Enhancing Taxation on Idle Agricultural LandsA Policy Study in Aid of Legislation

Francisco J. Lara and Rachael O. MoralaWith Lelanee Lanuza-Reyes, Elizabeth Lacson-Paguio, Ana Ria B. Manahan, and Jeffry P. Acaba

Copyright © 2008 by Development Academy of the Philippines and La Liga Policy Insitute

All rights reserved. This publication may be reproduced by any method without fee or prior permission for teaching purposes, and is not for resale. For copying in any other circumstances, prior written permission must be obtained from the publisher, for a corresponding fee.

ISBN: 978-971-576-033-1

Published by

DEVELOPMENT ACADEMY OF THE PHILIPPINESDAP Bldg., San Miguel Ave., Pasig City1600 PHILIPPINEShttp://www.dap.edu.ph

and

LA LIGA POLICY INSTITUTE304 Tempus Place I Matalino St., Brgy. CentralDiliman, Quezon City1101 PHILIPPINEShttp://www.laligapilipinas.org

Publication Coordinator: Rachael Morala, La Liga Policy InstituteJoanne Nuque, Development Academy of the Philippines

Content Editor:Edicio de la Torre, La Liga Policy Institute

Copy Editor: Connie J. Maraan, Development Academy of the Philippines

Cover Design and Lay-Out: Meg Sunega

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Enhancing Taxation on Idle Agricultural LandsA Policy Study in Aid of Legislation

Francisco J. Lara and Rachael O. MoralaWith Lelanee Lanuza-Reyes, Elizabeth Lacson-Paguio, Ana Ria B. Manahan, and Jeffry P. Acaba

Development Academy of the PhilippinesLa Liga Policy Institute

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Foreword

In the difficult times Filipinos now contend with, many look upon the recent past and wonder whether the crisis might have been prevented.

Indeed, it has been over 30 years since the tax on idle lands was made part of the Real Property Tax Code and thus could legally be imposed. In spite of its lack of success in other developing countries, the tax was mandated locally with the view that idle lands were damaging to both rural and urban development and should be levied. Yet the decades have passed with relatively little implementation, making the law as idle and futile as the tracts it intended to benefit from.

This volume, an endeavor of the Development Academy of the Philippines in partnership with the La Liga Policy Institute, is most timely in its efforts to provide some perspective on the situation through research, inputs from experts, as well as experiences depicted in five case studies conducted in the regions. In doing so it seeks not only to recommend reforms that will lead to an improved national law, but also more effective administration of the imposition of the idle land tax.

The study is doubly significant as 2008 is the year Congress decides the fate of the Comprehensive Agrarian Reform Program; moreover, there are at present eight bills in the House pertaining to land use, and two others that involve food security. As the study reviews the issues that obstruct taxes on idle lands from being implemented effectively, it can contribute to shaping more informed views both among and beyond those in legislature.

Ultimately it is hoped that the insights relayed here may lead to better governance and brighter prospects for the future of the Filipino farmer.

ANTONIO D. KALAW, JR.PresidentDevelopment Academy of the Philippines

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Foreword

Optimum use of land as a strategy to achieve agricultural productivity and self sufficiency has always been a part of our social advocacy. While we were in the Department of Agrarian Reform (DAR), we pushed for the enactment of appropriate and effective land use policy which included a combination of incentives and disincentives such as the Land and Water Use Tax and the Idle Land Tax. Our effort led to the incorporation in the MTPDP of 1998 of a legislative agenda under fiscal sector reforms that included a proposal to adopt a national idle land tax. This policy initiative became an impetus for this book.

As our nation is mired in a deepening basic food commodity crisis, eloquently captured by the queue for cheap rice among the urban and rural poor, the call for a rational and sustainable use of Philippine lands should be on the agenda of all citizens, most especially for the leaders of this country. Something urgent must be done to put an end to the monumental paradox of a predominantly agricultural country that has transformed into the world’s biggest net importer of rice. The challenge of achieving food for all must be addressed head on.

Our research team has studied, analyzed, and documented cases on the current application of idle land tax at the LGU level. It has also reviewed the country’s land tax administration system as it applies to agricultural lands. A set of policy recommendations seeking to enhance the effective use of agricultural lands while at the same time encouraging the application of progressive revenue generation measures to discourage land speculation has been forwarded.

This book exemplifies the continuing partnership between the La Liga Policy Institute (LLPI) and the Development Academy of the Philippines (DAP). Our institutional tie-up brings together reformers from inside and outside government in a partnership mechanism focusing on key development policy issues towards effecting good governance.

We in the La Liga Policy Institute are committed to developing a balanced constituency composed of local chief executives, heads of national line agencies, members of Congress as well as scholars, practitioners and advocates of rural development who shall serve as advocacy champions willing to carry out and concretize the results and recommendations contained in this study.

HORACIO “BOY” R. MORALES, JR.PresidentLa Liga Policy Institute

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Acknowledgements

The conduct and completion of this study is a result of the collaborative effort among the officers, fellows, friends and networks of the La Liga Policy Institute. Assistance and support varied across providing research leads, data, information, theoretical knowledge, lessons and insights from experiences. We would like to particularly acknowledge Mr. Horacio “Boy” R. Morales, Jr., La Liga President; Mr. Edicio de la Torre, La Liga Chairperson; Mr. Isagani Serrano, La Liga Board Member; and, Mr. Roland G. Cabigas, La Liga Managing Director.

We would also like to acknowledge the following experts for their inputs and participation in the various discussions and activities of the research: Ms. Joanna Michaela Arriola, Mr. Gerry Bulatao, Dr. Ben Diokno, Mr. Emmanuel Flores, Dr. Milwida Guevarra, Mr. Ed Pancho, Atty. Fred Peñaflor, Atty. Grace Que, Dr. Edita Tan and Atty. Deng Tan.

For the case studies, the research team would like to acknowledge the cooperation of the local government units, local line agencies, NGOs and farmers organizations from the City of Alaminos, Municipality of Daet, City of Sipalay, Davao City and Surigao City.

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Foreword.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Acknowledgements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Table of Contents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .List of Tables and Figures.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Abbreviations/Acronyms... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Executive Summary.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART ONE

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCEPTUAL AND DEVELOPMENT FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Nature of Land as an AssetLand Tax as it Impacts on Land UseLand Tax as it Impacts on Local AutonomyConsiderations in Reforming Land Tax Design and Administration

RESEARCH METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Review and Content Analysis of Related Laws and LiteratureNational Level Secondary Data Gathering and Analysis of StatisticsCase StudiesStudy Sessions with ExpertsCollective Critiquing and Alternative Policy Development

THE CREEPING IDLE LAND PHENOMENA IN THE PHILIPPINES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .What are Idle Agricultural LandsInternational DefinitionBased on the Local Government Code (LGC) of 1991Alternative Definition for the Purpose of the Study

IDENTIFYING IDLE AGRICULTURAL LANDSDetermining the Extent of Idle Agricultural Lands in the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimates from the National Statistics Office (NSO)Estimate from the Philippine Agribusiness Lands Investments Center – Department of AgricultureFrom the Department of Environment and Natural Resources (DENR)POLICY DIRECTION: Re-definition of Idle Lands and Establishing Cooperative Mechanisms for Its Identification

LEGAL ENVIRONMENTIdle Land Tax in the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presidential Decree 464Presidential Decree 1446The Local Government Code of 1991Other Policy Pronouncements on Idle Land TaxAdoption of the Idle Land Tax by Local GovernmentsPOLICY DIRECTION: Keeping Idle Land Tax Local But Making It Work

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Table of Contents

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IDLE LAND TAXStructure and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessing the Effective Tax Rates on Idle Agricultural Lands Exemptions from the Idle Land Tax Land Tax Administration: Appraisal and Assessment Land Tax Administration: Valuation and RevaluationLand Tax Administration: CollectionLGU Revenue Performance

EARMARKING IDLE LAND TAX PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Provisions of LGC Regarding Distribution of ProceedsPatterns of LGU Expenditures Expenditure Patterns of Local Governments in the Case Study SitesReconsidering Financing the Requirements of Land RedistributionStakeholders’ Views on Earmarking of ILT (Findings from Case Studies)

SUMMARY OF MAJOR FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Policy Issues and ConcernsIssues Related to Idle Land Tax AdministrationLack of Cooperative Institutional ArrangementsLGU Expenditures for the Agriculture Sector and Earmarking of Idle Land Tax Proceeds Insufficient Stakeholders’ Awareness and Public Acceptability

SUMMARY OF RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Adoption of Complementary LegislationComing up with an Operational and Practical Definition of Idle LandsPursuing Policy Reforms in the Idle Land Tax LawDealing with Idle Land Tax Administration IssuesDeveloping Institutional Mechanisms for Coordination and CooperationEarmarking of Idle Land Tax ProceedsDeveloping Popular Support for the Idle Land Tax

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART TWO: CASE STUDIES: IDLE LAND TAX AND LOCAL GOVERNMENTS

LUZON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daet, Camarines NorteAlaminos City, Pangasinan

VISAYAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sipalay City, Negros Occidental

MINDANAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Surigao CityDavao City

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82

86

90

100

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List of Tables and Figures

TABLESTable I Farm Area by Hectare, by Land Use (1961 to 2002)Table II Available Agricultural Lands Available for Agribusiness, by CommodityTable III Land Suitability by RegionTable IV Idle Lands per Region, covered by PFCTable V Estimated Size of Idle Lands in the Case Study AreasTable VI Matrix of Idle Land Tax LawsTable VII Proposed Amendments to the Local Government Code of 1991 related to ILTTable VIII Summary of Key Features of Existing Ordinances on Idle Land TaxTable IX Computed Effective Idle Land Tax Rates Across Property Class for ProvincesTable X Computed Effective Tax Rates in LGUs Implementing an Idle Land Tax on Agriculture LandsTable XI Sample Computation – Idle Agricultural Land Worth PhP 1 MillionTable XII LGU Revenues by source, in PhP ’000Table XIII Growth Rates of LGU Revenue Items (in percent)Table XIV Summary of Revenues of Case Study Sites for 2006 (in PhP ’000)Table XV Comparative Distribution of ILT Proceeds (LGC vs SB 1161)Table XVI Services Devolved to the LGCTable XVII LGU Total Expenditures and Expenditures on Economic ServicesTable XVIII Sectoral Distribution of Local Government Expenditures (in percent)Table XIX Ratio of LGU Expenditures versus Revenue Items (in percent)Table XX LGU Expenditures per Case Study Site (2004)Table XXI LTI Accomplishments of DAR and DENRTable XXII Budget for Land Acquisition and Distribution (in PhP million)

FIGURESFigure I Tax Assessment Levels for Various Property ClassesFigure II Major Processes Involved in Tax AdministrationFigure III Average Distribution of Revenues by SourceFigure IV Growth Rate of LGU RevenuesFigure V Share of Economic Service to Total Expenditures (2004)Figure VI Summary of LAD Accomplishments

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Abbreviations/Acronyms

ARMMARRDBIRBLGFCAOCARCARPCLOADADARDENRDoFECPGFGDFIELDS

HLURBILTIRAKIILADLBPLGCLMBLRAMAROMIMAROPAMMAMTPDPNAMRIANGONSCBNSONTRCOECDPA - LAMPPADCCPDPFCRPRPTSBSOCCSKARGEN

Autonomous Region in Muslim MindanaoAgrarian Reform and Rural DevelopmentBureau of Internal RevenueBureau of Local Government FinanceCity Agriculturist’s OfficeCordillera Autonomous RegionComprehensive Agrarian Reform ProgramCertificate of Land Ownership AgreementDepartment of AgricultureDepartment of Agrarian ReformDepartment of Environment and Natural ResourcesDepartment of FinanceEmpowering Civic Participation in GovernanceFocused Group DiscussionFertilizer, Irrigation, Education and training of farmers, Loans, Dryers and other post-harvest facilities and Seeds of high-yielding hybrid varietiesHousing and Land Use Regulatory BoardIdle Land TaxInternal Revenue AllotmentKey Informant InterviewsLand Acquisition and DistributionLand Bank of the PhilippinesLocal Government CodeLand Management BureauLand Registration AuthorityMunicipal Agrarian Reform OfficerOccidental Mindoro, Oriental Mindoro, Marinduque, Romblon, PalawanMetro Manila AuthorityMedium Term Philippine Development PlanNational Mapping Resource and Information AuthorityNon-Government OrganizationNational Statistics Coordinating BoardNational Statistics OfficeNational Tax Research CenterOrganisation for Economic Co-operation and DevelopmentPhilippines Australia Land Administration and Management ProjectPhilippine Agricultural Development and Commercial CenterPresidential DecreePhilippine Forest CorporationRepublic of the PhilippinesReal Property TaxSenate BillSouth Cotabato, Cotabato, Sultan Kudarat, Sarangani, General Santos City

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EXECUTIVE SUMMARY

Enhancing Taxation on Idle Agricultural Lands was undertaken by the Development Academy of the Philippines and the La Liga Policy Institute as a baseline research on idle land tax as it is crafted in policy and as it is implemented in the Philippines. As a policy instrument, taxes on idle lands have significant potential in terms of providing local governments with an additional source of local revenues. But more critically, such a local fiscal instrument is also a means to encourage optimum use of agricultural lands. Effectivity of the idle land tax in contributing to these objectives, however, requires paying attention to an operational policy environment and its administration. Enhancing the policy and implementation of taxes on idle agricultural lands can consequently contribute to addressing the crisis in the agricultural sector currently faced by the Philippines and in stimulating rural development in general.

As the country currently grapples with the spiraling prices of basic agricultural commodities, and deepening poverty particularly in the countryside, policymakers, consumers and the general public are turning their attention to the lackluster performance of the Philippine agriculture sector, assessing why despite our touted natural resources the country is suffering a food crisis. Long standing issues in the country’s rural sector have been discussed in many previous studies, which may lead one to say that the current food and rice crisis is but a result of years and years of neglect. Still, this event has provided renewed impetus to attend to key issues confronting the sector, foremost being the decline in productivity, the deterioration of rural infrastructure, the lack of support for it, and the rapid conversion of land away from agricultural use. Among these issues is the proliferation of idle and underutilized agricultural lands.

Enhancing taxes on idle agricultural lands is just one of the policy interventions that can be adopted to stimulate improved utilization of agricultural properties. Tax on idle lands can be utilized in congruence with other incentive and disincentive schemes to persuade landowners to develop their idle and underutilized agricultural land assets. There is an urgent need, however, to undertake a more systematic assessment of the impact of the idle land phenomena—which would include establishing a credible estimate, mapping and inventory of agricultural properties that are idle, taking into account the reasons why these lands are left idle—in order to come up with more strategic, comprehensive, multi-pronged and concerted policy and program reforms and interventions.

