Halting modern property valuation
Republic Act No. 12001, the Real Property Valuation and Assessment Reform Act (RPVARA), was hailed as a legislative milestone when it was signed by President Marcos in June 2024. The priority measure aimed to modernize the country’s outdated and inefficient property valuation and assessment system and help local government units (LGUs) generate more revenues to bankroll their development programs.
But after two years, Mr. Marcos—who had pushed hard for the measure when he was still a senator and listed the reform as one of his priority measures during his first State of the Nation Address—has changed his tune.
Following a meeting with the Legislative-Executive Development Advisory Council last week, he asked Congress to defer its implementation, to spare property owners and business from “additional burdens” and ensure a “smooth and reasonable” transition to the new valuation system that should be easier to follow and aligned with international standards.
The Chamber of Real Estate and Builders’ Associations Inc. (Creba) cheered Mr. Marcos’ move to suspend the implementation of RPVARA that was supposed to take effect in 2028, describing it as “timely opportunity to ensure that the landmark reform is implemented in a fair, transparent, and well-calibrated manner.”
Losing momentum
Given the government’s more urgent and pressing priorities, from bringing down the prices of basic goods and services to accelerating economic growth that is fast losing momentum and generating job-generating investments, there is wisdom in seeking more time to shift to the new property evaluation system as envisioned under the law.
However, the commitment to make that radical shift should not waver, lest the ills that the law is supposed to cure become even more grave.
Pampanga 2nd District Rep. Gloria Macapagal Arroyo pointed out back in 2018 that the current property valuation system was “hounded by discrepancies and conflicting land values,” resulting in unrealized government units, lengthy court litigation involving property disputes, and right-of-way compensation problems as there is no single basis for valuing property.
Then Finance Secretary Ralph Recto stressed in 2024 that there were at least 20 government agencies involved in land valuation, thus adopting a single basis for valuation–the market-based schedule of market value (SMV)–will lead to “one hundred percent transparency and accuracy” in the computation of real property tax.
This is especially important for LGUs that derive a significant portion of their income from property taxes.
Political backlash
With land to be assessed under the law solely on actual market value–as opposed to the usually lower assessed or zonal value–they stand to potentially collect more taxes which can then be used to finance their own programs and augment what they receive from the national government through the internal revenue allotment.
LGUs, however, have been unable to correctly update their SMVs due to potential political backlash as higher values will mean higher property taxes to be paid by constituents.
The new law is supposed to correct these deficiencies with the technical aspect of property valuation now to be removed from the LGUs but handled by a strengthened Bureau of Local Government Finance (BLGF), which will be tasked with the development, adoption, maintenance, regulation, and specification of property values.
Even then, backlash will indeed be inevitable since an increase in property taxes cannot be avoided with the adoption of the market values as basis.
This partly explains the Marcos administration’s reluctance to implement the law as originally scheduled, even if any increase in property taxes during the first year of using updated market values is capped at 6 percent and the two-year amnesty on interests and penalties for taxpayers with unpaid real property tax.
Education campaign
There will likewise be implications on the pricing of housing developments, thus Creba’s plea for the government to take this time to undertake a broader impact assessment of the law.
At the same time, the government should ensure that the agencies that will implement the overhaul, from the BLGF to the Bureau of Internal Revenue and the LGUs themselves are armed with the right equipment and capabilities to consistently enforce taxation using the updated, market-value based schedule.
Not to be forgotten is an adequate public information and education campaign to ensure acceptance and understanding of the new valuation system that will have implications not just on the property taxes but on other property-related fees as well, such as those involved in buying and selling property.
The government should use the extended time wisely and prepare both the bureaucracy and the public for the inevitable implementation of the valuation system.
It may cause some pain, but it is necessary nonetheless, and certainly easier to accept with the assurance that revenues to be generated will not go to corruption but real services for the people.
