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Sustaining the viability of Philippine decentralization requires the

mobilization of real property taxes as a meaningful source of local


taxes. While real property taxes remain to be a minor contributor to
the
regular revenue stream of local government units (LGUs), this
revenue
source offers great potential that is waiting to be tapped. In many of
the
successful decentralization models, the real property tax is the
principal
platform for raising revenues and influencing property development.
Optimizing the revenue take from this source would provide a
solution
to the quest of LGUs in building capacity for their development needs.
Fundamental reforms in the real property tax structure and
administration however have to be pursued to attain the vision of
LGUs
utilizing real property taxes and administration as the instrument not
only for gaining financial strength but for real property development
in
their respective jurisdiction.
I see this Manual on Real Property Appraisal and Assessment as the
beginning of such comprehensive reform program. It will stimulate
uniformity in the interpretation of the real property tax as it provides
clear direction to the Assessors of the concepts and processes in real
property administration. This Manual should serve as a most useful
tool in guiding Assessors and for them to effectively educate their
constituents on the merits of a rational and responsive real property
assessment and appraisal system.
For the local elective officials, the Manual is an indispensable reading
for better understanding of the entire assessment process. At stake is
the decision for the adoption of the schedule of values which should
be
well based given its implications on the financial future and
governance
of the local government.
Making this Manual work will further require vertical integration
between the national and local regulatory framework. The Department
of Finance will be supportive in providing the appropriate policy
environment towards this end. LGUs, on the other hand, should work
more to undertake policy initiatives to update their regulatory
regimes.
REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF FINANCE
Roxas Boulevard Corner Pablo Ocampo Sr. Street
Manila 1004
We are confident that through continued close cooperation between
national government and LGUs in modernizing the policy
environment
in the real property sector, we will together realize our comment
development goals in uplifting the living conditions of our
countrymen.

The property tax is the most widely used municipalrevenue source in


the developingworld. In almost all LDC's with large urban populatiVs, some
form of property tax is assigned to the support of local governments.-
The performance o:E the property tax is, however, generally
disappointing. Its contribution to total municipal revenues is small
(generallyunder 25 percent) and its burden tends to fall with a high degree
of arbitrariness.
This is the result of problems in both policy and administration.
Policy decisions--lowtax rates, broad exemptions,infrequentadjustmentsfor
inflation--reduce the statutory level of the property tax. Poor
administration--incomplete tax rolls, haphazard valuations, low collection
efficiency--reducethe proportion of the statutorybase that is effectively
taxed, and introducearbitrarinessinto the tax's incidence.
Efforts to improve the performance of the property tax need to
address both types of problems. While policy actions offer the prospect of
quick revenue increases, taken alone they exaggerate the inequities in the
tax's incidence. A rise in the tax rate, for example, places the burden of
the increase on those few irLdividuals whose properties are on the rolls and
are accuratelyvalued, and from whom taxes are actually collected.
Improvements in administration offer the prospect of increasing
yields by improving equity. Improvements in the comprehensivenessof tax
rolls, the objectivity of valuations, and the efficiency of collections
increase revenues by increasing the burden on those who presently underpay.
Taken alone, however, such administrative improvements may not be
worthwhile. If tax rates remain low, the absolute level of property taxes may
be trivial. Under these conditions, the property tax, although equitably
administered,may not produce enough revenue to be worth collecting

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