In response to this immediate context and as a contribution to the search for the appropriate policy mix to deal with this situation, this study provides key legislative policy and institutional reforms both at the national and local level that will allow

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not only for an improved national law on idle land tax but more importantly for its better administration. The paper (i) discusses the quietly creeping phenomena of idle lands in the country and the important role of an idle land tax to curb this trend; (ii) summarizes findings and insights from experiences on idle land tax in the five case studies conducted by the research, including relevant literature, other country experiences; and insights from experts; and (iii) reviews the issues hindering the effective implementation of taxes on idle lands.

Keeping agricultural lands idle puts to waste a scarce and valuable economic resource necessary for the production of agricultural produce including staples such as rice and corn and other basic food items. Estimates of idle agricultural lands range from a measly one percent to a high of 94 percent of the total agricultural lands in the country. The varying working definition of idle lands and consequently the huge differences in estimated scope only highlight the emerging problem related to non-cultivation and under-utilization of otherwise productive agricultural lands in the country. It also points to a very basic problem encountered by idle land taxes as it is implemented in the Philippines: that the existing legal definition has been assessed to be vague and consequently unimplementable. Moreover, the lack of institutional arrangements across local governments and various national line agencies prevents the complementation of efforts or at the minimum information sharing on idle land definition, identification, valuation, tax administration and more critically improved utilization of these idle lands.

The idle land tax remains largely unimplemented. Despite the governing law and various policy directives, which define the framework, parameters and mechanics, adoption of local governments of the idle land tax has been slow. Considerations raised for the adoption of the idle land tax include: problems in definition and identification, limited potential revenues versus cost of implementing, the need to invest in tax mapping, tax rate is too low, equity issues and political dynamics. Full implementation of the idle land tax also faces resistance from big land owner-politicians in the areas, suggesting the need for strong local government push, consultations and consolidation of support among the various stakeholders before the promulgation and implementation of the measure.

Given these considerations raised by local governments and experts in the field, an assessment of the policy is long over due. Since the reference law on idle land tax was promulgated in the early ‘70s, this is particularly true considering the changes in policy and context, and advances in information technology. Several policy reforms that can keep the tax on idle land essentially a local fiscal instrument and still ensure its more consistent implementation among local governments can be considered.

For one, the current definition of idle lands within the LGC have to be reviewed and a stricter definition would have to be adopted in order to have a significant enough tax base and more importantly so as to seriously promote more intensive land use. The definition should be based on optimal use of the land rather than

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just on its current use. To improve on the current definition of idle agricultural lands, the NTRC (1977) suggested that lands suitable for plant cultivation but not being used for such purpose will have to be declared as idle, arguing further that agricultural lands which have not been cultivated or used according to their land use classification will have to be subject to the idle land tax. This definition relates the actual use of the land with its land-use classification.

Secondly, the optional character of the idle land tax must be reviewed. Local governments may or may not adopt an idle land tax with rates ranging from zero to five percent. The optional nature of idle land taxes creates an inconsistent policy environment when it comes to ensuring effective land use. A minimum tax rate and an increase in the maximum tax rate can be adopted.

Third, the existing biases in the land tax structure, including the exemption structure, must also be reviewed. The current bias for residential properties and rural areas must be reconsidered, while a stronger signal against idle properties must be put in place. As for exemptions, in cases when properties can be utilized for agricultural purposes and are not necessarily held productively, their exemption from the basic real property tax can be maintained, but the exemption of the idle land tax should be removed.

Fourth, the national government can consider providing incentive measures for local governments who have adopted and fully implemented an idle land tax to further encourage its use as a local tax and land use measure. The national government, in order to encourage local governments to adopt the idle land tax, can provide incentives, technical and grant assistance to local governments that will adopt the measure. The central government should consider matching funds generated by local governments from the idle land tax. For every peso collected by local governments from the idle land tax, the central government can provide an additional peso or even just a proportion thereof in grants or transfers.

And lastly, current provisions of the idle land tax law on the distribution of proceeds need to be reassessed, including the possibility of earmarking the proceeds to agriculture sector development programs of local governments.

Outside policy reforms and tax administrative reforms must also be put in place. Administration of land taxes in the country remains largely problematic. As a first and critical step, an inventory of taxable idle properties must be generated. By experience this is facilitated by adopting new technologies in digital mapping—a process that is overly expensive—that will make it affordable for most local governments. The national government, because of its inherent capacities, can greatly assist in providing this service. The system of self declaration when it comes to property taxes requires a certain level of tax ethics, discipline and internal control with respect to revenue authority—something the country has not achieved. Innovations can be adopted to complement the self declaration system, if not completely do away with it.

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The lack of centralized, accurate and complete information on taxable properties undermines revenues that can be potentially generated from land taxes. Incomplete information results in some level of discretion from local assessors in determining the assessed values and therefore tax liabilities of real properties. This has become a source of corruption. Accurate property valuation impacts on the performances of land taxes not only in terms of potential revenues but also in terms of (i) undermining land use objectives, since property owners get away with not paying the appropriate tax liabilities; and (ii) equity since smaller and/or poorer property owners are most likely to report more accurately than their bigger/richer counterparts. The valuation and re-valuation process should be de-politicized. What could have otherwise been a technical process of ascertaining the fair market value of a property for appropriate land taxation became a politicized process since the approval of the Sanggunian is required in revising the schedule of fair market values. Other factors affecting valuation include insufficient and inaccurate comparative sales data, lack of assessment tools, and absence of technically qualified personnel at the local level. Coordination mechanisms among national and other local line agencies involved in various valuation activities should also be institutionalized and strengthened. DA and DAR offices deal with identification, assessment and valuation of agricultural properties. Various authorities involved in the sale of properties can also be included. The national government, in order to assist local governments and ensure the accuracy and fairness of land market values, should also consider providing technical assistance and capability building support to local assessors.

The many problems confronting land taxes in the country are reflected in the lackluster performance of local governments in terms of local revenue generation. Data strongly supports that the performance of local governments in collecting real property and idle land taxes has been weak, as its implementation has been mired with policy, administrative and political obstacles. More than 60 percent of LGU revenues come from internal revenue allotments (IRA), and the rise in LGU revenues is largely accounted for by increasing grants and transfers available from the national government. Increasing IRA has made the LGUs more dependent on national government grants and serves as a disincentive for the LGUs to maximize their revenue-raising powers. On the other hand, revenues from local sources only account for a little less than 30 percent of LGU revenues, with RPT revenues contributing less and less to the total. Data from the case study sites amplifies the diminishing significance of real property taxes on local revenues.

Local government expenditures have been increasing over the years. Revenues from local sources, however, are only able to finance, on the average, 36.8 percent of total LGU expenditures, demonstrating that the rise in local government spending has been financed by continuing increase in IRA. Bulk of LGU spending is accounted for by expenditures on general public services, which include expenses on public administration and on peace and order. Expenditures on economic services, on one hand, represent a fourth of LGU expenses with the agriculture sector only receiving a minimal at three percent of total LGU expenditures. Proceeds from

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taxes on idle lands should then be seen as a policy reform with potential benefits, in terms of revenues, improvements in land use and development of the agriculture sector, to be felt in the medium term. To amplify these benefits, funds generated from the idle land tax, while accruing to local government units, should still be earmarked to expenditures for the agriculture sector.

Mobilizing popular support for the idle land tax from local governments, relevant national line agencies and rural development stakeholders will be important in pushing for increased adoption of and the full implementation of idle land taxes nationwide. During the course of the research, local governments who have adopted and are implementing the idle land tax were documented. A more thorough evaluation of the experiences of these local governments where best practices are studied, insights and lessons drawn can be undertaken with the end view of further informing revision of the existing national policy as well as a starting point for soliciting support among local government units for the adoption of the idle land tax. In addition, popularization of the benefits of an idle land tax among ARRD stakeholders will also be important in generating public support for a more consistent implementation of taxes on idle lands.

While beset with both policy and administrative challenges, the potential contributory impact of an idle land tax on encouraging productive use of the country’s agricultural land requires that constructive intervention must be undertaken. The challenges this particular local fiscal measure face are not insurmountable, and in fact addressing these challenges will have far reaching effects in terms of land-related taxes in general, in terms of the system of land administration and management in the country, and most significantly in effecting improved and efficient land use in the agriculture sector.

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PART ONE

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INTRODUCTION

The food crisis currently faced by the country more than illustrates the long standing problems the agriculture sector has had to deal with: the deteriorating conditions of agricultural infrastructure, underinvestment in irrigation, research and technology development, low value added, lack of markets, the massive conversion of agricultural lands away from agricultural use, and even the proliferation of idle agricultural lands. These conditions have converged in a situation such that by the first half of 2008, the country saw a rapid increase in food prices. Inflation is already at 11.4 percent from 4.9 percent at the start of the year – the highest in 14 years. Food prices as of March 2008 rose by 8.2 percent from the previous year.1 The average retail price of rice, one of the country’s major food staples, in 2007 was 4.9 percent higher than the average price in 2006 and 8.0 percent over the 2005 prices.2 Of particular concern is the impact of the spiraling prices of basic food commodities on the poor, who to begin with could not afford three square meals a day.3 On the supply side, the country is set to import 2.2 million metric tons of rice, as opposed to importing only 700,000 metric tons in 2001.

Addressing the current food crisis requires urgent attention from government and rural development stakeholders. As an immediate response, government took a bigger role in the importation and distribution of more affordable rice, targeting poorer communities mainly in the urban areas. More recently, the Department of Agriculture created the FIELDS4 program with funding allocation of PhP 43.7 billion. The program aims to boost productivity in the agriculture sector and improve the poor’s access to cheaper rice. Still, advocates and experts point to the need to address the lackluster performance of the agriculture sector in a more strategic way, to go beyond stopgap measures.

There are two key pieces of legislation currently pending in both Houses of the Philippine Congress that can potentially positively impact the development of the country’s agriculture and rural sector – the proposed bill on food security, and the proposed bill on national land use.

1 Downloaded from http://www.census.gov.ph/data/pressrelease/2008/cp0803tx.html.2 From the Bureau of Agricultural Statistics, Rice and Corn Outlook for January 2008. One can expect higher

jumps in the price of rice if data for the second quarter of 2008 comes in.3 Latest poverty statistics from the National Statistical Coordination Board show that for 2006, 11 percent of

Filipino households or 1.9 million families are living on a subsistence basis. And the Social Weather Station survey estimates that 19 percent of Filipinos are unable to eat three times a day.

4 Fertilizer, Irrigation, Education and training of farmers, Loans, Dryers and other post-harvest facilities and Seeds of high-yielding hybrid varieties.

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At present, two House Bills (HBs) on food security are currently pending for approval at the Congress. HB 3870 and HB 3711, once enacted, will seek to resolve the perennial problem of food shortage, particularly of rice, and to introduce policy and institutional reforms in the agriculture sector. Both bills push for the establishment of a Food Security Board/Council that shall govern and oversee the overall production, distribution and redistribution of food supply to ensure its sustainable production and to assure that farmers are receiving equitable income. In addition, HB 3870 penalizes offenses committed as prescribed by this Bill.

On the other hand, there are eight House Bills on land use that are currently pending for approval with the Committee on Land Use at the House of Representatives. Two of the eight House Bills, HB 3745 and HB 64, were structured to improve environmental conditions, while the rest are based on the premise on the absence of a national land use policy and a wide array of overlapping and duplicating existing policies on land use that need harmonization. In implementing such, HBs 971, 3637, 2190, 1956, and 3175 provided comprehensive national and local land use and zoning frameworks to guide both national and local levels of administration. Likewise, they call for a national mapping program to be initiated to standardize and unify the development of the national land use policy. Critical areas for delineation that were considered by these bills are agricultural areas, forest lands and watershed reservation, coastal zones, mineral lands, energy resource lands, settlements development, industrial development areas, tourism development areas, and infrastructure development areas. National and local land use and zoning programs shall be overseen and managed by a national land use policy council or administration composed of Cabinet secretaries and commissioners with its local counterparts for proper orchestration of the policy. HB 1540, among other bills, proposed to establish a Land Use Policy Administration (LUPA) that will administer all matters pertaining to land use.

Reviewing and revising the existing idle land tax law in the country, as embodied within the Local Government Code of 1991, can further complement the intentions and objectives of these two important pieces of legislation. Integrating a tax on idle agricultural lands to the policy initiatives discussed above provides additional muscle both for local and national government in creating an enabling and enforcing policy environment conducive for agricultural growth and efficient use of land resources.

Enhancing Taxation on Idle Agricultural Lands (i) discusses the quietly creeping phenomena of idle lands in the country and the important role of an idle land tax to curb this trend; (ii) summarizes findings and insights from experiences on idle land tax in the five case studies conducted by the research including relevant literature, other country experiences; and insights from experts; and (iii) reviews the issues hindering the effective implementation of taxes on idle lands. The study seeks to provide key legislative policy reforms, including institutional mechanisms both at the national and local level that will allow not only for an improved national law and/or local ordinances on idle land tax but also for its better administration.

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An improved system of taxing idle agricultural lands—one that can maximize economic and non-economic benefits from such a policy, and one that addresses the various administrative shortcomings of the instrument, addressing as well the socio-political barriers it faces–is particularly important given the country’s situation. There is political pressure for government to address the food crisis beyond stopgap measures. Taxation on idle lands can potentially contribute not only in terms of raising revenues of local governments and consequently giving additional resources for their development programs; it can also contribute to a policy environment that can influence more productive use of agricultural lands.

To further amplify the gains from enhancing the policy and practice on idle agricultural land taxes, the study also explores the possibility of earmarking proceeds from the idle land tax to finance rural development programs that will contribute to the development of the agricultural sector. Examining in particular the possibility and requirements of designating the proceeds to one of government’s key rural development program, the Comprehensive Agrarian Reform Program (CARP),5 Deininger, Lara, et al. (2000) discussed the potential benefits of identifying an independent source of fresh funds for land transfer, suggesting that a land tax that finances a land purchase fund which provides landless households with a fixed land purchase grant can potentially speed up and improve the ongoing land distribution program of government; improve the efficiency of land use even outside the land reform sector; provide a rationale to upgrade the country’s land registry and cadastre system; and encourage well functioning land rental markets.

