Game-changer for property sector
The real estate sector has been operating for decades with an inefficient property valuation system. Last June 13, President Marcos finally signed Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act, to streamline, digitize, and enhance this through a uniform appraisal based on internationally accepted standards, concepts, principles, and practices.
“No longer will we rely on the outdated valuation system,” he noted in his speech during the signing ceremony in Malacañang, expressing optimism that the new law will also improve bureaucratic efficiency.
This long overdue overhaul of the country’s antiquated and problematic property valuation system presents what the President calls a game-changer that will dramatically improve the real estate landscape and benefit both the government and the private sector. It is part of the administration’s Comprehensive Tax Reform Program that aims to promote a just and efficient property valuation system.
Stop recurring problems
Its main effect is that it will broaden the tax base used for property and property-related taxes of the national and local governments. But more than just increasing government tax revenues from real estate, the new law will hopefully put a stop to the recurring problems experienced by individuals and companies when they pay property taxes or sell their land. It will also minimize right-of-way (ROW) problems that have delayed numerous public and private infrastructure projects, causing cost overruns that at times lead to their eventual cancellation.
The valuation system prior to this law was chaotic. When Mr. Marcos was a senator in 2013, he had actually introduced Senate Bill No. 415 on revamping it, citing that with 23 national government agencies, almost 1,300 local government units (LGUs), and hundreds of private appraisers performing valuation using different methods and standards, the property sector has been riddled with inconsistent property values. As a result, many projects were delayed or scuttled due to just compensation issues and lengthy court litigation. Although the government is authorized under RA 10752, or the 2016 Right-of-Way Act, to purchase real property needed as a ROW site or location for a public infrastructure project, such acquisition often gets delayed by valuation problems.
Single valuation base
Among the LGUs, it is more complicated as the technical process of property valuation is tied to real estate taxation, which is a political function of elected local officials. With the approval of the schedule of market values (SMV) assigned to the local councils, the technical function of valuation is often influenced by highly politicized decisions. This compromised the capacity of LGUs to generate enough property taxes that could have funded public services for their constituencies.
A single valuation base for taxation purposes, which is the principal feature of RA 12001, will hopefully resolve the difficulties that taxpayers face every time they pay property taxes and other imposts on the sale of real estate, among them transfer taxes, capital gains and withholding taxes, documentary stamp tax, and value-added tax. This single valuation system will also facilitate and speed up private property transactions.
The creation of an electronic and comprehensive property information system is another major highlight of the law as it will serve as the only database of all real property transactions currently with the Registry of Deeds, the Bureau of Internal Revenue, notaries public, and other agencies.
Prone to compromise and corruption
In short, multiple benefits, not just increasing taxes, are expected from RA 12001. According to the Chamber of Real Estate and Builders Associations Inc, “it is a timely opportunity to overhaul the current (SMV) system which has, for many years, been prone to compromise and corruption and wanting of direct participation by the private sector and professionals with the requisite technical know-how and training.”
Real estate investment management firm Colliers Philippines added that the newly signed law will provide “much-needed transparency” in a volatile industry that may soon rebound from the pandemic. “We see its implementation as providing much-needed transparency to the current opacity of the Philippine real estate market,” it added.
As it is, however, RA 12001 presents only the potential to become a game-changer in the property sector. As with any other law, the success or failure of RA 12001 will depend on the implementing rules and regulations (IRR) needed to implement it. All property stakeholders therefore need to get involved in its formulation and prudently scrutinize the proposed IRR. It is hoped that the government, in crafting the IRR for RA 12001, will give private sector experts the opportunity to participate in the process and give inputs that will make it transparent, efficient, and acceptable to everyone.
