The design of idle land tax is to help ensure optimal land use decisions and if necessary to discourage land speculations. Notwithstanding these benefits, the implementation of the idle land tax in the Philippines has been inconsistent due to a number of policy and implementation gaps.
First, the imposition of the idle tax measure is optional in nature, and the Local Government Units (LGUs)—through the issuance of a Sanggunian ordinance—may charge a tax rate from 0 to 5 percent. In effect, the application of idle tax rates considerably varies across LGUs. Second, there is no clear definition of what constitutes idle land despite the various policy directives that provide the framework, mechanics and institutional arrangement for its implementation. The lack of a harmonized definition therefore leads to difficulties in coming up with an inventory of idle lands in the country.
Finally, the incentives for LGUs to actively collect taxes are weak. The weak performance of LGUs in implementing idle land tax largely explains its small contribution to the real property tax as a whole. From a non-fiscal perspective, the inability of the tax measure to act as an effective regulation against non-utilization of land assets represents a significant loss of food production and rural employment. This paper explores the challenges and issues faced by the local government units, as well as the national government, in effectively implementing the local tax measure. More importantly, it proposes reform directions that will provide legal policy remedies to the shortcomings of the idle land tax implementation.