This study consolidates new and most recent information and data surrounding idle lands, idle land taxes and its performance including documenting, drawing insights and lessons from existing experiences of some local governments regarding the implementation of land taxes in the country. There are very limited studies conducted specifically on idle land taxation in the Philippines. In most cases this theme is discussed as an add-on to real property taxes. There are two critical studies on idle land taxation in the country that this current study builds on.

The first is an unpublished manuscript released by the National Tax Research Center6 in 1977, three years after the landmark legislation on idle land taxes was promulgated.7 The manuscript served as an input to the presidential decree issued in 1978, which gave the directive to implement the idle land tax in the Philippines. It reviews the initial idle land tax law focusing on refining the provisions on definition, coverage and tax rate in order to make the law’s implementation more practical.

5 CARP is set to expire by June 2008; however, there are indications that the program will be extended for another five years.

6 Formerly called the National Tax Commission.7 Dr. Milwida Guevarra, then an NTRC associate, was involved in the conduct of this study.

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A more recent study conducted by Alabado (2005) assessed the implications of idle land taxes in managing lands within the central business districts in the country, using Davao City as a case in point. The study pointed out that idle land taxes are not just a source of additional revenues for local governments, but more critically an instrument by which they can control and maximize the utilization of finite but available land resources in their localities.

Many relevant and highly interconnected issues were uncovered in the conduct of the study requiring additional investigation and their own set of policy alternatives. This research, however, limits itself to crafting alternatives directed at improving idle land tax structure and administration; coordination and cooperation mechanisms that inform and augment the cost of idle land tax implementation; and influencing the adoption of an idle land tax by local governments. Nevertheless, since administration issues related to taxes on idle land are in fact the very issues faced by real property taxes in the country, many of the policy recommendations contained in this report can in fact be adopted, to the benefit of land related taxes in general and even to the system of land administration and management in the country.

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CONCEPTUAL AND DEVELOPMENT FRAMEWORK

The Nature of Land as an Asset

The significance of land as an asset goes beyond its stock value as a commodity but more critically for its use. Land is a major investment input to agricultural production activities, such that its ownership and use has economic, social and political ramifications. Benefits from owning and utilizing land consequently do not simply redound to the landowners and those who work these lands in terms of generating private income or wealth. It has far reaching effects in term of making goods and services available to the market, in terms of generating backward and forward linkages within and outside the agriculture sector, in terms of generating employment and spurring growth particularly in the rural areas. In the case of agricultural lands, for example, optimal land use makes available affordable food produce that can meet the ever increasing consumer demand, thereby contributing to public welfare in general. For highly rural and poverty stricken developing countries like the Philippines, the distribution of ownership, availability and accessibility of land and its optimal use also have high equity implications.

Optimal use of land, especially agricultural lands, however does not come as automatically. Many factors determine the decision of an individual, household or enterprise to own, invest in, develop, cultivate or even sustainably manage their properties. Often these private decisions only consider potential private returns, rarely taking into account the positive externalities and the social benefits that can be gained, from optimally owning and utilizing lands.

Land Tax as it Impacts on Land UseIn one of the more comprehensive discussions on land issues and policies and its impact on growth, development and poverty reduction, Deininger (2003) emphasized the importance of land as a key asset for the rural and urban poor and as a foundation for economic activity and the functioning of non-market institutions in many developing countries. The study identified land taxes as among the fiscal instruments available to local governments to earn revenues that can finance the services they provide.8 At the same time, taxes on land given the design by which they are imposed across various types of properties, their administration and the

8 Most taxes related to land, as in the case of the Philippines, are imposed by local governments.

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distribution of proceeds also influence individual and/or household decisions and behavior towards socially desirable land use.

Taxing idle agricultural lands more heavily than productive agricultural lands creates a signal that society puts a premium on owners of agricultural properties who cultivate their land for agricultural produce, either for their own consumption or for marketable surplus since these actions create positive externalities for the economy, thereby contributing to public welfare. On the other hand, an idle land tax serves as a penalty for landowners who, by keeping actually productive lands idle, are not maximizing economic opportunities, either privately and publicly, that could have otherwise been gained if land use was maximized. The potential of land taxes to encourage more effective use of land or reducing the tendency to hold lands idle was discussed by Hayami, Quisumbing and Adriano (1990), who argued that taxes on land discourage land speculation and can induce landowners to sell out or use their land more intensively.9 In this sense a tax on idle lands is conceptually very similar to a land speculation tax. For the Philippines, the option to “sell out” can be interpreted not just as putting up lands for sale but its meaning can be extended as offering properties for land reform coverage.

In the case of the Philippines, Llanto (2003) argued that the cost of holding idle, unimproved land in the country is minimal, creating an opportunity for land speculation and concentration of land ownership. The efficient allocation of lands to their best use has been constrained by relatively low tax burdens, encouraging land speculation and undermining the generation of significant revenues from land ownership. An appropriate land tax system is needed for efficient land markets. Although the property tax system in the country is well designed, land taxation has not been used effectively to generate fiscal revenues or to encourage active land markets.

Land Tax as it Impacts on Local AutonomySince local taxes are often administered by local governments, they can have a potentially positive impact on local revenues and local governance as they enhance local fiscal discipline, accountability and autonomy. The very nature of property taxes allows them to be developed with very minimal distortions and with a positive impact on the accountability of local governments and their autonomy.10 These features include: (i) the process by which property taxes are directly identified and paid by landowners; (ii) the relatively unchanging tax base (tax covered area of land) in the course of time, with the only way to increase revenue being to increase the tax rate;11 (iii) the basis of the tax being asset values as opposed to market transactions/exchange; and (iv) the almost exclusive role of local governments in collecting it. 9 As cited in Deininger 2003.10 Bird and Slack (2002).11 This assumes that the level of effectiveness in administration remains constant.

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According to Foldvary (2006), in assessing the potential of land value taxation in the United States, they create a decentralizing force, shifting or “devolving” power down to local government in accord with the principle of subsidiarity: that which can be most efficiently done by individuals or smaller jurisdictions should not be done by larger or higher-level jurisdictions. As a consequence, functions of government come under more observation and control by the voters, who can monitor and alter local governments much more easily than remote federal agencies.

In the Philippines, the national government recognized that it would be more efficient if local communities were given the power and the responsibility to decide on goods and services that they need.12 To support this tenet, certain functions of the central government were devolved to local governments while their power to raise revenues essentially from real property taxes to finance these functions was ensured. These moves gave local governments greater autonomy in decision making.

Considerations in Reforming Land Tax Designand AdministrationWith regard to the extent by which idle land taxes can influence and impact on land ownership and use, local government revenues and local autonomy are equally dependent on its tax structure as well as its administration. There is a need to evaluate the existing tax structure, which includes factors such as coverage, valuation, assessment, and the differences in tax rates within and across the different types of properties. Paugam and Maurer (2001) argue that the degree of influence that a land tax will create on land use decisions will depend on the effective tax rate imposed on the property’s market value ascertaining whether they are significant enough to generate changes in allocation of land and capital. Bird and Slack (2002) posit that the very characteristics of real property taxes make it unpopular and vulnerable to taxpayer resistance, difficult and costly to implement, suggesting that the direction for taxing agricultural lands in developing countries is to come up with a simple, uniform local property tax on a classified area basis, but still allowing for heavier taxes on land than on the improvements on the land.

As experienced by some countries, mostly from Latin America, devoting income from taxing lands to land reform has had limited success due to difficulties in valuation, enforcement, and litigation surrounding the issue.13 Furthermore, the “almost universal failure of taxes on rural lands” as experienced by other countries is attributed mainly to problems related to its administration, particularly the continued political clout enjoyed by landlords and their dominance in local politics in the rural areas.14

12 Guevarra (2003).13 Bird 1974 and Strasma et.al. 1987, as cited in Deininger 2003.14 Deininger (2003).

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Skinner (1991), based on comparative theoretical modeling results, also argued that since land values were difficult to observe in rural areas, and ensuring compliance from land taxpayers is costly, the use of nationally administered agricultural land taxation has diminished over the years, despite it being an optimal tax in theory. There is renewed interest, however, in reviewing the effectiveness and wisdom behind collecting local taxes on the unimproved value of land. Foldvary (2006) argues that a land value tax, imposed for some percentage of the land value or rent, is far better tax than taxes imposed on income and production, following arguments forwarded by Henry George (1879 and 1890). When designed and implemented properly, taxes on land values or rent can induce an efficient use of land, as it gives land a “carrying cost,” inducing title holders to put their land to its most productive current use, rather than hold it awaiting higher prices. With the price of land thus kept low, banks would lend for productive investments rather than to buy land, arguing further that resistance to full adoption of land value taxes is purely political.

Because rural land taxes will have an influence on rural land use decisions, altering the status of idle lands and affecting the financial viability of small agricultural enterprises, some care in defining its structure should also assess its potential impact on biodiversity conservation, as discussed by Botha (2000) upon review of the adoption of new local rural land taxes of municipalities in South Africa. The article argues that while idle and unproductive agricultural lands are often considered as wasted economic opportunities, they can alternatively be viewed as a crucial ecosystem element that produces water, prevents soil erosion, acts as a wildlife corridor and as a pollinator refuge. By inducing the more intensive use of idle agricultural lands, rural land taxes can potentially create a perverse incentive that can compromise conservation of biodiversity. As remedies, environmental principles and safeguards should be taken into account in the design of rural land tax; at the same time, exemptions on properties with significant conservation value can be explored; and lastly, earmarking of rural land tax proceeds for conservation functions and rural service provision of local governments should be considered. Beck (1999) discusses as well the impact of land taxes on the environment, as he points out that tax on site-holding or on land values also serves as an ecological tax since it discourages idle speculation, underuse, waste and sprawling development of sites.

Administrative considerations and parameters for reviewing and reforming policy on taxing land were also raised in several studies. The role of the national government in ensuring that local lands taxes are utilized to their full potential has been pointed out by Paugam and Maurer (2001), who argue the need for national governments to create the proper legal and regulatory environment, implementing and enforcing mechanisms that would include technical and staffing support for the property valuation process.

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Again, Deininger (2003) cites the need for a careful and nuanced policy approach in defining land policies that are efficiency and equity inducing. As suggested by the study, policy reforms aimed at effective implementation of taxes on rural land, considering the high visibility of land taxes, which make the instrument politically difficult to implement and where they exist difficult to reform, compounded by the many technical and administrative requirements of such an instrument, require carefully crafting alternative proposals and mechanisms aimed at removing distortions in the tax structure, identifying cooperative roles between national and local governments, and paying attention to how the land tax is administered. Furthermore, the study suggested piloting interventions to assess viability and potential impact, capability building for those involved in the administration of the tax, and securing support from a broad constituency for land tax reform proposals.

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RESEARCH METHODOLOGY

Review and Content Analysis of Related Laws and Literature

This study reviews literature on related thematic areas: agriculture and agrarian reform, rural development, real property taxes, especially administration and idle land tax, and local government finance and autonomy. The literature include academic and empirical studies—local and abroad–discussing various aspects of these themes, including issues and concerns. The study analyzes significant aspects of the literature, particularly propositions and recommendations, and the issues that are surfaced.

Content analysis of national laws, rules and regulations, and local revenue codes and ordinances was likewise conducted, and similarities and contrasts of the salient features of these policies were studied. Other country experiences on land taxation were also examined.

National Level Secondary Data Gathering and Analysis of Statistics Visits to the following government agencies were conducted to gather the data on land use, farm area, idle lands, agricultural performance, land administration and laws, and local government finance, particularly revenues and expenditures: Department of Agrarian Reform; Department of Agriculture; Department of Environment and Natural Resources—Budget Division and Land Administration and Management Project; National Statistics Office; Department of Finance—Bureau of Local Government Finance and National Tax Research Center; and Commission on Audit. Data from these agencies were collated and analyzed in terms of trends and implications on the study questions.

Case StudiesAs part of the research on idle land tax, five case studies were conducted. These areas were selected based on the following characteristics: (i) “rur-ban” composition – urbanizing areas still largely rural in character; (ii) incomes largely dependent on agriculture; (iii) geographic spread across the main island groups in the country; (iv)

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existence of idle land tax ordinances (or similar mechanisms); (v) presence of open-minded and reform-oriented local government executives; and (vi) presence of local ARRD advocacy groups. For Luzon, the study sites are Alaminos City, Pangasinan and Daet, Camarines Norte; for Visayas, Sipalay City, Negros Occidental; and for Mindanao, Davao City and Surigao City.

The following variables were examined:

• Area characteristics (geographic and demographic); • Agricultural and rural situation, in terms of: poverty incidence; productive use

of land; urgent agrarian reform and rural development needs; status of CARP implementation, including funds available for land transfer, and budgetary requirement for the completion; and political economy;

• Local government finance and real property taxation-their legal bases and instruments, performance, and priorities in terms of allotment;

• Idle land tax—whether idle lands are identified and the concept understood and operationalized; whether idle land taxation is acceptable and feasible, and if not, what the possible impediments and incentives are; its anticipated impacts; and possibility of earmarking for agrarian reform and rural development; and

• LGU capacity for fully implementing the tax on idle agricultural lands.

In conducting the case studies, field level secondary data gathering and analysis focusing on local government profiles, development plans and performance reports was undertaken. Also, key informant interviews (KIIs) and focused group discussions (FGDs) with local chief executives, Municipal Planning and Development officers, treasurers, assessors, and officers of local line agencies, as well as stakeholders from non-government organizations (NGOs), People’s Organizations, and the business sector were conducted. Twenty KIIs were conducted in Davao City, 15 in Surigao City, 13 in Alaminos City, 9 in Daet and 8 in Sipalay City. Two FGDs were conducted in Surigao City and Daet.

Study Sessions with ExpertsTo deepen the Team’s understanding of the study and enrich the findings, six discussion sessions with experts on selected fields were organized:

Session 1: The Current Agrarian Reform Situation. Speaker: Ed Pancho, Agrarian Reform Advocate, Associate of the PEACE Foundation

Session 2: CARP Implications and Scenarios beyond June 2008. Speaker: Victor Gerardo “Gerry” Bulatao, former Department of Agrarian Reform Undersecretary, former Executive Director of the Kaisahan Tungo sa Kaunlaran sa Kanayunan at Repormang Pansakahan, presently the

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Managing Director of the Empowering Civic Participation in Governance (ECPG) and the lead convenor of LGCNet.

