President Marcos—PPA POOL
President Marcos on Thursday signed a law he had proposed when he was still a senator to improve the country’s tax collection by streamlining and digitalizing what he called an “outdated” real property valuation and assessment system.
Marcos expressed optimism that Republic Act No. 12001, or Real Property Valuation and Assessment Reform Act (RPVara), will “change our real estate landscape” and raise bureaucratic efficiency through transparency, digitalization and innovation.
“This new law is borne out of necessity and the realization that there is a need to enhance the country’s tax collection system so we can generate revenues, generate jobs and investments all over the country. No longer will we rely on the outdated valuation system,” he said in a speech in Malacañang.
Multiple benefits
Marcos said the law “streamlines and enhances the real property valuation and assessment system through a uniform real property appraisal that is compliant with international standards.”
“It also adopts the prevailing market value as the single real property valuation base for the assessment of real property tax. Furthermore, the law complements our efforts to modernize the services in our local government units (LGUs) through the creation of a Real Property Information System—a comprehensive, digitalized real property tax administration,” he added.
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RA 12001 will also “instill and encourage long-term and consistent tax compliance by providing a two-year amnesty on interests and penalties for taxpayers with unpaid real property tax” as a strategy toward efficient tax collection.
Standardizing valuations, plugging tax leaks, and ensuring transparency are among the biggest expected benefits of the newly enacted RPVara, according to industry stakeholders.
In a statement, the Chamber of Real Estate and Builders’ Associations Inc. (Creba) said the new law would hopefully “introduce the needed reforms in real property valuation and assessment.”
“It is a timely opportunity to overhaul the current system of Schedule of Market Values (SMV) formulation which has, for many years, been prone to compromise and corruption and wanting of direct participation by the private sector and professionals with the requisite technical know-how and training,” Creba said.
For real estate investment management firm Colliers Philippines, it will provide “much-needed transparency” in a volatile industry on a postpandemic rebound.
Paul Vincent Ramirez, senior director and head of valuation at Colliers, said that while the law would likely raise acquisition and disposal costs, as well as the real property taxes of all property players across the spectrum, from developers to investors and end-users, “we see its implementation as providing much-needed transparency to the current opacity of the Philippine real estate market.”
IRR up for scrutiny
“The game-changing details will be in the law’s yet-to-be finalized and published implementing rules and regulations (IRR) which all property players need to prudently scrutinize,” he added.
Ovialand Inc. president Pammy Olivares-Vital welcomed the passage of the RPVara, saying it would lead to a balanced property assessment across areas and regions.
“We have seen progressive local city assessors adjust their recent methods in assessing which was beneficial for the municipality or city. Standardizing this method, I believe, will benefit areas that are not yet practicing this,” Olivares-Vital said.
Sharon Saclolo, associate director and head of Research at Leechiu Property Consultants Inc., added that the RPVara would improve the ease of doing business and enhance the country’s appeal to investors.
In July 2013, then Senator Marcos introduced Senate Bill No. 415 to revamp what was considered a flawed land valuation system.
High cost to gov’t
He then noted that with 23 national government agencies, almost 1,300 LGUs and private appraisers performing valuation using different methods and standards, the property sector had been riddled with inconsistent real property values.
As a result, many government-led projects and investments were delayed due to compensation issues and lengthy court litigations, particularly on right-of-way issues.“Such condition has crippled the government, both at the local and the national levels, to fully tap the potential of the land sector, and resulted in foregone revenues from national and local real property-related taxes,” Marcos said.
He also noted that the valuations used for governmental purposes were outdated.
A later version of Marcos’ bill noted that as of 2018, only 38.8 percent of LGUs had updated SMVs, with 93 noncompliant cities and 46 provinces, while only 50.4 percent of Revenue District Offices (RDOs) had updated zonal values, with 65 RDOs still in the process of revising.
Single system for all
According to a briefer from the Bureau of Local Government Finance that was released prior to the signing of the law, the RPVara will provide a single system of valuation to be used by all LGUs and other government agencies for taxation and other purposes.
The new law also transferred the approval of the SMVs from the local government council to the finance secretary, hence insulating the technical function of valuation by local assessors from the political function of setting assessment levels and tax rates by LGUs.
It also mandated the creation of an electronic and comprehensive Real Property Information System which will serve as a database of all real property transactions with the Registry of Deeds, Bureau of Internal Revenue, notaries public, and other agencies.
2-year amnesty program
The new law also provides for a real property tax amnesty lasting two years and will cover penalties, surcharges, and interests from all unpaid real property taxes.
Delinquent owners may settle their dues through a one-time payment or installment payment.
The amnesty does not cover delinquent real properties already disposed of through a public auction, real properties with tax delinquencies being paid under a compromise agreement, and those that have pending court cases on tax delinquencies.
For the first year of effectivity of the approved SMVs, increases in real property taxes will be capped at 6 percent of the real property taxes assessed on such properties prior to the effectivity of the law.
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For the succeeding years, the LGU may enact an ordinance imposing a cap on the increase in real property taxes. —WITH A REPORT FROM MEG J. ADONIS
