DOF bullish on property valuation law

A new law expected to widen the tax base could be out this month as the head of the Department of Finance (DOF) expects the proposed Real Property Valuation and Assessment Reform Act (RPVARA) signed by President Ferdinand R. Marcos Jr. as soon as the bill gets legislative imprimatur.

Finance Secretary Ralph G. Recto told the Businessmirror he fervently seeks the Chief Executive’s signature on the proposed RPVARA, tagged currently as Senate Bill (SB) 2386, after the Senate approved the bill on second reading last Tuesday.

Recto said he expects the RPVAR A “will simplify real property valuation and will be good for all stakeholders.” The DOF chief expressed gratitude to the Senate for its “positive consideration” of the bill. Recto specifically cited Senator Sherwin T. Gatchalian “for his leadership in sponsoring [this] admin proposal.”

The RPVARA forms “Package 3” of the DOF’S “Comprehensive Tax Reform Program,” (CTRP), which aims to promote the development of “a just, equitable, and efficient real property valuation system.”

The proposal is expected to broaden the tax base used for property and property-related taxes of the national and local governments, as well as improve tax collections without increasing the existing tax rates or imposing new taxes, according to the DOF.

Gatchalian, the sponsor of SB 2386 and also chairman of the Senate Committee on Ways and Means, emphasized that RPVAR A will “pave the way for (local government units) LGUS to automate their processes including revenue collection” once enacted into law. (See: https://businessmirror.com.ph/2023/03/29/ real-property-valuation-reforma-win-win-for-all/)

The senator added that the RPVARA mandates the Bureau of Local Government Finance (BLGF) to “develop, adopt, maintain and implement uniform valuation standards,” which will be utilized by all appraisers and assessors in the LGUS and other concerned parties in the appraisal or valuation of lands, buildings, machinery, and other real properties for taxation and other purposes.

The bill specifically proposes the use of Schedule of Market Values (SMV) as the single basis of real property tax and real propertyrelated taxes of national and local governments.

The local autonomy of LGUS is pursued by the RPVARA through retaining the authority of local assessors to prepare SMVS and empowering LGUS to adjust assessment levels and tax rates while providing technical oversight by the national government.

The bill is set for its third hearing in the Senate next week.

Market determination

ECONOMISTS at the nongovernment group Foundation for Economic Freedom Inc. have “strongly” supported the RPVARA, even expressing the law could “bring in additional revenues” for both the national and LGUS, “without imposing new or additional taxes.”

“Real property tax contributes less than 30 percent to LGU revenues due to outdated property values,” the FFEF has said through a statement. “This hinders growth in tax collections. Around 70 percent of LGUS have outdated property valuation.”

The group, which has Economist Raul V. Fabella as one of its advisers, explained that the “lack of uniform standards in determining the cost and value of real properties have led to confusion, causing distorted land values.”

“An updated and credible benchmark for valuation will protect property owners from being deprived of the full benefits that can be derived from their property. Better valuation also means better selling price, rental fees and collateral value,” the FFEF has said.

It added that “valuation will be determined by the market thru professional appraisers, while the tax rates and assessment levels will be set thru an ordinance by the LGU thru its Sanggunian.”

“The LGUS will retain their autonomy to modify tax rates and assessment levels, taking into account the current level of development in their locality and comparing it with other LGUS,” the FFEF has said. “This will enable them to be more responsive to the needs of their constituents.”

Legislative agenda

THE DOF aims to pass the remaining key legislations by 2024 to generate revenues that will support the budget and meet the targets set in the Medium-term Fiscal Framework. These include the following: imposing a value-added tax on digital service providers; the rationalization of the mining fiscal regime; the Singleuse Plastic Bags Tax Act; and, the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy law.

“These reforms will not only finance development but will reduce the deficit and our dependence on debt,” Recto earlier said.