Session 3: Real Property Tax, Performance and Issues. Speaker: Emmanuel Flores, Assessor, Provincial Government of Rizal

Session 4: Real Property Taxation and Potential Contributions of the Idle Land Tax. Speaker: Edita A. Tan, Ph.D., Faculty Member, University of the Philippines-School of Economics

Session 5: Idle Land Tax and Possible Alternatives. Speaker: Dr. Milwida Guevarra, Former Undersecretary, Department of Finance, Republic of the Philippines, and President and Chief Executive Officer, Synergeia Foundation

Session 6: Rice Forum with Former DA Secretary Mr. William Dar and Former Executive Director of PhilRice Mr. Santie Obien.

Collective Critiquing and Alternative Policy DevelopmentThe paper was presented to a review panel, composed of experts from various fields, including La Liga officers, partners, advisers, and fellows and representatives from the Development Academy of the Philippines. The venue was utilized to craft alternative policy/ies in relation to the study.

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THE CREEPING IDLE LAND PHENOMENA IN THE PHILIPPINES

Often faulted but never quite pinned down, idle agricultural lands in the Philippines is a silently creeping phenomenon hounding the country’s rural sector. Although not a recent occurrence, the cumulative impact of otherwise productive agricultural lands left uncultivated either purposely or inadvertently is increasingly felt as the country now faces limited supply and spiraling prices of basic food commodities. Of the 30 million hectare Philippine land area, an estimated 41.3 percent15 or 12.4 million hectares are devoted to agricultural use. Estimates of idle agricultural land range from a measly one percent to a high of 94 percent of the total agricultural lands in the country. This does not cover scattered data on idle lands within the country’s forest areas or those within non-agricultural lands.

As early as 1976, more than three decades ago, the growing area of lands that were idle was recognized upon the issuance of Presidential Decree 1446: Providing for the Imposition of an Additional Tax on Idle Lands, and Amending for the Purpose the Pertinent Provisions of PD 464, Otherwise Known as the Real Property Tax Code. In its statement of principles, the decree acknowledged the existence of and the continued accumulation (at that time) of vast tracts of privately owned idle and undeveloped agricultural and urban lands that were not being cultivated or utilized and were held largely for speculation purposes. Idle lands, according to PD 1446, are detrimental to rural development and urban growth. Idle land taxation was integrated into the country’s Real Property Tax Code precisely to effect desirable land utilization (NTRC 1977).

What are Idle Agricultural Lands?

International Definition

The Organization for Economic Cooperation and Development broadly defines idle lands as those that were previously cultivated but are now in a state of disuse, abandoned or fallowed.16 This internationally accepted definition distinguishes two important features of idle lands: One, that these lands were previously productive; and two, that for one reason or another, whether intentional or unintentional, use of these lands was discontinued. An example of intentionally leaving lands idle would

15 Crops Statistics of the Philippine, Bureau of Agricultural Statistics, (2001-2006).16 Glossary of Statistical Terms – OECD; http://stats.oecd.org/glossary/detail.asp?ID=1276;

Downloaded May 5, 2008.

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be fallow lands, which refer to farmlands that were intentionally not cultivated, plowed or tilled but left unseeded and kept free from crops for at least one harvest cycle, so as to recover and preserve the natural fertility of the soil.17

Based on the Local Government Code (LGC) of 1991

As defined in the Local Government Code of 1991, idle agricultural lands are those suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which remain uncultivated or unimproved. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare and lands actually used for grazing purposes are not considered idle lands. Lands other than agricultural located in a city or a municipality, one half of which remain unutilized or unimproved, are considered idle urban lands. Adopted by the LGC from two Presidential Decrees promulgated by the Marcos regime, this definition is utilized for the purpose of providing local government units a basis to impose a special levy on idle lands and it primarily takes into consideration the current use of a property without consideration on the potential income or optimal use of the property.

For the purpose of this study, taking into account the various statutes and administrative orders related to idle lands and at the same integrating elements from the NTRC (1977) study on the taxation of idle lands, the definition of idle agricultural lands is expanded in this study to refer to properties/lands classified and/or zoned as agricultural lands which are (i) uncultivated; (ii) or in cases where cultivated, cultivation is limited to less than 75 percent of its area/scope—underutilized; and/or, (iii) utilized for purposes outside agricultural use.

The economic and non-economic costs related to the non-cultivation and non-utilization of otherwise productive agricultural lands represents a devastating loss of opportunity in terms of agricultural production, income, rural growth and development, which a developing country such as the Philippines simply can not afford to keep unabated. Keeping agricultural lands idle puts to waste a scarce and valuable economic resource necessary for the production of agricultural produce, including staples such as rice and corn and other basic food items.

As one of the policy instruments available to government that can potentially curb the rise of idle agricultural lands, the idle land tax as it is designed and implemented in the Philippines is presented and analyzed in this study. As a first step, there is a need to establish the extent of idle agricultural lands in the country. As we will see in the discussion that follows, this remains problematic.

17 From usinfo.state.gov/products/pubs/geography/glossary.htm and www.lethamshank.co.uk/glossary/glossary.php. Downloaded May 5, 2008.

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IDENTIFYING IDLE AGRICULTURAL LANDSDetermining the Extent of

Idle Agricultural Lands in the Philippines

Estimates from the National Statistics Office (NSO)

The most basic estimate of the extent/scope of idle lands in the Philippines comes from the National Statistics Office. Every 10 years, the NSO conducts a census of Philippine agriculture, surveying agricultural farm operators nationwide. The census provides a relatively in-depth look at the status of the country’s agriculture sector. Within the survey, farms lying idle are identified. Idle farms are defined as (i) lands temporarily fallowed – farms purposely allowed to stay idle for a period of at least one year to at most five years in order to recover their fertility, after which period they are again planted to temporary crops; and as (ii) lands under temporary meadows/pasture – lands purposely used for temporary grazing of animals for a period of five years or less.18 Given this definition, the survey is only able to monitor farms that are purposely left idle. Results of the survey show that its scope by 2002 seems negligible.

The latest census, conducted in 2002, shows that of the total farm area in the country, estimated at 9.7 million hectares, 1.2 percent or a total of 119,641 hectares of farms are idle. Table I further shows that in the past five decades, the area of idle agricultural lands is steadily and markedly declining. In 1960, when the survey was first conducted, for example, 14.4 percent of farm areas in the Philippines representing 1.1 million hectares were lying idle. This declined to 8.9 percent in 1971 and 8.6 percent in 1980. By 1991, area farmlands that were idle dramatically dropped to 1.5 percent of the total farm area in the country.

18 Page xviii, 2002 Census of Agriculture Philippines, Volume 1, NSO.

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Farm Area by Hectare, by Land Use (1961 to 2002)Area of Farmsby Land Use(in hectares)

1960 1971 1980 1991 2002

All Classes a/ 7,772,465 8,493,735 9,725,155 9,974,871 9,670,793

Arable Lands

Lands Planted to Temporary Crops

3,784,619 3,891,982 4,365,200 5,332,770 4,815,938

Lands Lying Idle b/ 1,115,953 752,272 838,600 154,187 119,641

Idle lands in % of total arable lands 14.4% 8.9% 8.6% 1.5% 1.2%

Lands Planted to Permanent Crops

1,798,606 2,532,166 3,489,000 4,172,540 4,225,393

Lands Under Permanent Meadows/Pastures

380,024 690,988 530,000 130,943 129,278

Lands Covered With Forest Growth

581,712 433,707 336,500 70,144 73,865

All Other Lands c/ 114,571 192,621 165,900 114,288 268,542

a/ A farm was counted once under “ALL CLASSES” but was counted under each reported land use.b/ Included lands temporarily fallowed and lands under temporary meadows/pasture.c/ Included homelot, etc.Source: National Statistics Office, 2002 Census of Agriculture: Philippines (November 2004).

There are counter indications, however, regarding the officially reported extent of idle lands in the country, as presented in the Philippine Agriculture Census. The NSO survey is only able to account for 9.7 million of farm lands in the country, when total agricultural lands are estimated at 12.4 million hectares. There is a disparity of around 3 million hectares representing some 22 percent of the total agricultural lands in the country. The status of these agricultural lands, particularly in terms of land use whether they are utilized or not, is unclear.19

Varying reports also suggest that the extent of idle lands is actually bigger. One concrete example is the size of idle lands available for cultivation, as identified in the recently suspended RP-CHINA trade agreement. In a dialogue with farmers, DAR and DA officials claimed that there are 1.2 million hectares that can easily be carved out of idle private and public lands that can be devoted to joint venture agreements in agriculture investments with Chinese investors.20

19 According to Analisa Piad, Statistician II at the Census Planning and Operations Division of the Household Statistics Department, the data from NSO (9.671 million hectares) was published in 2002 while BAS (12.4 million hectares) data was published in 2006, and time can be a factor in the discrepancy between the two data. She also noted that DA uses the data coming from the Census of Agriculture of NSO.

20 Ofreneo, Rene. Questioning China Deals Amid Deepening Land and Food Insecurities. Shades of Amos, page 70. PARRDS. June 2007.

TABL

E I

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Estimate from the Philippine Agribusiness Lands Investments Center – Department of AgricultureIn 2006, the Philippine Agribusiness Lands Investments Center (PhilAgriBizLands Center), an office under the management of the Philippine Agricultural Development and Commercial Corporation (PADCC),21 released startling information regarding the status of idle and underutilized agricultural lands in the country. The PADCC is the agribusiness development arm of the DA.

Adopting a definition based on potential rather than on current use, the DA defined idle agricultural lands as unutilized and underutilized lands with potential for agricultural and fishery production. These include public lands, government owned properties, military reservations, alienable and disposable lands, private individual and corporate lands and areas covered by the Comprehensive Agrarian Reform Program (CARP). This definition is more comprehensive than the one used in the LGC and also compared to the NSO definition, since it looks beyond farmlands and takes into account lands that are cultivated below their optimal agricultural use.

Following this definition, the PhilAgriBizLands Center in cooperation with the National Mapping and Resource Information Authority (NAMRIA), the Bureau of Soils and Water Management and the DA – Field Operation Services and Regional Field Units, identified idle lands that can be potential areas for agribusiness development. As a starting point, the team utilized the idle lands and farmlands identified in the NSO survey. From there, the PhilAgriBizLands Center survey used the 2003 land classification data of the DA and DENR and matched/overlaid these with the GIS survey conducted by NAMRIA in 2006. The results identified idle (both unutilized and underutilized) lands in the country.22 The results are summarized in Tables II and III.

The survey covers 9.3 million hectares of the country’s agricultural land. Results show that idle lands total as much as 8.8 million hectares or a staggering 94.4 percent of the country’s total agricultural lands. Idle lands suitable for farming vegetables/cutflowers and mangoes were among the biggest, totaling 1.8 million hectares and 1.9 million hectares, respectively.

21 PADCC is the corporate arm of the Department of Agriculture.22 Validation of survey results is still on-going. From a mediated interview with Engr. Pantua conducted in

May 15, 2008.

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Agricultural Lands Available for Agribusiness, by Commodity

COMMODITIES

AVAILABLE LANDS FOR AGRIBUSINESS (in Ha)

EXISTING AREA

- land with planted crops

IDLE LANDS Idle lands in % of existing area

Idle lands by crop in % of

total idle

PHILIPPINES 9,337,598 8,811,240 94.4 100.0

Rice 3,143,377 501,132 15.9 5.69

Corn 1,317,402 223,277 16.9 2.53

Vegetable/ Cutflowers 66,977 1,777,415 2,653.8 20.17

Coconut 3,487,297 756,945 21.7 8.59

Sugarcane 784,545 771,890 98.4 8.76

Cassava 59,933 701,543 1,170.5 7.96

Pineapple 60,205 869,009 1,443.4 9.86

Mango 37,165 1,900,311 5,113.2 21.57

Banana 234,758 - - -

Rubber 50,010 538,183 1,076.2 6.11

Coffee 95,929 771,534 804.3 8.76

Source: Basic data from the Department of Agriculture – Agribusiness. 2006.23

With respect to staple commodities, rice production areas account for 33.7 percent of total estimated agricultural lands. There are 501,132 hectares of idle lands suitable for rice production, representing 15.9 percent of areas planted with rice. As for corn, existing production areas are estimated at 1.3 million hectares, 223,277 hectares or 16.9 percent of which were categorized as idle. Coconut production areas account for 37.3 percent of agricultural lands surveyed, with 756,945 hectares or 21.7 percent of these lands considered idle.

It is interesting to note that rice, corn and coconut production areas together account for 85.1 percent of the total agricultural production areas in the country. Furthermore, these three major crops idle lands cumulatively total 54.5 percent.

23 Downloaded from http://www.da.gov.ph/wps/portal/da/agribusiness.

TABL

E II

36

Land Suitability by Region

Region

Existing Area Planted to Proposed

Commodity* (Ha)

Suitable Expansion

Areas To Proposed Commodity (Ha)

Idle Lands Idle Lands

(in % of total idle)

Land Planted to Other Crops

Cordillera Autonomous Region 193,787 835,358 9.5 693

I – Ilocos Region 397,257 568,630 6.5 6,024

II – Cagayan Valley 593,507 642,510 7.3 31,395

III – Central Luzon 624,264 528,009 6.0 12,466

IV A – CALABARZON 657,997 403,109 4.6 47,555

IV B – MIMAROPA 471,966 726,613 8.2 91,853

V – Bicol Region 805,148 480,312 5.5 71,961

VI – Western Visayas 937,573 641,153 7.3 12,656

VII – Cantral Visayas 666,556 617,378 7.0 13,322

VIII – Eastern Visayas 908,348 511,664 5.8 53,731

IX – Zamboanga Peninsula 487,171 557,450 6.3 4,493

X – Northern Mindanao 557,639 380,366 4.3 15,223

XI – Davao Region 638,028 685,430 7.8 49,961

XII – SOCCSKSARGEN 633,461 711,514 8.1 206,729

CARAGA 340,900 316,493 3.6 15,035

ARMM 423,996 205,251 2.3 65,662

PHILIPPINES 9,337,598 8,811,240 100.0 698,759

*Rice, corn, sugarcane, pineapple, cassava, coconut, mango, rubber, vegetables/cutflowers, coffee, and banana Source: Basic data from the Department of Agriculture – Agribusiness. 2006.

The Cordillera Autonomous Region (CAR) registered the biggest area of idle lands at 835,358 hectares, accounting for 9.5 percent of total idle lands. Meanwhile, idle lands in Regions IV-B MIMAROPA and XII – SOCCSKSARGEN each account for a little over eight percent of the total idle lands. The Autonomous Region of Muslim Mindanao (ARMM) has the smallest size of idle lands, with only 205,251 hectares or 2.3 percent of the total.

