ADB: PH revenues to grow 90% if real property valuation more efficient | Inquirer Business
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ADB: PH revenues to grow 90% if real property valuation more efficient

By: - Reporter / @bendeveraINQ
/ 05:24 AM October 22, 2020

Reforming the country’s real property valuation system as proposed under the third tax package pending in Congress would nearly double government revenues five years from now, the Asian Development Bank (ADB) said Wednesday.

During a webinar for local treasurers, ADB public finance economist Aekapol Chongvilaivan cited a 2019 study showing the proposed valuation reform act would increase combined collections from city and provincial real property taxes by 25 percent in 2023, and further hike the incremental tax revenues by as much as 90 percent by 2025.

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He said estimates showed that with valuation reforms in place, incremental provincial real property taxes would rise to P17.56 billion in 2023, P23.23 billion in 2024, and P30.63 billion in 2025.

Incremental collections from real property taxes in cities would also climb to P65.76 billion in 2023, P87.01 billion in 2024, and P114.73 billion in 2025.

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In contrast, data showed the proportion captured by local governments in the property taxes had even declined by over 8 percent annually even as strong economic growth boosted domestic real estate market prices by an average of 15 percent yearly from 2009 to 2018, Chongvilaivan said.

He said LGUs could hike their collections even without increasing rates for as long as real property valuation was regularly updated and harmonized.Finance Undersecretary Antonette C. Tionko said during the webinar the Department of Finance (DOF) was hopeful the third tax reform package, which was already passed by the House of Representatives last year, could also soon hurdle the Senate.

Chongvilaivan said the package would address many LGUs’ relatively low real property tax efficiencies, which had forced them to jack up tax rates up to the maximum legal limits.

The reform bill would address weak enforcement of property-related taxes like idle land tax; the lack of uniform property valuation; outdated real property values, which usually result in political intervention during property valuation; and the limited use of information technologies in the appraisal process.

Amid the pandemic-induced recession, Chongvilaivan said local property taxes would take a hit in the near term but collections would also bounce back when the economy recovers.

Preliminary estimates from the DOF’s Bureau of Local Government Finance (BLGF) showed real property tax collection this year could slow to P56.14 billion, almost half of the prepandemic target of P107.2 billion.

For 2021, the BLGF estimated real property taxes could even go lower to P28.24 billion.

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Across all LGU revenue sources, the BLGF slashed the 2020 target to P193.04 billion from P307.1 billion previously, while the 2021 take was projected to reach only P102.01 billion.

The ADB has previously assisted the Philippines by extending a $300-million loan under the local governance reform program in 2018-2019. Another $400-million policy-based lending is in the pipeline to fund reform initiatives this year and next.

Last June, the ADB also green-lit a $26.5-million project loan for the Philippines so LGUs can assess property taxes digitally.

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TAGS: Asian Development Bank (ADB), Real Property Valuation, revenues
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