Philippines: LGUs lose PHP30bn revenues from outdated property valuation – DOF

  • Local government units (LGUs) may have incurred an estimated PHP30.5bn in foregone revenues due to their outdated valuation system for real properties, according to the Department of Finance.
  • Citing a report from Bureau of Local Government Finance (BLGF), acting deputy executive director Jose Arnold Tan said cities could have collected as much as PHP23.077bn in additional real property taxes had their Schedule of Market Values (SMVs) been updated to be at par with international standards.
  • Another PHP7.397bn in revenues may have lost by provinces due to failure to update their system, the DOF said.
  • Based on Tan’s report, only 36% of LGUs currently have updated SMVs, while the rest, comprising of 97 cities and 48 provinces, remain non-compliant in updating their SMVs.
  • Due to this outdated system, Tan said overvaluation of properties usually happens when the government pays for a piece of real property, while underevaluation occurs when it is the government’s turn to collect.
  • To fix this system, the DOF is proposing for the adoption of international standards in valuation, and the establishment of a single valuation base for taxation and benchmarking.
  • The DOF is also proposing for non-compliant LGUs to be barred from receiving any conditional or performance-based grants or any form of credit financing from the national government.
  • “Essentially, real estate is the most valuable asset and biggest financial resource. But its contribution to government revenues, particularly for local governments, has remained dismal due to outdated SMVs, poor collection efficiency and tax administration and lack of uniformity in the valuation of real property,” Finance Secretary Carlos Dominguez said.

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