TABL

E III

37

From the Department of Environment and Natural Resources (DENR)

A definition covering public lands adopted by the DENR describes idle lands as areas of cleared land which are in transition from one land use activity to another; or areas characterized by the lack of any signature or identifiable land use.24 According to the Philippine Forest Corporation (PFC), a government owned and controlled corporation attached to the DENR, there are about two million idle lands within untenured areas in the country. Tasked to “derive economic productive activity out of idle lands,” the PFC was given direct jurisdiction over developing 375,091 hectares of idle public lands.

Estimates from the Case Studies As an exercise, the research team sought to estimate the scope of idle lands in each of the case study sites. The results were rather uneven given the problems related to the definition of and identification of idle lands. All the local governments that have promulgated an idle land tax adopted the definition of idle lands as it is laid out in the LGC, although most of them find the definition open to different interpretations, vague, and very difficult to operationalize. Also, there is a relatively low awareness among those apart from the local assessors in terms of definition and scope of the idle land tax.

Unfortunately, it is not within the corporate powers of the local government units to pass an ordinance further defining the term “idle lands.” Sections 236 and 237 of the Local Government Code (LGC) empower the local government units (LGUs) to levy an annual tax on idle lands, but do not delegate the power to the LGUs to interpret or define idle lands beyond what is provided by law. Having enumerated and described what make up “idle lands,” a local ordinance may not add or subtract from this

24 DENR Administrative Order No. 29-91; Guidelines in the Inventory and Sketching of Foreshore Areas.

TABL

E IV

Idle Lands per Region, covered by PFCRegion Area (in hectares)

CAR No data available

I – Ilocos Region 3,210.3

II – Cagayan Valley 42,277.0

III – Central Luzon 7,539.7

IV A – CALABARZON 268.0

IV B – MIMAROPA 2,303.7

V – Bicol Region 1,812.0

VI – Western Visayas 50.0

VII – Cantral Visayas 9,219.6

VIII – Eastern Visayas 1,921.8

IX – Zamboanga Peninsula No data available

X – Northern Mindanao 2,476.6

XI – Davao Region 62, 294.0

XII – SOCCSKSARGEN 74,515.4

Caraga Region 167,203.0

Total 375,091.0

Source: www. forestry.denr.gov.ph/dmc2007-05

38

definition, even for the purpose of improving or clarifying the provision. The power given to LGUs to levy other taxes, fees or charges is limited to those subjects that are not specifically enumerated in the LGC or taxed under the provisions of the National Internal Revenue Code or other applicable laws (Section 186, LGC). 25

As illustrated in Sipalay City, the City Assessor found the exclusion of properties with 50 trees to a hectare from the idle land tax to be vague. To illustrate his point, he posed the following question: “What if when his staff goes to the site of the property, there are less than 50 trees, but when they return there are already 52? Could we still impose an idle land tax?” In Davao City, the concept of idle lands seems to be alien to most of the MAROs interviewed. According to them, idle lands, or what the MAROs define as not being tilled, are mostly found in forest, timberlands or areas with high elevation (a more than 20 percent slope). There is a general perception that there are no idle lands in Davao City. Lands have either been occupied for residential, commercial uses, or for plantation expansion in agricultural areas.

Even if the LGC specifically directs local assessors to include in the assessment roll or master list of taxable properties those that are considered idle lands, none of the case study sites—despite the existence of idle land tax ordinances or even the Province of Rizal (also interviewed by the research team)—have compiled this information.

Data summarized in Table V represent the best guess-estimate of the scope idle lands available in the various case studies. Some caution must be taken in looking at this table since the data is highly uneven. It is based on the varying working definitions of idle lands as understood by the different local government representatives interviewed.

In Alaminos City, the estimate of size of idle agricultural lands, although only covering a portion of the city, is actually based on the DA survey (discussed in an earlier part of the study), since the city is among the areas targeted for joint ventures in agricultural investments in the RP-China trade agreement. In this particular case, underutilized lands were considered as idle. Data for Sipalay City, as presented by the MARO, show that 81.3 percent of the total land area of the city can be categorized as idle.

25 Notes from consultation with Atty. Grace Que and Atty. Fides Tan.

39

Estimated Size of Idle Lands in the Case Study Areas

Case Study SiteTotal Land

Area(in Has.)

Total Agricultural Land Area(in Has.)

Estimated Size of Idle Agri-Lands(in Has.)

Estimated Size of Idle

Lands(in % of total agri-land area)

Alaminos City, Pangasinan, Luzon 16,623.36 10,163.27 784.73 7.72

Daet, Camarines Sur, Luzon 5,105.35 3,393.59 47.43 1.40

Sipalay City, Negros Oriental, Visayas

317.65 157.37 258.40(total idle

lands)

81.3 (of total land

area)

Davao City, Mindanao 244,000.00 187,465.00 73,200 30.00

Surigao City, Surigao del Norte, Mindanao 24,534.00 4,013.02 - -

Sources:1. Office of the City Planning and Development, Alaminos City2. Based on a GIS-derived total land area- Daet3. Sipalay’s draft Comprehensive Land Use Plan4. Estimates from the City Agriculturist’s Office (CAO) in Davao City5. City Agriculture Office, Surigao City

POLICY DIRECTION: Re-definition of Idle Lands and Establishing Cooperative Mechanisms for Its Identification

Toward a More Operational Definition

The varying working definitions of idle lands and consequently the huge differences in estimated scope only highlight the emerging problem related to non-cultivation and under-utilization of otherwise productive agricultural lands in the country. They also point to a very basic problem encountered by idle land taxes as it is implemented in the Philippines. Official definitions and statistics themselves are not consistent. The tax base can be as measly as one percent, making it irrelevant to actively pursue the implementation of the idle land tax, versus a potential tax base of 94 percent of total agricultural lands.

The definition adopted by the LGC, since it is based on current use, does not capture the broader scope of underutilized lands. At the same time, the definition is quite liberal, effectively diminishing the applicable tax base. All properties devoted for grazing purposes are not considered idle regardless of the number of animal heads within the property. Properties with 50 trees to a hectare—which translates to one tree per 200 square meters—are also not considered idle. This definition would have to be reviewed and a stricter definition would have to be adopted in order to

TABL

E V

40

have a significant enough tax base, and more importantly so as to seriously promote more intensive land use.

To improve the current definition of idle agricultural lands, the NTRC (1977) suggested considering that lands suitable for plant cultivation but not being used for such purpose will have to be declared as idle, arguing further that agricultural lands that have not been cultivated or used according to their land use classification will have to be subject to the idle land tax. This definition relates the actual use of the land to its land-use classification.

In the context of the Philippines, while the role of land taxes in local resource generation has been widely accepted, its role, however, in spurring productivity, better use and management of agricultural properties and rural development in general has not been well established. Land taxation in the Philippines, in practice, has rarely been integrated as a policy instrument in rural development; or conversely, agrarian reform, the agriculture sector and rural development programs rarely take land taxation into account.

The lack of one harmonized definition including full sharing of available information leads to serious difficulties in identifying which agricultural properties are actually idle. One property can be categorized as idle or not idle, depending on who is evaluating it. This creates confusion in terms of which properties can be covered or not covered by the idle land tax. Improving the current legally accepted definition is an important policy reform. The LGC being the law that deals with taxation of idle lands in a more detailed way than other laws, it is this definition of idle lands that would hold sway when it comes to levying taxes on the same.26 In terms of easing the confusion, harmonizing the definitions of what is and what constitutes an idle land, and consequently which properties are actually idle, will require coordination among local governments and national line agencies.

For an Improved System of Idle Land Identification

As mentioned above, current institutional arrangements do not support harmonization of efforts and information sharing. This needs to be addressed. Since taxes on land are within the mandate of the local governments, their implementation is very much a local affair. Monitoring of revenues and expenditures of local governments is part of the function of the Department of Finance (DoF). The DoF, however, has very few regulatory functions over local taxes. On the other hand, the Department of Environment and Natural Resources takes the lead in land administration, land use planning as well as developing idle public lands. While land reform, developing idle private agricultural lands and rural development in general fall within the mandate of the Department of Agrarian Reform and the Department of Agriculture, respectively.

26 Notes from consultations with Atty. Grace Que and Atty. Fides Tan.

41

Often, although local governments and each of these executive agencies deal with land related concerns whether in terms of registering land, mapping it, taxing land or developing it, very minimal coordination, and less so cooperation, actually happens. For example, the agriculture census conducted by the NSO has a confidentiality clause that stipulates that data contained therein cannot be used for purposes of taxation, investigation, or for law enforcement.27 Cost related to identifying idle agricultural lands that can be subject to taxes will be significantly reduced if coordination and information sharing are institutionalized. Each of the executive agencies identified have various mandates, expertise, data and information base, personnel and resources. Taken together, these agencies have both institutional and human resources that they can contribute and share in assisting local governments, particularly their local taxing offices, in terms of undertaking the basic requirement of idle land identification.

27 Page xii; 2002 Census of Agriculture Philippines, Volume 1, NSO.

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LEGAL ENVIRONMENT:Idle Land Tax in the Philippines

Laws on Taxing Idle Lands Through the Years

Presidential Decree 464

Presidential Decree 464: Enacting a Real Property Tax Code (PD 464), promulgated in 1974, became the overarching law that was the basis for taxes on real property in the Philippines as it is currently implemented. Within this decree are the beginnings of the country’s policy for taxing idle lands.

Under Chapter Five of PD 464, the authority of government to impose special levies on real property is defined, and includes the power to impose an ad valorem tax28 on idle lands. The levy on idle lands is a tax over and above the basic or regular real property tax collected by local governments.

The formulation of the PD regarding implementation of taxes on idle lands, however, was tentative. Section 42 states, “…The President of the Philippines, at his discretion or upon recommendation of the Secretary of Finance, may authorize provinces, cities and municipalities to levy, assess and collect an additional real property tax on idle private lands.” Implementation of a real property tax on idle land, at this point, relied on an issuance or a directive from the President.

Nevertheless, key features and parameters of a real property tax (RPT) on idle land were defined within sections 41 to 46 of PD 464, making this particular PD the reference point for all subsequent laws related to idle land tax in the country.

All lands, whether for agricultural or non-agricultural use, were subject to the RPT on idle land tax with an applicable tax rate not exceeding two percent per annum. The tax rate shall be applied to the prevailing assessed value of the property. Agricultural lands of more than five hectares, three-fourths of which remain uncultivated or unimproved, shall be subject to the RPT on idle lands.29 However, agricultural lands planted to permanent or perennial crops with at least 100 trees to a hectare and lands used for grazing purposes shall not be considered idle lands.

28 Ad Valorem Tax is a levy on real property determined on the basis of a fixed proportion of the value of the property.

29 Urban lands, lands outside agricultural lands, of more than 5,000 square meters, two-thirds of which remain unutilized or unimproved, were also subject to the idle land tax.

43

In general, administration of the tax on idle land was appended with the implementation of the basic real property tax, following the steps as defined in RPT administration. This includes the process of tax declaration, determination of fair market values, assessment levels and collection. There are, however, several specific provisions that relate to the administration of RPT on idle lands.

As a special provision, the provincial or city assessors were instructed to keep an updated record of idle lands. A copy of the record he/she shall make available to the provincial, city or municipal treasurers so that the latter can notify the property owner that an additional tax will be imposed for their idle lands and for the purposes of collecting the idle land tax. The PD also went as far as identifying a date (the first day of January of every year) when the RPT on idle lands shall become due and payable in full.

Exemptions in paying the RPT on idle lands were also identified. These included adverse peace and order conditions; financial loss of the landowner due to fire, flood, typhoon, earthquake and other causes of similar nature; court litigations involving the land subject to tax; necessity to leave the land in a fallow state; and unfavorable physical factors, such as rocky nature of ground and uneven topography rendering the land unsuitable for cultivation.

These exemptions were defined based on very specific time bound conditions and subjected to appropriate certifications. For example, the certification of the Police Provincial Commander regarding adverse peace and order conditions where the property is located was a required attachment to petitions for exemption. Within one year upon restoration of the peace, the idle property shall have been made productive, otherwise it shall be subject to the idle land tax.

Filing of the exemption shall be initiated by the landowner, while its acceptance and approval shall be decided upon by the provincial or city assessor following a guideline to be developed by the Department of Finance.

Presidential Decree 1446 Four years after the promulgation of PD 464, a directive to implement a real property tax on idle lands from then President Marcos was issued through PD No. 1446: Providing for the Imposition of an Additional Tax on Idle Lands and Amending for the Purpose the Pertinent Provisions of PD 464, Otherwise Known as the Real Property Tax Code. Apart from serving as the directive for line agencies and local governments to impose a tax on idle lands, PD 1446 also introduced amendments to certain provisions contained in PD 464.

The applicable tax rate was raised, prescribing it now at a rate not to exceed five percent per annum from the benchmark being set previously at two percent. It revised the coverage for idle agricultural lands. It still covered agricultural lands

44

more than five hectares, but now those where only one-half30 remain uncultivated or improved.

The decree also specifically stipulated as part of the role and function of assessors the assessment and valuation of idle property. More critically, distribution of proceeds from the additional RPT on idle lands were defined in the decree as follows: for provinces – 50 percent goes to the municipalities and 50 percent goes to the province; for cities – 100 percent goes to the city; and for cities and municipalities in Metro Manila – 50 percent goes to the Metropolitan Commission and 50 percent goes to the city or municipality in which the property is located.

The Local Government Code of 1991It is still unclear whether the two Marcos presidential decrees relating to taxation of idle lands was ever implemented in full. Officials from the DoF are able to recall the decrees but not their implementation.31

When the Marcos dictatorship was ousted, many of the vestiges of his authoritative rule were dismantled. The 1986 Constitution and subsequently legislation on local autonomy recognized the need for a more decentralized form of government. Devolution, as ushered in by the Local Government Code (LGC) of 1991, transferred certain roles, functions and services together with fiscal or taxing powers to local governments. These include the power to impose special levies on real properties such as an additional tax on idle lands.

Provisions of the Code on revenue raising powers of local governments including real property taxation superseded PD 464. Although, many of PD 464’s sections and features were maintained – carried over in the LGC—there lies a critical difference between the pre- and post-Code era in terms of where the power to impose taxes on real property emanate. In PD 464, it is the Philippine President who holds this power, delegating the authority to implement and collect to the local government units. On the other hand, in the LGC, real property taxes fall under the taxing and revenue raising power of local government units. This perhaps is the most significant modification between the previous and the current legislation on idle land taxation.

