Part 20
The Asian Development Bank has been focused on assisting the Philippines’ tax collection efforts and enhancement of its tax administration systems. In the ADB press release of August 27, 2021, it announced that the ADB has approved a $400 million policy-based loan to the Philippines to help improve local governments’ capacity to provide high-quality public services. This Local Governance Reform Program Subprogram 2 intends to assist in the strengthening of the local government units’ service delivery framework, modernize local public financial management, and improve LGUs’ financing and investment capabilities.
Under this program, ADB is supporting reforms to move toward the full devolution of national government functions to LGUs based on Executive Order 138 Series of 2021 and increased revenue allocations to LGUs as a result of the 2019 Supreme Court Mandanas decision.
The new program builds on ADB’s support since 2006 to help the Philippines boost efficiency, accountability, and transparency in local governments’ financial management and service delivery. A $300 million policy-based loan in 2019 helped the government create a legal and institutional framework to mobilize local revenues. A $26.5 million investment project in 2020 is supporting government initiatives and reforms to improve local governments’ real property tax collection.
The Bureau of Local Government Finance (BLGF), under Executive Director Consolacion Agcaoli, is the lead agency in these real property tax reforms. Specifically, this includes the Local Governance Reform Project that started in 2020. The LGRP consists of various components including the adoption of digital tools for local real property tax valuation and collection, capacity building and training for LGU officials, and the implementation of legislative and policy mandates.
The BLGF definitely will be very much involved in the implementation of the Real Property Valuation and Assessment Reform (RPVAR). The bicameral committee concluded its hearings in March 2024 and the bill is scheduled for signing into law by the President within the next few weeks.
The RPVAR is another landmark tax measure that aims to improve local finance and empower LGUs toward sustainability. The current real property system suffers from multiple, overlapping valuations, leading to wide disparities in property values among various LGUs. Outdated valuations are used for governmental purposes, resulting in inefficient tax collection processes and foregone revenues. Furthermore, there is no single agency responsible for ensuring that valuations are completed according to standards. RPVAR seeks to address these issues by adopting internationally accepted valuation standards and professionalizing real property valuation administrators and processes. Additionally, RPVAR mandates the establishment of a comprehensive real property electronic database to capture transactions and support regular property re-valuations. The intent is to improve real property tax collections by updating property valuations without increasing taxes or imposing new ones.
The bicameral body adopted the Senate version of providing an amnesty on interest and penalties for taxpayers with unpaid real property taxes. I am pleased that this provision, which was based on my written position paper submitted to the Senate Ways and Means Committee, was incorporated into the RPVAR.
In my submission, I gave the rationale for the amnesty as needed to “support the fiscal and revenue capacity and resources of the LGUs and to promote up-to-date information on real properties and improvements and taxes thereof that will be unloaded in the electronic database. With the tax amnesty, taxpayers who are late or did not pay their real property taxes in the past years will be encouraged to pay their unpaid taxes due to the savings they will derive from the waiver of the penalties and interests.” “Owners of undeclared real properties and improvements will also be encouraged to report these and pay the taxes due for the same reason that they will be deriving savings from the waiver of the penalties and interests related to the non-payment or late payment of taxes.”
The BLGF will be at the forefront of implementing these many reforms and initiatives. I am sure that the officials of the BLGF and other government agencies will be capable of administering simultaneously the VTARA, the tax amnesty, Standardized Examination and Assessment for Local Treasury Service Program, the LGRP, setting up of the comprehensive real property electronic database, and the capacity building of the treasurers and staff of 81 provinces, 144 cities, and 1,490 municipalities (not counting anymore the 42,080 barangays that can also collect their fees, permits, and “taxes”).
I wish them my prayers and call for motivation for them to handle all of these mandates, which can, later on, be broadcasted and shared with the global tax community as being best practices for revenue collections.
To be continued
Joel L. Tan-Torres was a former Commissioner of the Bureau of Internal Revenue. He has also held the various positions of Dean of the University of the Philippines Virata School of Business, Chairman of the Professional Regulatory Board of Accountancy, Tax partner of Reyes Tacandong & Co. and the SyCip Gorres and Velayo & Co., and director of various corporate boards. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979. He is now back to his tax and consultancy practice and can be contacted at joeltantorress@yahoo.com and his firm JL2T Consultancy.