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Tax hike to greet property owners in 2012

    Published : Monday, December 12, 2011 00:00 [ ]
    Written by : Katrina Mennen A. Valdez Reporter

LAND owners are poised to pay higher real property taxes next year as local government units complete the update of their respective schedules of market values in a bid to raise more revenues.

So far, five provinces and 10 cities have already updated their schedules for real property tax assessments, while 12 provinces and 26 cities would undergo reviews starting next year.

The review stemmed from a joint memorandum circular issued last year by the Departments of Finance and of Interior and Local Government.

Issued in October 2010, Joint Memorandum Circular 2010-01 ordered all LGUs to update the schedules used by local assessors as basis for appraising properties for real property tax purposes.

“Using an updated SMV as basis in the assessment of real property tax increases LGUs’ capacity to generate revenue from real properties so that they do not depend much on their share of internal revenue allotment (IRA),” said Salvador del Castillo, officer-in-charge of the DOF-Bureau of Local Government Finance (BLGF).

IRA is the LGU share of revenues from the national government mandated under Section 284 of the Local Government Code. Provinces and cities would recieve 23 percent of total IRA, while municipalities, 34 percent; and barangays, 20 percent.

“By making SMV current, real property tax base expands, thus, provides LGUs the opportunity to generate additional income which can be used to finance various projects and improve delivery of basic services,” del Castillo said.

Under the law, LGUs should conduct a general revision of assessments and property classification every three years to reflect true market values of properties.

Del Castillo said most LGUs have yet to comply with this provision of the law.

Data from the BLGF, which has supervision over all LGU treasurers, showed that only 28 percent of the provinces and 22 percent of the cities in the country have revised their SMVs as of the last scheduled revision in 2008.

To date, a total of 29 provinces and 84 cities have yet to revise their SMVs with base years 2006 or even older.

“There are even a number of LGUs whose real property tax collections are based on the SMVs going back to 1996 and even 1993 when it was first implemented,” del Castillo said.

“If the LGU uses outdated SMVs in real property tax collection, then properties which have appreciated in value over time would still be taxed based on the lower values, thus taxes imposed are lower than what they should really be,” he said.

“Conversely, properties which have depreciated in value over time would still be taxed based on higher value, penalizing property owners as they are taxed higher than what they should really be taxed with,” he said.

As to concerns that revising SMVs will cause property taxes to shoot up, del Castillo said that the assessment levels or tax rates—two other factors being used to compute for real property tax—may be adjusted by the LGUs to cushion the impact of the increases in real property taxes.

“Tax policy options such as phased or staggered implementation and discounts for early tax payments should also be optimized to mitigate potential tax hike,” del Castillo added.

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