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Property Tax Compliance and Distributional Impact Study on Naga City, September - October 2008


The Property Tax Compliance and Distributional Impact Study on Naga City covering CY 2007 was undertaken in house by NTRC. The study aims to: 1. Assess compliance in the payment of property taxes under the present system to serve as baseline for assessment of LGU property tax reforms; 2. Examine the extent to which the different classes and strata of properties are contributing to property tax collection; and 3. Recommend measures to improve property tax compliance and introduce greater equity in the distribution of the tax burden among taxpayers. Overall, 63% of the potential revenue from the four major property classes in CY 2007 was collected. In detail, 56% was generated from residential properties; 72% from commercial properties; 69% from industrial; and 43% from agricultural properties. By property classification, the bulk of potential real property tax collectible came from residential properties (49%), followed by commercial properties (47%), agricultural (2.5%), and industrial (1.5%). By stratum of land value, low-end (85%) and medium-end (78%) commercial lands recorded the highest compliance ratios followed by medium-end (75%) and high-end (68%) industrial lands. By level of building values, the most compliant are commercial buildings at the medium and high-end strata (79% and 77%, respectively). The relatively low compliance ratio of the city can be attributed to the following: 1. Existence of poor urban housing grantees who cannot afford to pay their property tax obligations; 2. Difficulty in collecting tax from GOCC-owned properties; and 3. Lack of clear policy on the taxability of certain properties like road lots and those owned by the Catholic Church. The following measures are recommended to aid the city government in its campaign to improve tax compliance of property taxpayers. 1. Combine in one billing statement/notice of assessment of real properties and the RPT due annually; 2. Continuously update and clean the property database to ensure that the correct potential tax is computed and from which an appropriate tax enforcement program is developed and implemented; 3. Develop a unified database system that would merge the existing database found in the Assessor’s and Treasurer’s Offices to facilitate the analysis of the status of collection and delinquency and thus, improve policy decisions on collection enforcement; 4. Consider writing off the delinquencies which remained in the treasury’s records for many years; 5. Draw up a list of properties that have the highest tax potentials for closer monitoring and remedial action, if warranted; 6. Consider the possibility of classifying all industrial properties as commercial since there are very few industrial properties in the City; 7. Intensify tax campaigns in the barangays with the least tax compliance ratios; 8. Consider the possibility of providing zero assessment levels for certain residential buildings with MV above P 175,000.; 9. Engage in programs and projects to be funded by the collection from RPT; 10. Encourage taxpayers to comply with their tax obligations through effective information program to keep the public aware of the government services; 11. Promote awareness of property owners through increased participation and active involvement of local public schools in tax information and education; and 12. Formulate a real property tax policy that would address the issues/problems in collecting the tax from lands subject to land conversion under the Comprehensive Agrarian Reform Program (CARP), properties owned by the government and government-owned and controlled corporations (GOCCs).

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