DOF eyes higher real property tax revenues from LGUs

Published June 22, 2021, 3:08 PM

by Chino S. Leyco

The Department of Finance (DOF) expects revenues from real property tax (RPT) would accelerate as local government units (LGUs) enhance their digital tools to strengthen local property valuation and tax collections.

In a statement, Finance Secretary Carlos G. Dominguez III said on Tuesday, June 22, that the government is targeting to increase RPT revenues of LGUs to P113.4 billion by 2024, boosted by an Asian Development Bank (ADB)-funded project.

Finance Secretary Carlos G. Dominguez III

The goal is expected to dramatically improve the RPT collections by P26.7 billion from what they collected in 2017 or an increase of 30.85 percent through the implementation starting this year of the ADB-backed Local Governance Reform Project (LGRP).

Dominguez underscored the importance of the LGRP in boosting the revenue-raising capacities of LGUs during the virtual first meeting last May 18 of the Interagency Governing Board (IGB) tasked to implement this four-year project.

“This project is quite important. We should put our attention to it because in the end it will help the local governments improve their capacity to raise their own finances,” Dominguez told the IGB board during the meeting.

Dominguez, who chairs the IGB, increased the frequency of the IGB meetings from the recommended schedule of twice a year to every two months until the LGRP gets off the ground, and set the schedule of the next meeting on July 19.

According to Bureau of Local Government Finance (BLGF), the LGRP’s goal is to have at least 80 percent or 1,372 LGUs achieve 100-percent efficiency in RPT collection and valuation by 2024, which is expected to increase by 30 percent the total own-source revenues of local governments.

The share of RPTs to local tax revenues has been decreasing since the enactment of the Local Government Code, and currently contribute only nine percent as compared to business tax collections that account for 13 percent of total LGU aggregate income.

As of 2019, around 98 out of the 146 cities and 46 out of the 81 provinces in the country are non-compliant with the requirement to revalue properties in their respective jurisdictions once every three years, BLGF said.

Niño Raymond Alvina, BLGF executive director said that 64 percent of LGUs have outdated property valuations, with the RPT collection efficiency of provinces and municipalities at only 68 percent, and provinces, only 71 percent.

As a result, the Philippines lags behind its Asian peers in terms of the share of property tax collections to the Gross Domestic Product (GDP), Alvina said.

The Philippines’ property tax ratio has been decreasing since 2003, settling at only 0.5 percent as of 2019, which is the same as Thailand’s, and way lower than the 2-percent average set by the Organization for Economic Cooperation and Development (OECD).

Singapore’s property tax-to-GDP ratio is at 2 percent, while Japan is at 2.5 percent and South Korea, 3 percent.