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