Wednesday, November 01, 2006 Osmeña: Corporate functions of LGUs By Antonio V. Osmeña Estatements
Local government units (LGUs) should function and operate like corporate entities.
Since the expenses of government (to safeguard public health and welfare, law and morality) are recurring, annual property taxes, among others, are imposed to defray expenditures of LGUs.
Realty tax is the most important source of revenue, upon which the strength of and support from government depends, and without which a landowner’s rights may lack necessary protection and enforcement.
Local government executives should therefore administer and perform their duties like chief executive officers of a private corporate entity. This is important considering that highly urbanized cities in Metro Cebu are now facing the problem of equitable distribution of government expenditures.
Since the power to tax in the hand of unwise government officials is tantamount to the power to destroy (property values), local executives should examine and appraise all taxable property equitably.
In taxation, two broad principles are considered — “benefit received” theory and the “ability to pay” theory.
Under the “benefit received” theory, taxes are imposed in proportion to benefits derived from government services.
This theory, although fundamentally equitable, is not practical since those in greater need of community aid and support are generally least blessed with possession of worldly (property) goods, and are thus 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 in the community and municipal level.
But then LGU executives should be able to determine a reasonable realty tax rate against its budget.
To ascertain the a-mount 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 rate can be derived by dividing the total amount to be raised with the total assessed value.
The rate applied to the value of a particular parcel of real estate gives the amount of taxes chargeable to it. For example, assuming a budget of P200 million, the assessed value of the property at P8 million and the amount derived from revenue other than taxes for real estate is P50 million.
The tax rate would be determined by deducting P50 million from P200 million, which would leave P150 million. The 150 million is then divided by P8 million, which will result in .01875 or P1,875 per P100 assessed valuation.
Like any corporate entity, LGUs have to prepare a budget containing a statement of probable revenue and expenditure and financial proposal for the coming year as presented to or passed upon by a legislative body.
Have local government executives ascertain the overall assessed valuation of the parcels of land in their particular districts? If not, what is the basis for determining the tax rate?
Will a parcel of land classified as agriculture adjacent to a highly developed residential subdivision have the same tax rate?
Since LGUs have allowed the encroachment of residential subdivision projects in agricultural areas, it is but logical that the assessed valuation of the latter increase in value accordingly.
It is, among others, the function of local executives to examine and appraise all taxable property equitably since the tax is apportioned to various properties in proportion to the value of each.