Book II of the 1991 LGC entitled Local Taxation and Fiscal Matters prescribed the parameters of the power of local governments through their respective Sanggunian to raise revenues through levy taxes, fees and charges. Sections 236 to 239 detailed the Code’s provisions for an additional ad valorem tax on idle lands, largely adopting the wording of PD 464.

30 This was previously three-fourths.31 There is no record of any implementing rules and regulations on idle land taxes after the promulgation of PD

1446 in the Department of Finance.

45

Again, the formulation remained tentative and its implementation was optional: “A province or city, or a municipality in the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not exceeding five percent of the assessed value of the property which shall be in addition to the basic real property tax.” In this case, imposition of an idle land tax is dependent on the directive of the Sanggunian through the issuance of an ordinance.

Amendments introducing subtle changes on the coverage of RPT on idle lands were likewise adopted. Tax on idle agricultural lands shall now be imposed for agricultural lands, more than one hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which is to remain uncultivated or unimproved by the owner. Similar to PD 464, agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare and lands actually used for grazing purposes are not considered idle lands.

The minimum size of property to be covered was reduced from five hectares to one hectare. The reduction in size increased the potential number of properties that can be covered by the idle land tax. However, agricultural lands with permanent or perennial crops, the volume of which was reduced from 100 trees to 50, run counter to increasing the potential number of properties that can be covered. This inconsistency makes it difficult to ascertain whether the LGC attempted to be stricter or more relaxed in terms of coverage.

Exemptions identified in PD 1446 were maintained in the LGC. The role of the assessor in making, keeping and updating the listing of idle lands located in their area of jurisdiction and furnishing a copy thereof to the provincial and/or city treasurers for purposes of tax collection was also retained.

Other Policy Pronouncements on Idle Land TaxOver the years, after the adoption of the LGC there have been several policy pronouncements, spanning across administrations, related to the implementation of the idle land tax in the country.

During the Ramos administration (1992-1998), taxing idle lands was among the policy action agenda contained in Philippine Agenda 21. This document, crafted in response to the 1992 Earth Summit, contained key policy and program agreements on sustainable development between government and key sectors in society. As part of its action agenda to sustainably develop lowland agricultural ecosystems, a review and full implementation of idle land tax was proposed to facilitate the integration of idle lands to existing production areas.32

32 http://www.psdn.org.ph/agenda21/action_agri.htm. Downloaded May 5, 2008.

46

Under the Estrada Administration (1998 to 2000), tax on idle lands was embodied in several policy pronouncements. In the Medium Term Philippine Development Plan (MTPDP) for the period 1998 to 2004, particularly within Chapter VII (Macroeconomic Framework and Development Financing), the priority legislative agenda under fiscal sector reforms included a proposal to adopt a national level idle land tax (from being a local tax imposition) with a tax rate proposed at 10 percent of market or zonal value of the property (previously based on assessed value of property). A new definition of coverage was also being developed based on size and indicators of utilization.33 This was further affirmed in the second meeting of the Legislative-Executive Development Advisory Council.34 Part of the new revenue measure to be adopted within the Estrada administration was the imposition of an idle land tax where potential revenues were estimated at PhP 200 million.

Also under the Estrada Administration, in 1998 as part of the policy pronouncements of then newly appointed DAR Secretary Horacio R. Morales, who recognized that the implementation of CARP had been slowed down by land use disputes, there was as immediate enactment of an appropriate and effective land and water use policy which included employing a combination of incentives and disincentives, such as a Land and Water Use Conversion Tax as well as an Idle Land Tax.35

In Administrative Order No. 38 Series of 1999,36 the Department of Agriculture imposed an idle land tax amounting to PhP 3,000.00 per hectare per year to property owners of any irrigated agricultural lands of more than seven hectares within the protected areas for agricultural development who keep these lands idle or unproductive. Furthermore, should agricultural inactivity exceed two years, the idle agricultural land shall be subject to escheat proceedings.

Under the Arroyo Administration, as contained in the 2004 to 2010 MTPDP, the need to develop idle agricultural lands through an agribusiness program was recognized as a means to address poverty in the rural areas. As the incumbent government’s anchor program, developing new agribusiness lands entails expanding the effective production areas for agriculture and fisheries, which include cost-effectively cultivating idle and marginal lands such as planting fruit trees in denuded upland areas as well as idle off-shore and inland areas. Among the policy reforms it seeks

33 Medium Term Philippine Development Plan (1998 – 2004), downloaded from http://www.neda.gov.ph/Subweb/MTPDP_Angat_Pinoy_2004/AngatPinoy/ch7/chapter7-VII.htm.

34 Summary of Discussions and Agreements, Second Meeting of the Legislative-Executive Development Advisory Council, Malacañang, 1999, downloaded from http://www.geocities.com/LEDACWEB/ledmin02.htm.

35 Morales, Horacio R., Agrarian Reform Agenda of the Estrada Administration: Completing the Foundation for Sustainable Development and Democratic Governance in the 21st Century, Philippine International Review, Vol. 1, No. 2, 1998, downloaded from http://www.philsol.nl/pir/Morales-98b.htm.

36 DA AO No. 38: Adoption of Strategic Agriculture and Fishery Development Zones (SAFDZ) and the Network of Protected Areas for Agriculture and Agro-Industrial Development (NPAAAD) as the Prime Natural and Economic Resource Endowments for the Modernization of Agriculture and Fishery Sectors in the Philippines and providing Institutional Mechanisms for Their Sustainable Utilization, Management, 1999.

47

to undertake in line with its main strategy and to prevent agrarian land ownership reconsolidation is the passage of bills such as the Progressive Land Tax, Graduated Capital Gains Tax and Land Conversion Tax, Idle Land Tax, and the National Land Use Act.

Both Houses of the Philippine Congress also acknowledged the role of idle land taxation as a reform instrument for improving land utilization and ultimately as a poverty alleviating measure. In the Senate, an increase in the tax on idle lands is being considered as a tool to improve overall access to land and as disincentive for landowners who keep their land idle. At the same time, they also see this as a means to minimize land speculation and as a means to reduce conflicts between landowners and government.37 There are two pending bills in the Philippine Senate seeking to amend provisions of the LGC on idle land tax. Senator Ramon Revilla, Jr. proposed to raise the cap on idle land tax five percent to 10 percent. Senator Aquilino Pimentel, Jr., on the other hand, proposed a scheme for the distribution of proceeds from taxes on idle lands. Details of these bills are presented in the Table VII.

Then Lower House President Representative Jose de Venecia, Jr. in addressing the issue of individuals and corporations who speculate on land values and who are awaiting land conversion, talked of an idle land tax as a means to “discourage land speculation and as a means to make lands serve their economic purpose of generating wealth.”38 Current Speaker of the Philippine House of Representatives, Prospero Nograles, in response to country’s current food crisis and zeroing in on the increasing number of under utilized properties, announced that he will be filing a bill that would allow government take over privately owned idle agricultural lands for food production.39 In preparation for this bill, he called on the DA, DAR and DENR to come up with an inventory of private and public idle lands and even pasture leases that can be utilized for food production.

37 Contained in Five Pillars of Growth: An Economic and Social Development Framework by the Senate Economic Planning Office and the United Nations Development Programme, 2004 and in Sustaining the Momentum, Making Growth Work for the Poor: A Proposed Legislative Agenda for the 14th Congress by the Senate Economic Planning Office, 2007.

38 De Venecia, Jr., Jose, A Program for Economic Takeoff Toward Sustained Growth: A Philippines Without Absolute Poverty in 2010, downloaded from www.congress.gov.ph.

39 Public Relations and Information Department. Nograles Proposes Five-Point Action Plan to Achieve Food Security. Congress of the Philippines - House of Representatives Official Website, 2008. Accessed April 5 2008. Available from http://www.congress.gov.ph/press/details.php?pressid=2197 and Bordadora, Norman. Speaker Mulls Takeover of Idle Property. Philippine Daily Inquirer, 2008. Accessed April 15 2008. Available from http://newsinfo.inquirer.net/breakingnews/nation/view/20080415-130616/Speaker-mulls-takeover-of-idle-property.

48

Matrix of Idle Land Tax LawsFeatures PD 464 PD 1446 LGC of 1991

Applicable Tax Rate

RPT on idle lands at a rate not exceeding TWO PERCENT (2%) PER ANNUM based on the prevailing assessed value of the property

RPT on idle lands at a rate not exceeding FIVE PERCENT (5%) PER ANNUM based on the prevailing assessed value of the property

RPT on idle lands at a rate not exceeding FIVE PERCENT (5%) of the assessed value of the property which. shall be in addition to the basic real property tax

Coverage by Land Size for Agricultural Lands

RPT on idle agricultural lands applicable only to properties of more than five hectares

*no mention of size coverage, assumed to be carried over from PD 464

RPT on idle agricultural lands applicable only to properties of more than 1 hectare in area

Coverage by Land Size for Urban Lands†

RPT on idle urban lands applicable only to properties of more than 5,000 square meters

RPT on idle urban lands applicable only to properties of more than 2,000 square meters

Lands other than agricultural, located in a city or municipality, of more than 1,000 square meters

Coverage by Land Use for Agricultural Lands

• Agricultural lands in area suitable for cultivation, dairying, inland fishery and other agricultural uses, three-fourths of which remain uncultivated or unimproved by the owner.• Agricultural lands planted to permanent or perennial crops with at least 100 trees to a hectare shall not be considered idle land.• Lands actually used for grazing purposes shall not also be considered idle land.

Agricultural lands suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which may remain uncultivated or unimproved by the owner.

• Agricultural lands, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which remain uncultivated or unimproved by the owner.• Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare shall not be considered idle lands.• Lands actually used for grazing purposes shall likewise not be considered idle lands.

Exemptions for non-residential lands

• Adverse peace and order conditions as certified by the Provincial Commander (1 year exemption upon restoration of peace)• Financial loss of the landowner due to fire, flood, typhoon, earthquake and other causes of similar nature as attested through an affidavit (two-year exemption)• Existing court litigations involving the land subject to tax as certified by the Courts (one year-exemption after final adjudication of the case)• Necessity to leave the land in a fallow state as certified to by the provincial agriculturist (one-1 year exemption after prescribed fallow period)• Unfavorable physical factors, such as rocky nature of ground and uneven topography in the case of agricultural land, which render the land unsuitable for cultivation, as certified by the provincial agriculturist

• Adverse peace and order conditions as certified by the Provincial Commander of the Philippine Constabulary (one year exemption after restoration of peace and order)• Financial losses of the owner due to fire, flood, typhoon, earthquake and other causes of similar nature as declared in a sworn statement submitted to the Assessor and certified by the proper agency of the local government (two-year exemption)• Existing court litigations involving the land subject to tax as certified by the Courts (one- year exemption after final adjudication of the case)• Necessity to leave the land in a fallow state as certified by the provincial agriculturist or by the Secretary of Agriculture or his duly authorized representatives (one-year exemption after prescribed fallow period)• Unfavorable physical factors, such as rocky nature of ground and uneven topography in the case of agricultural land, which render the land unsuitable for cultivation, as certified by the provincial agriculturist or by the Secretary of Agriculture or his duly authorized representatives

(Section 238) A province or city or a municipality within the Metropolitan Manila Area may exempt idle lands from the additional levy by reason of force majeure, civil disturbance, natural calamity or any cause or circumstance which physically or legally prevents the owner of the property or person having legal interest therein from improving, utilizing or cultivating the same.

TABL

E VI

49

Features PD 464 PD 1446 LGC of 1991

Administration: RPT on Idle Lands Exemptions

• Applications for RPT on idle land exemption shall be filed with the assessor of the province or city.• The DoF shall develop the guidelines for implementation of RPT on idle lands exemptions.

Applications for RPT on idle land exemption shall be filed with the assessor of the province or city.

Administration: Identification and Listing

(Section 46) The provincial or city assessor shall make and keep an updated record of idle lands.

*carried over from PD 464 (Section 239) The provincial, city or municipal assessor shall make and keep an updated record of all idle lands located within his area of jurisdiction.

Administration: Valuation & Assessment

Assessed value of idle property shall be determined by the Provincial or City Assessor of the Province or City or by the Municipal Assessor in the case of idle lands situated in the municipalities of Metropolitan Manila

Administration: Collection

• For purposes of collection, the provincial or city assessor shall furnish a copy of the listing to the provincial, city or municipal treasurer, as the case may be, who shall notify on the basis of such record the person having legal interest in the lands of the imposition of the additional tax. • RPT on idle lands for any year shall attach and become due and payable in full on the first day of January.

The assessment and collection of the additional tax on idle land shall be in accordance with the provisions of Presidential Decree No. 464, as amended.

Distribution of Proceeds RPT on idle lands

(Sec. 87) …The proceeds of the additional real property tax on idle private lands shall accrue to the respective general funds of the province, city and municipality in which the land subject to the tax is situated.

The proceeds of the additional real property tax on idle lands shall accrue to the general fund of the Province, City or Municipality in which such land subject to tax is situated, and shall be distributed as follows: In the Province: 50 percent shall accrue to the Municipality and 50 percent shall accrue to the Province In the Cities: The entire proceeds of the additional tax on idle lands shall accrue to the City In the Cities and Municipalities in Metropolitan Manila: 50 percent shall accrue to the Metropolitan Manila Commission, and 50 percent to the City or Municipality in which the property subject to tax is situated.

(Section 273) The proceeds of the additional real property tax on idle lands shall accrue to the respective general fund of the Province or City in which the land is located. In the case of a Municipality within the Metropolitan Manila Area, the proceeds shall accrue equally to the Metropolitan Manila Authority and the Municipality in which the land is located.

Promulgation May 20, 1974 June 11, 1978 October 10, 1991

† Lands other than agricultural lands are considered urban lands.

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Proposed Amendments to the Local Government Code of 1991 related to ILTFeatures LGC of 1991 Proposed Amendments

Applicable Tax Rate

(Section 236)

RPT on idle lands at the rate not exceeding FIVE PERCENT (5%) of the assessed value of the property which shall be in addition to the basic real property tax

Senate Bill No. 163 (filed by Senator Ramon Revilla, Jr.)

Proposed to increase the ceiling tax on additional Ad Valorem Tax on Idle Lands from five percent (5%) to TEN PERCENT (10%).

Distribution of Proceeds RPT on Idle Lands

(Section 273)

The proceeds of the additional real property tax on idle lands shall accrue to the respective general fund of the province or city where the land is located.

