Just over two months into the Duterte administration, Secretary of Finance Carlos G. Dominguez III renewed his call for passage of the Real Estate Valuation and Valuation Reform Act, saying that it would help the government collect more revenue.
Dominguez lamented that the government is losing tens of billions of pesos because it uses an “obsolete” property valuation system that the proposed measure seeks to remedy.
Passing the bill would help the government collect the right amount of taxes by regularly updating the market value table (SMV) in the valuation of real estate assets, the finance chief said.
“The market value of the major shopping areas on Ayala Avenue near San Lorenzo in Makati City is only around P40,000 per square meter (m²), based on the city’s SMV, so that in fact the actual market value ranges from P400,000 to P900,000 per m². So we are losing tens of billions of pesos because this type of wealth is not properly taxed,” Dominguez said in a statement.
An audit by the Department of Finance (DOF) on land values located at Barangays San Lorenzo and Bel-Air in Makati City showed that the current SMV for Land Tax (RPT) imposed by LGUs in these areas does not is only P40,000 per m². m, as opposed to the high-end zonal value of P940,000 per m² used by the Bureau of Internal Revenue to calculate inheritance, gift and capital gains taxes, which are state taxes.
Based on the current SMV set by Makati local government, the DOF said the total RPT for the two business areas would only be 50.27 million, which it called “relatively paltry”. compared to 1.18 billion pesos that could be collected each year using the most current zonal values to calculate the PTR.
“Thus, the total TPR that could be collected each year would be higher at 593.78 million pesos for Barangay San Lorenzo and 587.46 million pesos for Barangay Bel-Air, making a total of 1.18 billion pesos for these commercial areas sampled in Ayala. Avenue,” the DOF said.
Better than wealth tax
Dominguez also reiterated that reforming the property assessment system is the right way to impose a so-called “wealth tax” on the wealthy because land cannot be hidden or evaded unlike the proposed wealth tax. wealth on movable property which could lead to capital flight and tax evasion.
He added that local government units are best placed to implement the “efficient form of wealth tax” using updated SMVs and a property valuation system aligned with international standards. However, the DOF pointed out that LGUs are reluctant to impose the RPT based on updated SMVs, mainly due to political considerations despite the Local Government Code stipulating that these must be updated every three years.
“That kind of wealth can’t escape to offshore accounts or anywhere else. That’s the wealth here. The other kind of wealth that they want to tax can go away,” Dominguez said in a statement on Monday, referring proposals by some individuals and legislators to impose a “wealth” tax on the wealthiest Filipinos in the country.
The third package of the Duterte administration’s comprehensive tax reform program also aims to increase government revenue by broadening the tax base used for property taxes imposed by state and local governments instead of increasing existing tax rates. or design new taxes.
Last year, Dominguez wrote a letter to the Speaker of the House, Lord Allan Jay Velasco, saying that imposing a “super-rich” tax on people with assets over 1 billion pesos, as proposed in Bill (HB) No. 10253, would defeat its purpose of generating more revenue.
While this wealth tax could initially lead to gains in tax revenue, it could, at the same time, discourage long-term growth and investment, he said in his letter.