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08, 2013

NR # 3250B

Huge revenue losses due to defective real property valuation

Lawmakers are wondering why the Philippines land market is contributing only six (6) percent to the Gross National Product when, as reported by the World Bank, 50% to 75% of the nations wealth relates to its rich natural resource -- land. The House Committee on Government Reorganization is now in receipt of six separate but similar measures seeking to institute reforms in real property valuation and assessment in the country. Two of these measures are HB No. 84 authored by Rep. Mel Senen Sarmiento and HB 2807 filed by Rep. Diosdado Macapagal Arroyo and Rep. Gloria Macapagal-Arroyo, both proposing the reorganization of the Bureau of Local Government Finance and appropriating funds for its implementation. Characterized by inconsistencies and inefficiencies in the land administration and management sector, specifically in real property valuation, our country has failed to capture and maximize the huge potential that the land sector offers, Arroyo and Sarmiento said. They pointed out that the real property valuation system in the country depicts a depressing state of chaotic, inefficient, and inequitable layers of bureaucracy. Why? At least 23 national government agencies and more than 1,700 local government units perform or require valuation functions and services using varied systems and methodologies for different purposes, thus resulting in multiple, confusing, unrealistic, or outdated values for the same property, they explained. The other similar measures are HB 2368 filed by Rep. George P. Arnaiz, HB 1968 proposed by Rep. Rufus Rodriguez and his brother and party-list Rep. Maximo Rodriguez, HB 490 authored and filed earlier by Rep. Rodolfo Biazon, and HB 1797 filed by Rep. Lani Mercado Revilla. The Arroyos, Sarmiento, the Rodriguezes, and Arnaiz are seeking reforms through the reorganization of the Bureau of Local Government Finance, while Biazon and MercadoRevilla are proposing the establishment of the National Valuation Authority. The House Committee on Government Reorganization chaired by Rep. Romeo Acop and to which the six measures were referred for proper consideration and action, is expected to come up with a reconciled or substitute measure which would focus on the main intentions of the bills to address the challenges in attaining good and responsive governance and effective public service delivery that all Filipinos deserve.

The authors claim that the discrepancies in real property values have had considerable cost to the government, particularly in terms of maximizing revenues and gaining the confidence of investors. Conflicting land values resulted to right-of-way compensation problems, lengthy court litigations arising from valuation disputes, project delays, and unrealized revenues and socio-economic benefits, they pointed out. Likewise, the current confusing system has also caused huge disparities of taxable base for local and national taxation, and revenue leakages due to the absence of single market based valuation for taxation purposes, they added. As an example, the authors noted that the Bureau of Internal Revenue imposes zonal valuation for capital gains tax and other national land-related taxes, while the LGUs use the Schedule of Market Values (SMV) as basis for real property tax. The problems in real property valuation may be traced to the failure of LGUs to correctly update the SMVs. While the Local Government Code (LGC) requires the regular conduct of the general revision of SMVs and property assessments every three years, LGUs have failed to comply with the requirements of the law for lack of penal sanctions in the law and for fear of political backlash arising from it, the lawmakers argued, among other points. As a consequence, the lawmakers have proposed penal provisions to be meted violators ranging from one to six months suspension of basic salary for government officials or employees and/or suspension from government service of up to one year. Other violators, juridical or natural, may be dealt with under applicable existing laws. The lawmakers, in their bills, provide provisions related to funding requirements and transitory guidelines, including taxpayers remedies in cases of erroneous assessments of real properties. (30) dpt