MANILA, Philippines — Five provinces and 10 cities in the country have already updated their schedule of market values (SMVs) for real property tax assessments in response to a joint circular issued last year by the finance and local government departments to raise more revenues and make local government units (LGUs) less reliant on the internal revenue allotments (IRA).

Joint Memorandum Circular 2010-01 issued in October last year enjoined all LGUs to update their SMVs, used by local assessors as basis for appraising properties for real property tax purposes.

As of November this year, those that already complied were the provinces of Pangasinan, Cavite, Rizal, Romblon and Compostela Valley and the cities of Santiago, Palayan, Antipolo, Tagaytay, Trece Martires, Calapan, Kabankalan, Bayawan, Zamboanga and Davao.

By next year, other 12 provinces and 26 cities are also expected follow suit.

“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 IRA,” said Salvador M. Del Castillo, OIC-executive director of the finance department’s Bureau of Local Government Finance (BLGF).

IRA is the LGUs’ share of revenues from the national government mandated under Section 284 of the Local Government Code with provinces and cities allocated 23 percent of total IRA each, municipalities with 34 percent share, and barangays with 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 explained.

He noted that under the law, LGUs should conduct a general revision of assessments and property classification every three years in order to reflect true market values of properties. However, this has not been followed by most LGUs.

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 its last 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, same data showed.

“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 revealed.

“If the LGU uses outdated SMVs in real property tax collection, then properties which have appreciated in value over time would still be taxed based on the lower values, thus taxes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 explained.

“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.”

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.

Thus, the finance department calls on LGUs which have not revised their land valuations to do it now.