In the case of a municipality within the Metropolitan Manila Area, the proceeds shall accrue equally to the Metropolitan Manila Authority and the municipality where the land is located.

Senate Bill No. 1161 (filed by Senator Aquilino Pimentel, Jr.)

Proposed that the proceeds of the additional real property tax on idle lands shall be distributed as follows:

a. In case of provinces1. Province - 30 percent shall accrue to the general fund2. 45 percent to the general fund of the municipality where the property is located; and,3. Barangay - 25 percent shall be distributed to the component barangay of the municipality in the following manner:

i) 60 percent shall accrue to the barangay where the property is locatedii) 40 percent shall accrue to all other barangays of the municipality

b. In the case of Cities1. 70 percent shall accrue to the general fund of the city; and2. 30 percent shall be distributed among the component barangays of the city in the following manner:i) 50 percent shall accrue to the barangay where the property is locatediii) 50 percent shall accrue to all other barangays of the municipality

c. In case of a municipality within Metropolitan Manila Area:

1. Municipality - 70 percent shall accrue to the municipality where the property is located2. Barangay - 30 percent shall be distributed among the component barangays of the city in the following manner:ii) 50 percent shall accrue to the barangay where the property is locatediv) 50 percent shall accrue to all other barangays of the municipality

Source: Senate bills downloaded from www.senate.gov.ph

TABL

E VI

I

51

Adoption of the Idle Land Tax by Local GovernmentsDespite the governing law and various policy directives, which not only define the framework, parameters, mechanics and institutional arrangements, adoption of local governments of the idle land tax has been slow. The idle land tax remains largely unimplemented.

The research team was able to document 10 cities and two provinces that have adopted local laws on idle land tax. These are summarized in Table VIII. Note that this is not necessarily a complete listing since adoption of the idle land tax by LGUs is not centrally and systematically monitored.

The quality of the various local laws on ILT, however, is inconsistent. Some just simply incorporated in their local revenue codes the provisions of the LGC on the idle land tax without specifying the applicable tax rate for idle lands. Consequently, in order to implement a tax on idle lands, an ordinance approved by their respective Sanggunian Bayan is still required. For example, Tagum City right after the LGC adopted its local revenue code which included provisions for an idle land tax, one of the earliest within Table VIII to do so. This, however, has not been translated to a specific ordinance which provides a directive for implementation and which identifies the actual tax rate to be imposed on idle land. This is also true for Sipalay City.

The applicable tax rates on idle lands, in cases where they were identified, vary considerably. Pasig City and the provinces of Rizal and Bohol set their tax rate on idle lands at five percent. This is the highest tax rate that can be imposed on idle lands based on the LGC. On the other hand, Davao City’s tax rate on idle lands was the lowest at 25 percent of one percent or 0.25 percent.

It must also be noted that the existence of local ordinances on idle land taxation do not necessarily imply its full implementation. For example, both Davao City and Alaminos City promulgated an ordinance on idle land taxes on agricultural lands since 2005, yet these have not been implemented. Although adopted in early 2008, the Province of Rizal is set to implement their idle land tax ordinance in 2009.

While taxes on idle lands were generally accepted by respondents from the various case studies as a means to improve the revenue source for local governments, several issues and considerations were raised as to why adoption and implementation of such has been weak. As discussed in the previous section, one of the first hurdles encountered by local governments regarding the idle land tax is the inoperability of its definition. A clearer definition including more definitive provisions in identifying idle lands is required.

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Summary of Key Features of Existing Ordinances on Idle Land TaxArea Ordinance Title Date Adopted Key Features

Pasig City, National Capital Region

Ordinance no. 25 Series of 1992

1992 Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 5 percent

Marikina City, National Capital Region

Ordinance Imposing and Additional “AD Valorem Tax” on Idle Lands in the Municipality of Marikina

December 21, 1993 Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 4 percent• No exemption for residential lands

Rizal Province An Ordinance Approving the “Revenue Code” of the Province of Rizal

February 4, 2008 Adopted all provisions in LGC for ILT except for:• Exemption for residential lands• Applicable tax rate set at 5 percent

Tagaytay City, Cavite No copy of the ordinance yet

1999 Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 1 percent

Alaminos City, Pangasinan*

City Ordinance No. 05-001 Revenue Code of the City of Alaminos

1995 Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 1 percent

Naga City, Camarines Sur

The Real Property Tax Ordinance of 1993

June 2, 1992 Adopted all provisions in LGC except for:• Applicable tax rate set at 0.5 percent• No coverage by land use for residential lands• No exemptions for residential lands

Bohol Province An Ordinance Enacting the Revenue Code of the Province of Bohol

1996 Adopted all provisions in LGC except for:• Applicable tax rate set at 5 percent• No exemption for residential lands

Davao City The 2005 Revenue Code of City of Davao

December 2, 2005 Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 0.25 percent• No exemptions for residential lands

Tagum City, Davao del Norte

Real Property Tax Administration

1991 Adopted all provisions in LGC for ILT. No specific rate identified.

Island City of Samal, Davao del Norte

Samal City Tax Ordinance no. 2004-083

2004 Adopted all provisions in LGC except for:• Applicable tax rate set at 3 percentNo exemption for residential lands

Surigao City** Surigao City Comprehensive Revenue Code (2007)

ILT still pending. Adopted all provisions in LGC for ILT except for:• Applicable tax rate set at 1 percent

Sipalay City City Ordinance No. 2001-002 Real Property Tax Code

September 25, 2001

Adopted all provisions in LGC for ILT. No specific rate identified.

*There is an ongoing deliberation within the LGU to revise the City’s existing ILT ordinance.**The Surigao Sanggunian did not approve the entire Revenue Code and issued ordinance(s) pertaining to the chapter by phase; approval of the ILTG is still pending.

Many of the local governments within the case studies are actually examining whether implementation of a tax on idle land is worth pursuing, largely because the anticipated revenue from the measure is insignificant since the coverage or scope of taxable properties is limited due to problems of definition and of identification. At the same time, the idle land tax rates are too low. According to them, unless certain requisites are met, it might be more beneficial for local governments to focus on improving implementation of the basic real property tax and on supporting the development of idle lands. For example, the local government in Alaminos argued that it would perhaps be more productive to work for or provide programs

TABL

E VI

II

53

that can make the idle lands productive rather than taxing these properties. The city government engages in partnerships with other governments (e.g., RP-China Agreement) to devote idle lands to sweet sorghum production. Developing a clear land use plan both locally and nationally, and the improved capability of local tax officials in updating tax mapping and valuation schemes, are also among the requisites raised by local governments needed in order to bolster taxation on idle lands.

In Davao City, since the applicable tax rate on idle lands is too low, there are questions of whether the measure can be a good deterrent to landowners from not developing their lands. It still comes out less expensive to maintain idle lands and to just pay the tax as opposed to spending for making the lands productive. Respondents in Davao City likewise argued that idle land tax is only good in theory and has a limited effect on improving land use, since taxation is based on actual or current use of the land rather than its zoning classification, which ascribes the best use of the land.

Another consideration forwarded within the case studies is the issue of equity. Common to all areas is the perception that the idle land tax will be an additional burden to the farmers with small landholdings who are already burdened with lack of capital and access to support services and minimal incomes. In Surigao, for example, members of people’s organizations and agrarian reform beneficiaries are afraid that they might not be able to cope with idle land taxation and consequently lose their lands. In the case of Daet and Davao, the need to exempt properties of small landowners was reiterated, and they argued further that the idle land tax should target big landowners who have higher capacities to pay. Exemptions from the idle land tax on agricultural lands that are barren and properties that cannot be made productive were also raised.

Full implementation of the idle land tax also faces resistance from big land owner-politicians in the area, suggesting the need for a strong local government push, consultations and consolidation of support among the various stakeholders before the promulgation and implementation of the measure. Among the non-local government respondents of the case studies, many were suspicious about the intention of local governments to raise more revenues, saying that this measure may yet be another opportunity for corruption. Transparency in the implementation of the tax on idle land and its subsequent spending was also raised as a consideration for the measure’s acceptability.

In sum, the factors affecting the non-adoption of and weak implementation of local governments of the idle land tax are as follows: (i) the lack of an operational definition; (ii) scope and coverage limited by unclear definition and the local government’s capacity to identify idle lands; (iii) tax rates too low to generate significant enough revenues; (iv) equity issues; and (v) the continued influence of landowners over local government leaders.

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POLICY DIRECTION: Keeping Idle Land Tax Local But Making It WorkThe legal framework and policy parameters of the idle land tax in the country were essentially drawn from the 1974 Marcos PD, although the LGC did adopt certain amendments which resulted in subtle changes in terms of coverage and tax rate. The PDs were crafted almost 35 years ago. Guevarra (2003) argued that the LGC hardly altered policies on local finance, and that the framework supporting the provisions of the code is of martial law vintage. The policy is due for review, and apart from taking into consideration changes in policy and context, advances in information technology can further inform and improve a revised law.

The most important policy development within the LGC on idle land tax as compared to the Marcos PDs is the fact that the authority to impose an idle land tax now emanates from local executives and their respective decision making bodies (the Sanggunian Bayan). This is a clear move towards decentralization, which provides a more conducive environment for local autonomy.

There have been attempts to centralize the implementation of the idle land tax to the national government, since very few local governments actually implement the tax, consequently failing to contribute to the country’s land use objectives. Some considerations must be raised regarding re-centralizing this authority. Among the many considerations is the fact that real property taxes are more viably implemented by local governments, considering that local authorities would have a better assessment of ownership, location and use of these properties. Since idle land taxes essentially target the same tax base (differentiated only by its use), its implementation becomes a natural extension of the function of local taxing offices. Centralizing will require adding a layer of bureaucracy that will add costs to administer taxes on idle lands. A centralized idle land tax will still heavily rely on local taxing authorities for its implementation. This can create confusion in terms of accountability. While local taxing authorities will be accountable to local authorities in terms of implementation of real property taxes, they will be accountable to a central office in terms of implementation of the idle land tax. Another important question as to when tax on idle lands is centrally mandated is the distribution of proceeds whether the current set-up in which any revenues generated from the idle land tax directly go to the coffers of the province or the city will continue, or whether the proceeds will also be centralized to the national government. This move defeats the purpose of decentralization and can lead to reducing the accountability of local governments to idle land taxpayers. Guevarra suggests keeping the idle land tax a local imposition.40

40 Notes from the research team’s study session with Dr. Milwida Guevarra dated May 2008.

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What is perhaps more important to review is the optional character of the idle land tax. Local governments may or may not adopt an idle land tax with rates ranging from zero to five percent. The optional nature of idle land taxes creates an inconsistent policy environment when it comes to ensuring effective land use, although this can be partly explained by the fact that local governments do not automatically share nationally defined priorities and land use objectives. Non-adoption of and non-implementation of taxes on idle lands also arise from the lack of complete clarity in definition – what idle lands are and which lands should be covered (PA-LAMP, 2002). Guevarra (2003: p.5) sees the definition as structurally infirm. The continued power and influence enjoyed by landowners on local politicians can also explain why idle land taxes have not been popularly adopted.

Remedies can be adopted that can keep the tax on idle land essentially a local fiscal instrument and still ensure its more consistent implementation among local governments. This includes amending the range of tax rate (currently at zero to five percent) that can be applied to idle lands, specifically defining a minimum applicable tax rate to one or even higher. One fixed rate, as was set for taxes on real properties, can also be considered.

At the same time, the national government can focus its efforts on providing the necessary enabling policy environment that will support decentralization and local autonomy. Incentive schemes for local governments who will adopt the idle land tax can be provided, including technical and grant assistance for administration of the idle land tax. Given the current need of the country for improved utilization of agricultural lands for food sufficiency and security, implementation of the idle land tax is urgent. The central government should consider matching funds generated by local governments from the idle land tax. For every peso collected by local governments from the idle land tax, the central government can provide an additional peso or even a proportion thereof in grants or transfers to the respective LGUs.

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IDLE LAND TAX:Structure and Administration

Assessing the Effective Tax Rates on Idle Agricultural Lands

Theory suggests a flat land tax rate that minimizes distortions across property class and their location, and where the difference in collectible tax is accounted for by the differing market value of the property as the more ideal tax structure. In the case of the Philippines, tax rate imposed on idle lands is set within the range of zero to five percent of the assessed value of a property. Assessment levels are pre-determined rates applied to the market value of a property in order to determine its taxable value. Taxes collectible on idle lands are in addition to the basic real property tax. The LGC set the basic RPT at one percent of assessed value of the property for provinces and two percent for cities or municipalities within Metro Manila.

The design and structure of the country’s current taxes on land results in strong biases in terms of (i) locational bias - properties in cities are more heavily taxed than properties within provinces; and (ii) property class bias – properties classified as residential are least taxed compared to those classified as agricultural and industrial, commercial and mineral.

Table IX presents the comparative effective tax rates on idle lands across different classes of properties. To exemplify the bias, the table below holds the basic real property and idle land tax rate constant. Effective real properties taxes of 0.20 percent and consequently effective idle land taxes of 1.20 percent are lowest for residential and timberland properties. There is a clear bias for properties intended for residential use with the effective tax rates on agricultural lands double the rates imposed on residential properties. Commercial, industrial and mineral lands are most heavily taxed with the basic RPT effective tax rates of 0.50 percent and effective idle land tax rate at three percent.

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Computed Effective Idle Land Tax Rates Across Property Class for Provinces

Property Class Assessment Levels (in %)

Basic RPT Tax Rate (in %)

Effective Tax Rate (Basic)

(in %)

Idle Land Tax Rate (in %)

Effective Tax Rate of ILT

(in %)

Residential 20 1 0.20 5 1.20

Agricultural 40 1 0.40 5 2.40

Commercial, Industrial and Mineral

50 1 0.50 5 3.00

Timberland 20 1 0.20 5 1.20

Despite applying constant tax rates (one percent for basic real property taxes and five percent being the highest allowable tax rate that can be levied on idle lands), effective rates came out differently across properties due to the varying assessment levels across property taxes. Figure I illustrates the assessment level according to the LGC. Tax collectible on properties with the same values will differ based on their property classification. The tax structure on real property (whether idle or not) encourages large real estate holdings and investments in residential improvement, pointing out that the incentive effects of the current tax structure on real property negate the development objectives of the country—that is, productive investments in all production sectors resource preservation and socially optimal use (Tan, unpublished, as cited in PA-LAMP: 2002). This was supported by Guevarra (2003), who maintains that the different assessment levels can distort decisions on resource allocation. She cited that since farmlands are taxed more heavily than residential lands, there is an incentive rather than a disincentive to convert farmlands into residential subdivisions.

