Gov’t study urged LGUs to conduct tax impact study
posted 7-Jan-2019  ·  
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As early as 2014, the Land Administration and Management Project (LAMP) had recommended that local government units conduct a study on the tax impact of revisions in the Schedule of Market Values (SMV) used in the assessment of Real Property Taxes (RPT).

The LAMP recommendation was reiterated by the National Tax Research Center (NTRC) in its journal that same year.

“Said study can provide information to policy makers and taxpayers on the impact of the adjustment in the values and of the reclassification of properties during the SMV revision and thereby recommend an appropriate tax policy option that will strike a balance between raising revenues that the LGU needs and at the same time making the RPT burdensome for the property owners,” the LAMP noted.

The assessment level and/or tax rates may be adjusted for as long as they do not exceed the prescribed maximum levels and rates, it added.

“Various tax policy options may be considered, choosing therefrom the best option that may be adopted by the LGU taking into consideration its revenue requirement and the capacity of property owners to shoulder increased RPT liabilities,” LAMP stated.

“It was particularly of big help to explain during public hearing the rationale of revising the SMV and to facilitate its acceptance by the property owners and what the LGU did to mitigate the tax impact of the increased property values,” it stressed, citing the example set by Naga City.

The NTRC research was done to study LGUs compliance with a joint memorandum circular of the Department of Finance (DOF) and the Department of the Interior and Local Government (DILG) in 2010 enjoining all provinces and cities to conduct a regular revision of SMVs for property assessments every three years.

In its conclusion on the disappointingly low compliance of LGUs, the study said elected leaders generally try to avoid the process of SMV revision during their terms because it is correspondingly associated with increased RPT.

“However, the revision of values need not result to abrupt increase in real property taxes as they have the option to lower the assessment levels or tax rates of different classes of real properties,” the center said, adding that the option that strikes a balance between the need of the LGU for more revenue and the property owners’ capacity to pay means the revised SMV will be more acceptable to property owners.

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