Proposed real property valuation reforms in Congress to rev up property market, attract investments

Finance Secretary Carlos Dominguez III said pending legislative proposals to reform the country’s outdated real property valuation system will bring in more investments, further invigorate the property market, and generate additional revenues for local government units (LGUs).

Senate Bill No. 44 filed by Senator Panfilo Lacson and its counterparts, House Bill No. 2207 introduced by Speaker Gloria Macapagal-Arroyo and H.B. No. 68 by Albay Second District Representative Joey Salceda, are being supported by the Department of Finance (DOF), given that the fundamental valuation reforms being pushed by the government in the real property sector are already outlined in both measures, Dominguez said.

In separate letters sent to Lacson, Salceda, and Arroyo, Dominguez said the three lawmakers can count on the DOF’s full support behind their bills’ immediate enactment in the Congress even as the DOF suggested several enhancement measures to their proposals to further strengthen the country’s real property valuation and taxation system.

“Essentially, real estate is the most valuable asset and biggest financial resource. But its contribution to government revenues, particularly for local governments, has remained dismal due to outdated Schedule of Market Values (SMVs), poor collection efficiency and tax administration and lack of uniformity in the valuation of real property,” Dominguez said in his letters.

Thus, the need to put in place an “equitable, efficient and transparent valuation system has become even more urgent and necessary to “stimulate the property market, attract investments, improve government’s resource mobilization through property taxation, and foster greater confidence in the real estate sector,” Dominguez said.

The proposed reforms in the Salceda, Arroyo and Lacson bills aim, to adopt international standards in real property valuation and strengthen local autonomy by "setting up a single valuation base for taxation and benchmarking purposes, insulating the valuation process from politics as LGUs will continue to regulate tax rates and assessment levels, improving the oversight functions of the national government, and establishing an electronic database to support valuation."

Among the enhancements proposed by Dominguez to SB 44, HB 2207 and HB 68 are: the establishment of a Real Property Valuation Service (RPVS) within the Bureau of Local Government Finance (BLGF), an attached agency of the DOF. While all the three bills provide for the creation of the RPVS, Dominguez has proposed the inclusion of a provision designating counterpart BLGF personnel in the RPVS in the bureau’s regional offices.

With the BLGF serving as the lead agency in implementing the proposed reforms in real property valuation, Dominguez said the DOF is recommending the removal of the provision in SB 44 creating a Regional Technical Committee (RTC) on Real Property Valuation.

Dominguez said doing away with this committee will streamline the review of the SMVs, because the same function will already be performed by the BLGF regional offices in coordination with BIR regional offices.

The DOF has added a proposed provision which will bar an LGU from receiving any “conditional or performance-based grants or any form of credit financing from the national government” in cases when it fails to update its SMV and conduct a general revision of property assessments every time the Secretary of Finance approves a new set of SMVs.

Dominguez also recommended a provision requiring local assessors and other local officials and staff dealing with real property valuation to undergo training under the Philippine Tax Academy, as well as mandating them to automate their operations, adopt tax mapping technology, maintain software-enabled valuation system, undertake data cleansing and computerize their records management system.

On the provision pertaining to the preparation of the SMVs, he recommended that a section be included stating that the process should include the approval and publication of the SMVs by the Secretary of Finance.

Dominguez likewise proposed that the bills make clear that the publication of the local ordinance for the new and revised assessment levels and tax rates should be the responsibility of LGUs.

He also proposed that the Secretary of Finance shall no longer endorse qualified persons for the appointment of local assessors, considering that the law already requires assessors and assistant assessors to be licensed.

The Finance Secretary further recommended that a provision on the mandatory constitution of the Local Board of Assessment Appeals be included to ensure that available redress mechanisms are in place and that the Register of Deeds shall provide assessors with real property transactions data and make the information sharing free of charge(DOF).