGF), in coordination with the Bureau of Internal Revenue (BIR), and improve oversight function on property valuation and assessment by the Department of Finance (DOF), through the BLGF.
- Establish a comprehensive database to support valuation function.
- Establish the Real Property Valuation Service in the BLGF to oversee and manage valuation related concerns of local governments.
The DOF, through the BLGF, shall be the lead agency responsible for the implementation of the reforms. The BLGF shall have the following powers and functions:
- Develop, adopt, and maintain valuation standards consistent with generally accepted international valuation standards, regulations and specifications for real property appraisal used for tax and other purposes, and ensure compliance therewith by LGUs and other concerned parties.
- In coordination with the BIR, review for compliance with the real property valuation policies and standards and recommend for approval of the Secretary of Finance the SMVs as prepared by the provincial assessors together with municipal assessors, and city assessors, including the municipal assessor in Metropolitan Manila area, for tax, both local and national, and for other purposes.
- Provide technical assistance on real property appraisal matters to government agencies and instrumentalities, and coordinate or conduct the valuation and appraisal of special purpose properties, when requested.
- Provide leadership and policy direction to LGUs on real property valuation and appraisal for taxation and other purposes, including the development and maintenance of valuation standards, the regulation of valuation and appraisal activities and other related matters, and the promotion of valuation and appraisal training and seminars.
- Maintain a roster of licensed local government appraisers and assessors.
- Develop and maintain a comprehensive and up-to-date electronic database of real property transactions and prices of materials for buildings, machinery, and other structures.
- Conduct continuing study and research on valuation and maintain a database of information on global and country trends and developments in real property valuation and appraisal.
- Determine, fix, and collect reasonable amounts to be charged as administration fee, fines, and penalties relative to the implementation of this Act.
- Perform such other functions as are necessary, proper, and incidental to implement the provisions of this Act.
Consistent real property valuation
Single valuation base will eliminate wide disparities and achieve consistency in real property valuation. The predictability of valuation will have a positive impact for planners.
Uniform standards will improve the integrity of real property appraisal in accordance with the generally accepted valuation standards. This will also ensure transparency at all levels and provide national and local governments, businesses, financial institutions, lenders, and investors with greater confidence in valuation reports.
The establishment of a comprehensive database will also promote greater transparency in land transactions. Ready access to a database will improve the Sanggunian’s decision-making and policymakers’ planning process.
Increased LGU revenues without adopting new tax measures
The adoption of true market-based values for taxation purposes will increase the national and local governments’ revenues without adopting new tax measures. Specifically, this will result in an increase in the revenue generating capacity of real property through real property tax (RPT), national government’s real property transfer taxes, and other related taxes. The increase in RPT collection could improve the RPT to GDP ratio from 0.36 percent to 0.43 percent. Likewise, its share to local income will increase to 23 percent.
Enhanced LGU financial self-sufficiency
The reform will enhance the LGU’s financial self-sufficiency and local autonomy through improved collection efficiency on real property taxes, as well as other taxes that involve real property.
Increased revenues for the national government through capital gains
In the long-term, land-related transactions, capital inflow, and investments in the economy are expected to increase which will lead to increased revenues for the national government through capital gains and other taxes involving transfer of properties.
Increased private investor’s confidence
The adoption of globally benchmarked valuation standards and higher degree of professionalism in real property valuation will foster private investor’s confidence.
Ensured higher special education fund
Strengthening the collection of RPT will ensure higher special education fund (SEF) collections – i.e., more funds available for public education. At present, an average of Php 760 is allotted per public school student. Package 3 is expected to increase this amount to Php 1,040 per student.
Reduced unnecessary expenses
The reform will reduce unnecessary expenses due to conflicting appraisals which may lead to court litigations, project details, and cost overruns.