MANILA, Philippines — The Department of Finance (DOF) has asked local governments to adjust their real estate taxation as they are losing billions in resources because of outdated valuation of properties.

Finance Secretary Carlos Dominguez said legislating real property valuation reform would allow local governments to collect the right taxes by updating the schedule of market values in assessing real estate assets.

According to Dominguez, local governments lose billions of pesos by using property values that are no longer at par with international standards, including the rates used by the Bureau of Internal Revenue (BIR).

Dominguez said the DOF, for one, checked on the market value of commercial areas in Makati.

The local government of Makati values prime properties along Ayala Avenue within the vicinities of San Lorenzo and Bel-Air at P40,000 per square meter, significantly lower than the market value assessed by the DOF of up to P900,000 per sqm.

For instance, the total taxable commercial land area in San Lorenzo yields an assessed value of P842.24 million using the local government’s valuation. The total collectible real property tax then at three percent will generate just P25.27 million.

Also, the DOF looked into Barangay Bel-Air where for an estimated land area of 52,080 sqm, the local government can raise only around P25 million in real property tax.

In contrast, the local government can push the assessed value of properties in San Lorenzo to P19.79 billion and Barangay Bel-Air to P19.58 billion if it shifts to the valuation level used by the BIR.

For Dominguez, passing the real property valuation reform would equate to a wealth tax as the government will tax the immovable assets of the billionaire class. He said taxing billionaires on their wealth solely could be problematic given that some assets can be transferred abroad.

“That kind of wealth cannot escape to offshore accounts or anywhere, that is wealth here. The other kind of wealth they want to tax can disappear,” Dominguez said.

The real property valuation reform, the third package of the comprehensive tax reform program, puts up a single base in taxing real estate using benchmark values to improve collection.

While the measure mandates the Bureau of Local Government Finance to come up with unified standards guiding appraisers and assessors, it leaves to local governments the authority to set, change and regulate real property tax rates.