Wednesday, July 16, 2014

Ways to Improve Local Tax Collections

Most LGUs still depend on the Internal Revenue Allotment (IRA) to finance 75% of their operations and services. With most of the money going to the salaries of local government employees, very little is left to fund development programs that could bring progress to the localities. Under the Local Government Code (RA 7160), local governments can collect taxes, such as real property tax and business taxes. LGUs can also enter businesses, such as public markets, parking services, etc. Republic Act 6976, allows LGUs to enter into joint ventures with private sector like build-operate-transfer (BOT) projects, to float bonds, receive grants, and take out loans from banks.

Some local governance experts observe, the IRA has discouraged LGUs from trying hard enough, or from trying at all. With at least ¾ of the cost of local governance already ensured in the monthly automatic releases from the national government, LGUs may not be compelled to look for extra income beyond the real property taxes and business permit fees that they may not even be collecting aggressively.

It should be an incentive for IRA to be determined by the performance of individual LGUs, not just by land area or population. If they work harder to collect taxes and deliver basic service to their constituents, they will have additional IRA. The complacent LGUs will then be force to move.

Ways to improve tax collections, as follows: 

  • Wrote a manual that set collection goals. This manual sets forth the LGUs tax base, set collection targets for the succeeding years and laid out strategies to carry them out. The aim is to identify untapped sources of income, make the most of existing sources, plug leaks, generates more local funds.
  • Computerized tax collection system and records. Computerization of LGUs assessment, collection, and business permit licensing units. In my town Basey, it purchased hardwares and information system in 2010, but it was no longer used in the operation of the municipal treasurer and assessor office and the municipality stands to loss the property valued at P5,392,735.50. If we remove the human-to-human contact, we will be more accurate in our assessments. The use of index card system in its database in the real property division is vulnerable to manipulation and collusion between employees and real estate owners.
  • Shortened permits and licensing processes. Going digital shortens transaction time and increases efficiency rate.
  • Tracked down tax delinquents. One of the first things that an LGU can discover after going digital is its list of delinquent taxpayers. Marikina City accounted for only P40 million in tax delinquencies. After automation in 1999, the city discovered that it was actually losing P250 million to delinquent taxpayers.
  • Auctioned delinquent properties. Sent out demand letters to tax delinquents and held auctions for their properties.
  • Trained officials to handle tax collection responsibilities. Create a special team that should map out all the business establishments, forcing them to register.

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