Osmeña: Legislate homestead exemption

HOMESTEAD is a home and land occupied and worked by a family.

The ownership of property is subject to a number of important government limitations, among which is a state’s right to levy taxes for the support of government. Since the costs of government are recurring, annual property tax levies are imposed to defray the expense for state and community civic services.

The equitable distribution of the cost of government is a continuous problem. As a basis for taxation, two broad guiding principles are accepted. One is the benefit received theory and the other, the ability to pay theory.

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Under the first theory, taxes are imposed in proportion to benefits derived from government services. This theory, although fundamentally equitable, is not applicable in practice since those often in greatest need of community aid and support are generally least blessed with possession of worldly goods and hence unable to meet their share of the public expense.

For this reason, the principle “to each according to his needs and from each according to his ability to pay” is guiding and accounts for the widespread use of the ad valorem (according to value) tax system, especially on the community and town level.

Taxes may be levied upon both real and personal property. Once levied against real property, taxes become a lien and may be enforced by the sale of the property or some interest in it.

Our government allows tax exemption in whole or in part on real estate owned by certain types of persons or corporation, such as: property of the national government, property of municipality held for public use, property owned by religious corporations used for religious purposes, and property used for hospital, cemetery, or educational purposes.

It is about time for Congress to grant property tax exemptions up to a stated amount of value for owner-occupied homes under statutory “homestead law.”

The law should also grant property tax relief where homes or land are owned and occupied by widows or disabled persons.

The nature of the use of property determines whether a piece of property is in fact exempt. Requirements of statute must be strictly complied with to gain exemption.

Purposes of exemption

The homestead exemption usually has two purposes: 1.) to exempt a home from debt, and 2.) to provide the widow (sometimes the widower) with a home for life. The value and area of the exempt homestead should be limited. It usually must be occupied as the family home and a written declaration of homestead must be filed.

It is then free from general claims for debts, except those which are a lien on the property, such as taxes and mortgages.

As a rule, homestead exists in favor of a head of a family residing there and may cover a maximum of 80 hectares of land for agriculture or 2,500 square meters if located within a city or town.

A homestead right generally is not lost by legal separation if there are minor children whom the husband is bound to support, provided the husband and wife do not abandon the homestead.

Hopefully President Aquino, through the Department of Finance, can review the method in determining the amount of realty tax and preparation of the budget of the local governments.

Ideally, in order to ascertain the amount of tax against a particular piece of property, a tax rate must be determined.

To arrive at the tax rate, two factors are used: the budget or amount of money to be raised and the total valuation of taxable property within the district. The total amount to be raised by taxation divided by the total assessed valuation gives the rate.

Also, since the tax is apportioned to various properties in proportion to the value of each, it is necessary for the taxing body, acting through its representatives, to examine and appraise all taxable property equitably.

The budget is arrived at after consideration of all estimates on the amount of money the political body appropriates for its use for the period. Usually there are revenues derived from sources other than taxation, and these, estimated as closely as possible, are deducted from the total budget. The remaining amount represents the sum that must be raised by taxation on property within the jurisdiction.