1. Improving Fiscal and Land Governance
Through Property Valuation and Taxation Reforms
in the Philippines
Nino ALVINA
LAMP2- Component 4
Bureau of Local Government Finance
Department of Finance
The Philippines
Annual World Bank Conference on Land and Poverty 2013
Washington, DC, USA, April 8-11, 2013
With technical assistance grant
and funding support from:
In cooperation with:
Implemented by:

2. Outline of Presentation
Context, overview
Solution, reform agenda
Innovations, interventions
Pilot implementation
Benefits, lessons
Future directions
Conclusions, recommendations

3. Background: Sector Issues
Valuation
Dispersed: multiple systems, varying methodologies in 20+ national govt agencies, local govts
Wide disparities of values: mostly obsolete, below market levels, no uniformity
Neglected duty: politicized at the local level: low compliance to legislated mandate
Weak support system: lack of formal education, capacity building, dispersed data source, outdated land use plans, lack of integrated spatial framework
Overvaluation vs undervaluation: high when govt pays, low when govt collects
Taxation
Multiple taxes on property ownership & transfers,; high rates at the nat’l level
No singular base for assessment; weak enforcement
Real property undermined
Systemic effects
Weak LAM governance

4. LAM Program as a solution…
LAM reform agenda: years; Phase 1 ( ), Phase 2 (2006- present)
Valuation & taxation as core issues – impact on governance affairs
Partnerships with national, local governments, private sector, academe, etc.
Support of World Bank, AusAID, FAO
Comprehensive solution: policy, capacity, structures, systems and tools
Improved Land & Fiscal Governance
Standardized, harmonized approaches
Depoliticized valuation; make taxation equitable
Support the widening of property tax base
Enhanced capacity thru professional development, and education
Computerization & information management

5. Key Interventions, innovations
Policy and Legal Framework Reforms
Professionalization of appraisers: Real Estate Service Act of 2009; 3,900 licensed
Policies, proposals for sustainability: Executive Order No. 833, Valuation Reform Act bill, inter-agency circulars, tax reforms
New Tools and Systems
Philippine Valuation Standards
Mass Appraisal Guidebook
Basic Course on Mass Appraisal
Local tax policy studies
Prototype systems: Valuation Database and Information System (VDIS) and electronic Field Appraisal & Assessment Sheet (eFAAS)

6. Key Interventions, innovations
Capacity Development
Piloting in cities: Naga, Iloilo, Mandaue
Formal land valuation education courses by UP Open University
Continuing professional devt courses
Diploma, master’s programs
Trainings on valuation, tax policy setting
Information drives, roadshows, caravans, legislative briefings
Broader support to selected LGUs through Innovation Support Fund, grants, LGU-led rollout, replication of reforms

7. Paradigm shift…

8. Local Implementation: The Naga City Model
Situation
Nat’l, local values differ
LGU values outdated by 12 years
Re-valuation led to 147% increase in MV; 110% in AV 
Initial taxpayers’ resistance due to possible increases in tax liabilities
Selling points / Strategies
Revaluation as part of governance process, not mainly revenues, but fairness in taxation
Funding the LGU needs: RPT to support capital investments, basic services
Political will & inclusive approach: people’s participation -- engage them not only when taxes are raised, but also when government funds are spent
Results
Uniformity in valuation: Naga as model for harmonized nat’l & local valuations
Local revenues not felt immediately in 2009 due to discount, capping, taxpayer’s consciousness, LGU preference, BUT: nat’l taxes grew: CGT (68%), DST (63%);
As of 2011, RPT collections reached Php131.9M (27% more)
BIR’s total year-on-year collections (May 2012) grew by %
Balanced NG-LGU ratio – 1:1

9. Lessons Learned
Perpetuating faulty, weak valuation, neglect of mandate – indicate bad governance: effects are systemic and complex; leads to greater inequity
Valuation and taxation reforms are vital for effective decentralization to make LGUs economically viable
Win public support thru ‘champions’ (with political will), participatory communication, transparent agenda
Naga Case: reforms are doable, benefits from valuation reforms outweigh political costs;
Convergence/collective commitment & cooperation; broad-based stakeholders & whole-of-government support

10. Future Directions
Land Sector Development Framework (LSDF) + Roadmap for Valuation and Taxation Reforms
2030 LAM Vision
LSDF as overall land governance framework
Both reflect key elements of the Voluntary Guidelines on the Responsible Governance of Tenure of the FAO and WB guidance on land governance
Additional Financing to expand, rollout LAMP2 innovations
Nationwide digital conversion of land records
Adoption of systems, tools, etc.
Replication of pilot work, mainstreaming of reforms

11. Conclusions and Recommendations
LAM is good for fiscal governance, socio-economic development: it has to be efficient, effective
Put safeguards: ensure equity, mitigate impact on the poor
Complementary efforts: improve tax collection & awareness, good expenditure management, adoption/integration of computerized systems, completion of cadastral survey, updating of land use planning, other LAM initiatives.
LAM reforms – a continuing endeavor: to attain significant results, invest in the momentum, rollout and replicate.

12. THANK YOU!