Property assessments of local government units (LGUs) are not rising fast enough to keep up with market land values in the country, the Asian Development Bank (AfDB) has said.
During the Local Government Finance Office (BLGF) virtual webinar on Thursday, October 21, Jose Antonio Tan III, AfDB Director of Public Management, said that the property tax efficiency of LGUs is low.
Citing a recent study, Tan noted that real estate prices in the Philippines increased by an average of 15% per year from 2009 to 2018, while property tax efficiency contracted by more than 8%. per year during this period.
This low property tax efficiency has affected local finances and the fiscal sustainability of LGUs, especially protecting vulnerable people from the effects of the COVID-19 pandemic, the AfDB official said.
“Property taxes are LGU’s largest and most reliable source of own-source revenue, making it vital funding for local utilities and infrastructure,” Tan said.
For this reason, Tan raised the need for the passing of the Real Estate Assessment and Valuation Act so that land valuation in the country is closer to market values.
He said the enactment of property assessment reform is expected to significantly increase real poverty tax collection from LGUs.
“This allows LGU to leverage domestic sources for much-needed local public services, such as livelihood support, healthcare and education,” Tan said.
The share of property tax in local tax revenue has decreased since the promulgation of the Local Government Code and currently contributes only 9% compared to corporate tax revenue which accounts for 13% of total global revenue LGUs.
In 2019, about 98 of the country’s 146 cities and 46 of the 81 provinces failed to meet the requirement to reassess properties in their respective jurisdictions once every three years.
Last June, Niño Raymond Alvina, executive director of BLGF, said that 64% of LGUs had outdated property assessments, with provincial and municipal property tax collection efficiency at 68% and 71%, respectively.
As a result, the Philippines lags behind its Asian counterparts in the share of property tax collections in gross domestic product (GDP), Alvina said.
The Philippines’ property tax rate has fallen since 2003, standing at just 0.5% in 2019, which is the same as Thailand’s, and well below the Organization’s average of 2% economic cooperation and development.
Singapore’s property tax to GDP ratio is 2%, while Japan is 2.5% and South Korea is 3%.
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