DOF: Real property valuation reform to boost LGU revenues

MANILA, Philippines — The Department of Finance (DOF) is urging Congress to pass the real property valuation reform to provide local governments with additional revenues that they can raise on their own.

DOF chief economist Gil Beltran said in an economic bulletin that government spending went up by 10 percent to P301.46 billion in January from a year-ago level of P274.8 billion due to increased allocation for localities.

As mandated by the Mandanas ruling, Beltran said the government had to expand the share of local governments from the tax collections of revenue agencies like the Bureau of Customs.

“The country had to borrow more in order to finance the response against the pandemic. The national government also has to share BOC collections to LGUs with the implementation of the Supreme Court’s ruling on the Mandanas-Garcia case,” Beltran said.

According to Beltran, lawmakers should approve the real property valuation reform for local governments to generate new revenues they can deploy for social services.

Beltran explained that the measure also mobilizes fresh funds without the need to rely on the national government.

With greater resources following the Mandanas-Garcia case, the chief economist said LGUs are expected to assume greater fiscal responsibilities and carry on the functions devolved to them by the LGU Code of 1991.

“This is effectively fiscal federalism and could be further enhanced by passing the [Property] Valuation Reform Act such that LGUs are empowered to mobilize even more internally-generated resources,” Beltran said.

The real property valuation reform, the third package of the comprehensive tax reform program, adopts valuation standards observed by the international community.

It puts up a single base in taxing real estate through the use of benchmark values to improve collection. The reform tasked the Bureau of Local Government Finance to develop the unified standards guiding appraisers and assessors in the valuation of properties.

However, local governments maintain the authority to set, change and regulate the tax rates.

This, Beltran explained, is expected to boost investor confidence in the land and real estate markets that can be maximized by localities in beefing up their war chests.

As declared by the Supreme Court under the Mandanas ruling, the national government must raise the internal revenue share of local government units this year.

Data from the Department of Budget and Management (DBM) showed local governments will receive a total of P959.04 billion in 2022, of which P326.07 billion will go to municipalities, P220.57 billion each to cities and provinces and P191.8 billion to barangays.