The Department of Finance is looking to bring Metro Manila property valuations in line with current market values in order to more accurately calculate real property taxes. It is believed the government is losing out on significant tax revenue due to undervalued land in prime locations across the city.
“The current valuation for real property tax purposes of land is outdated and very low as compared to real market value,” Department of Finance Secretary Carlos Dominguez was quoted as saying by The Manila Times. “We are losing tens of billions of pesos because that kind of wealth is not being taxed correctly.”
He cited Ayala Avenue in Makati as an example of how current Metro Manila property valuations used for tax purposes were not aligned with real market values. According to Dominguez, the schedule of market values used to determine real property taxes was PHP40,000 per square meter while the Bureau of Internal Revenue used the zonal value of PHP940,000 per square meter to calculate estate, donor’s and capital gains taxes.
The Department of Finance noted the assessed total value of taxable commercial land area along Ayala Avenue is PHP842.24 million based on schedule of market values. However, this jumps to PHP19.79 billion if zonal values were to be used.
Implementing revised Metro Manila property valuations is seen as a challenge. The Department of Finance believes local government units (LGUs) have the ability to maintain a property valuation system aligned with international standards but obstacles remain.
“LGU officials, however, are hesitant to impose real property taxes based on updated schedule of market values mainly because of political considerations, although the Local Government Code states that these should be updated every three years,” Dominguez explained.
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