Real Estate Valuation Reform Expected to Increase State Revenue
REFORM the country The real estate appraisal system could generate more revenue for local government units (LGUs) and speed up deployment of infrastructure projects, experts say.
In a webinar hosted by the Foundation for Economic Freedom, Inc. on Wednesday, Bureau of Local Government Finance (BLGF) director Ma. Pamela P. Quizon said the existing system is plagued by issues such as ratings that overlap, outdated rates, the lack of a single watchdog and the lack of an electronic real estate database.
This has resulted in inefficient collection of property taxes by LGUs, lost income due to overvaluation and undervaluation of assets, and lengthy litigation in court, among others.
She said only 45% of LGUs had updated their Market Value Schedule (SMV) as of March 2019, leaving the rest of the 98 cities and 46 provinces with outdated SMVs.
“[Property values for public purposes are outdated because] there is no penalty for non-compliance in regularly updating the LGU scale of fair market values ââand BIR (Bureau of Internal Revenue) area values. LGUs fail to update and revise VPS despite legal requirements because they are unpopular. There is a fear of political backlash. They lack technical capacity and [their budgets cannot cover] reassessment costs, âMs. Quizon said.
The Duterte administration wants Congress to pass the Real Estate Valuation and Valuation Reform Bill, part three of its comprehensive tax reform program.
The House of Representatives approved its version of the bill at third reading in November 2019, while the Senate version is still pending at committee level. The bill is among the list of measures that the Council of the Executive and Legislative Departments agreed to adopt before Congress adjourned in June.
Wanted for comment, the leaders of the Senate and the House of Representatives did not respond at the deadline.
Differences over the different agency ratings also resulted in conflicts and delays in infrastructure projects, BLGF estimates showing that 23 state agencies have their own assessments.
Rail Transport Undersecretary Timothy John R. Batan said deployment of several infrastructure projects has been hampered by issues of right-of-way acquisition.
Mr. Batan said resolving right-of-way issues is a long and tedious process, especially in the absence of a consistent property rating system. Real estate appraisal reform will speed up acquisitions of rights-of-way and sites for infrastructure projects, he said.
âIf we have better visibility and predictability on the valuation of real estate, which is what this reform program is aimed at, then we can unlock this public wealth. The measure of the country’s public wealth largely lies in its land assets and if we can unlock that then 4-5 times more the projects we need to build can find their funding from the land value creation generated. internally (income), âhe said. said during the forum.
For example, Mr. Batan said the government had committed around 7 billion pesos in Fifinancial losses due to delays in the implementation of Cavite extension projects for metro line 7 (MRT) and light rail line 1 (LRT). These losses are mainly due to valuation issues, additional payments to close expropriation proceedings and contingent liabilities incurred due to the delay in acquiring the right-of-way.
The estimated overall economic losses attributed to valuation issues in the two rail projects have totaled P31.34 billion so far, as slow deployment has also delayed the realization of economic benefits.Fits.
He said the existing properties where the government railways are located to date covered 844,000 square meters (mÂ²). The rail footprint is expected to increase to 18.545 million mÂ². given the state’s current infrastructure pipeline.
By 2022, he said the government should acquire the right-of-way for 9.5 million square meters. and 13.5 million mÂ² of project sites to establish 1,209 kilometers (km) of railway tracks and install 168 stations where 1,381 trains will be deployed.
The Real Estate Valuation Reform Bill aims to establish a single valuation basis for taxation through LGU SMVs. The updated values ââcan also be used as a reference for other purposes, such as acquiring, renting and leasing the right-of-way, among others.
âThe real estate and housing development industry supports the adoption of the Valuation Reform Law. However, in order for it to effectively achieve its objectives, in particular by generating investor confidence in the valuation system, checks and balances must be in place to make it truly fair, equitable and transparent, especially for taxpayers. â, Rosie Tsai, president of the Subdivision and Housing Developers Association. said during the forum. – Beatrice M. Laforga