Tax Assessment Levels for Various Property Class

TABL

E IX

FIGU

RE I

Property Class Assessment Levels

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Commercial,Industrial and

Mineral

Agricultural Residential Timberland

50

40

20 20

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While establishing the locational and property class bias, the tax structure as it is designed, however, does not create a clear and strong signal or bias in terms of use – whether a property is idle or not. Since tax rates applicable to idle lands are set by local governments themselves, the rates can differ across provinces and cities. The wide ranging tax rates on idle lands adopted by local governments weaken the signal or bias intended to induce the more productive use of agricultural lands. In fact, as we have seen, these rates are as varied as the number of local governments who have adopted tax on idle lands. Table X shows how these various rates affect the effective tax rate on idle agricultural lands. It should be noted that majority of the provinces and cities within the country have not promulgated local ordinances for the implementation of an idle land tax. Consequently, for majority of the provinces and cities in the country, the idle land tax rate is actually zero.

Computed Effective Tax Rates in LGUs Implementing an Idle Land Tax on Agriculture Lands (in percent)

LGU

Assessment on

Agricultural Land (A)

Basic RPT Rate (B)

Effective Tax Rate (Basic) A x B = C

Idle Land Tax Rate (D)

Effective Tax Rate of ILT C + (D x A)

Pasig City, NCR 40 2 0.8 5 2.8

Marikina City, NCR 40 2 0.8 4 2.4

Tagaytay City, Cavite 40 2 0.8 1 1.2

Alaminos City, Pangasinan 40 2 0.8 1 1.2

Naga City, Camarines Sur 40 2 0.8 0.5 1.0

Davao City 40 2 0.8 0.25 0.9

Tagum City, Davao del Norte 40 2 0.8 - 0.8

Island City of Samal, Davao del Norte 40 2 0.8 3 2.0

Surigao City, Surigao del Norte 40 2 0.8 1 1.2

Sipalay City, Negros Occidental 40 2 0.8 - 0.8

Rizal Province 40 1 0.4 5 2.4

Bohol Province 40 1 0.4 5 2.4

Considering SB 163:

For Provinces 40 1 0.4 10 4.4

For Cities 40 2 0.8 10 4.8

TABL

E X

59

Sample Computation – Idle Agricultural Land Worth PhP 1 MillionMarket Value of Agricultural Property PhP 1,000,000

Assessment Level on Agricultural Properties 40 percent

Assessed Value PhP 400,000

Basic RPT Tax Rate (in percent)

Idle Land Tax Rate (in percent)

Tax Collectible (in PhP)

Pasig City 2 5.0 28,000.00

Marikina City 2 4.0 24,000.00

Tagaytay City 2 1.0 12,000.00

Alaminos City 2 1.0 12,000.00

Naga City 2 0.5 10,000.00

Davao City 2 0.25 9,000.00

Tagum City 2 - 8,000.00

Island City of Samal 2 3.0 20,000.00

Surigao City 2 1.0 12,000.00

Sipalay City 2 - 8,000.00

Rizal Province 1 5.0 24,000.00

Bohol Province 1 5.0 24,000.00

Provinces without ILT 1 0.0 4,000.00

Cities without ILT 2 0.0 8,000.00

Considering SB 163:

For Provinces 1 10.0 44,000.00

For Cities 2 10.0 48,000.00

Table XI further demonstrates the distortion created by the varying idle land tax rate across local governments. As an example, an agricultural property worth PhP 1,000,000.00 will be assessed similarly at PhP 400,000 across provinces or cities nationwide. However, idle land tax collectible varies despite the same market value of the property. The range of annual tax collectible on idle agricultural lands with a market value of PhP 1,000,000.00 ranges from a low of PhP 8,000.00 to PhP 28,000.00.

Does the effective tax rate on idle land provide a significant enough deterrent to hold lands idle? As illustrated above, the tax collectible is not significant enough even when looking at the highest potential annual idle land tax collectible of PhP 28,000 or PhP 2,333.33 per month. It is still cheaper to just pay taxes on idle lands than to invest or develop the land. Senate Bill N0. 163 which proposes that an increase in the maximum rate allowable for the idle land tax to ten percent, along with defining a minimum idle land tax rate, can potentially address this. This rate was also the proposal forwarded by the NTRC (1977) which, according to them, serves as a compelling measure for landowners to maximize land use since it is equal to a 10 percent increase in land value, making land speculation an unprofitable form of investment. An idle land tax rate set at 10 percent will raise the effective tax rate to

TABL

E XI

60

4.4 percent for provinces and to 4.8 percent for cities. Following the example above, tax collectible for provinces will increase to PhP 44,000.00 and for cities to PhP 48,000.00.

Exemptions from the Idle Land TaxPart of the tax structure of real property taxes and idle land tax in the Philippines is the exemption it allows for some properties under certain conditions. While exemptions limit the coverage and therefore the tax base for land taxes, it is a means by which the biases of the tax structure are refined.

The LGC exempts properties one hectare and below from the idle land tax. This provides ample consideration for small and marginalized farmers, especially those that have been recently redistributed under CARP and those that do not have enough capital to cultivate these properties. While the one hectare benchmark is below the average size of farm holdings of 2.3, farms exempt from the idle land tax, since their size is below one hectare below, represent 40.1 percent of the total number of farms the country.41

In principle, all other agricultural properties above one hectare, if found idle, are subject to the idle land tax unless the landowners specifically apply for exemptions based on the parameters discussed below. Properties that are left idle for the following reasons are also exempt from the idle land tax: (i) adverse peace and order conditions; (ii) financial loss of the landowner due to fire, flood, typhoon, earthquake and other causes of similar nature; (iii) properties subject to existing court litigations; (iv) the necessity to leave the land fallow; and (v) unfavorable physical factors, such as rocky nature of ground and uneven topography in the case of agricultural land, which render the land unsuitable for cultivation. Exemptions provided to properties above one hectare in size are time bound, require submission of application and approval from the local assessor based on certification from appropriate bodies. These additional exemptions are able to take into account unintentional reasons why agricultural lands are sometimes left unproductive. In effect, the exemption only leaves out properties intentionally left idle, such as lands held for speculation purposes as targets for the idle land tax.

Properties exempt from the basic real property tax, based largely on the nature of landowners, are also automatically exempt from paying the idle land tax.42 These include (a) real property owned by the Republic of the Philippines or any of its political subdivisions, except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; (b) charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly,

41 2002 Census of Philippine Agriculture; National Statistics Office; 2004.42 Section 234, LGC, 1991.

61

and exclusively used for religious, charitable or educational purposes; and (c) all real property owned by duly registered cooperatives as provided for under R. A. No. 6938. These would have to be reassessed. In cases when these properties can be utilized for agricultural purposes and considering that these properties are not necessarily productive, their exemption from the basic real property tax can be maintained, but the exemption of the idle land tax should be removed.

Land Tax Administration: Appraisal and Assessment Administration of land taxes in the country, whether it is for the basic real property tax or for the idle land tax, follows the same process. Considering that implementation of the tax on idle land has been very limited, many of the issues raised in this section deal with those faced by real property taxes in general. These can be viewed as an overriding context which will affect idle land tax administration once its full implementation is pursued by local governments.

Land tax administration involves three primary and cyclical processes: (1) appraisal and assessment; (2) valuation, preparation of schedule of market values and revaluation; and (3) collection. Figure II shows a schematic presentation of this process. It must be noted, however, that Section 239 of the LGC specifically instructs local assessors, for purposes of collecting the idle land tax, to maintain a list of properties that are idle and not idle.

62

Major Processes Involved in Tax AdministrationFI

GURE

II

DOFPromulgation of rules and regulations for classification, appraisal and assessment of real property (Section 201)

1. Appraisal and Assessment

3. Revaluation/ Preparation of Schedule of Market Values

2. Collection

Real Property Owner/ Administrator

Preparation and filing of sworn statement declaring current and fair market value of property (once every three years during the period January 1-June 30) (Section 202)

Provincial/ City/ Municipal AssessorListing of assessment rolls (Section 205)Declaration of real property of defaulting owner (Section 204) Submission of assessment rolls on or before December 31 each year (Section 248)

City/Municipal TreasurerPosting of notice of dates of payment at conspicuous and accessible places at the city/municipal hall on or before January 31 each year Publication in newspapers of general circulation in the locality once a week for two consecutive weeks (Section 249)Deputization of Barangay Treasurer to collect RPT in the barangay (optional) (Section 247)

Brgy. Local TreasurerCollection of RPT in the barangay

Registrar of DeedsPreparation and submission of abstract of registry including description of real properties, present owners and dates of recent transfers and alienation (Section 209)

Officials Issuing Building Permit/ Certificate of Registration of Machinery

Transmission of permits/certificates within 30 days of issuance (Section 210)

Geodetic EngineersFurnishing of white/blueprint copies of each of all approved original subdivision plans or maps of surveys executed by them within 30 days from receipt of plans from the LMB/ LRA/HLURB (Section 211)

SanggunianEnactment by ordinance

Preparation of fair market values for the different classes of real propertyPublication of revised schedules in newspapers of general circulation or posting in the municipal/city/provincial halls and conspicuous public places (Section 212)Summoning the owners of the properties to be affected to obtain information to base the market value of the property, administration of oaths, deposition concerning the property, its ownership, amount, nature, and value (Section 213)Amendment of schedule of fair market values (Section 214)

Prescribes date for collection

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The process begins with the tax declaration of property owners, in which they file a sworn statement containing pertinent information regarding themselves and the details regarding the property itself, especially the property’s current use and declared market value. This is submitted to the local assessor during the period of January to June every three years. In cases when property owners fail to undertake a tax declaration, the assessors have the authority to unilaterally declare these properties for tax purposes.

After the tax declaration period, the local assessor prepares the assessment rolls and submits the completed rolls to the local treasurer on or before December 31 of each year. The assessment roll is a master list of all taxable properties within a locality which should also contain all tax exempt properties including properties that are idle. It also contains the assigned classification of a property and its assessment value.

Since declared property values tend to be understated to minimize tax dues, the Code authorizes the assessors to seek additional information on the taxable properties from the Registrar of Deeds, Local Offices issuing permits for building permits, Geodetic Engineers who have conducted subdivision plans, and maps of surveys for approval of the LMB, LRA and the HLURB. This step of the process allows local assessors to come up with a schedule of fair market values in which they can match properties and double check their declared values. The final assessment roll takes this information into consideration and includes information on the latest sale or even results of site surveys by the local assessors office in re-adjusting the appraisal and assessment of each taxable property. When the declared value of the property does not match the ensuing schedule of fair market values, the assessment based on the schedule of fair market values prevails.

The system of self declaration, according to Guevarra, 43 for purposes of tax collection, requires a certain level of tax ethics, discipline and internal control with respect to revenue authority—something the country has not achieved. Innovations can be adopted to complement the self declaration system, if not completely do away with it. Indicators would have to be set up in order to validate the taxpayer’s declaration. In particular, involvement of members the community such as public school teachers, parent-teacher associations, barangay officials and other local line agencies in the identification of and even in the appraisal of taxable properties can be considered. In some countries, in order for property owners to be more accountable to the value of the property that they declare, these declared values are published and made publicly available (Bird and Slack: 2002). This allows potential buyers of properties to match their selling price. In some cases, owners of properties are only allowed to sell their properties within a range of their declared values.

43 Notes from study session with Milwida Guevarra, May 2008.

64

For the implementation of the idle land tax, assessors are tasked to determine which properties are idle or not idle. NTRC (1977) suggests that appraisal and assessment of idle agricultural properties be conducted annually during the start of the rainy season (May of each year) to factor the yearly cycle of cultivation. It further suggests that the assessed values of idle properties be based on zoning ordinances and land use plans of local governments.

The lack of centralized, accurate and complete information on taxable properties undermines revenues that can be potentially generated from real property and idle land taxes. Incomplete information results in some level of discretion from local assessors in determining the assessed values and therefore tax liabilities of real properties. This has become a source of corruption.

In the case of Alaminos City, the incumbent local chief executive opted to invest in a tax mapping project that utilized advanced GIS technology. As a result, information on real property tax delinquency was identified. In particular, it was discovered that there are 12,227 landowners that are delinquent—49 percent of RPT delinquents have been so since 2003 or earlier—and that the most number of RPT delinquents are located in the city’s poblacion. RPT delinquency totals PhP40 million. Data on real property delinquency on CARP lands per barangay was likewise gathered. There are a total of 799 tax declarations in the areas covered by the CARP, and 215 or 26.9 percent have been declared RPT delinquents. Out of the 24 barangays, only three barangays have no RPT delinquents and one barangay has 100 percent RPT delinquents. Information gathered by the City Government of Alaminos provides them with an accurate benchmark in terms of real property tax administration.

Land Tax Administration:Valuation and RevaluationUpon producing a schedule of fair market values, the assessor submits it for approval and enactment by the Sanggunian Bayan through a local ordinance. Once enacted, this becomes the basis of the assessor in determining the assessed value of each property and the tax liabilities of real property owners. Revaluation takes place every three years each time following the above process. Technically, the local Sanggunian Bayan approves and enacts the revised schedule of fair market values every three years.

Therein lies the catch. What could have otherwise been a technical process of ascertaining the fair market value of a property has become a politicized process. Sanggunian members frequently refuse to accept the new fair market value schedules for fear of losing their popularity among the constituents, since this will result in higher tax liabilities. Also, the decision of Sanggunian members is affected by pressures from land owners and businessmen who serve as the local officials’ political machinery. Adjustment of fair market value schedules, since it is done every

65

three years, often falls near election periods, and approval of the new schedules may result in losing in the elections. As a result, the schedules of fair market values are usually outdated and unchanged over an extended period of time. Consequently, property assessments and the tax base for real property taxes are systematically left grossly undervalued. The political dynamics of local governments may also result in partial or incomplete inventory of real property, as some local elites, who in some cases turn out to be the politicians themselves, want some portions of their land holdings to be kept off the tax record.

Llanto (2003) relates how the implementation of land taxes in the Philippines is poor, and attributes this to inefficient land valuation resulting from political factors. A landowner dominated local council may not support efficient land taxation, including the periodic assessment of land values to establish an appropriate tax base. Political pressure may also come from local businessmen or banks in possession of foreclosed lands. Thus, local government effort may largely be confined to town planning without the opportunities for raising local revenues through schemes such as idle land taxation, betterment levies, and land conversion tax.

Other factors affecting valuation include insufficient and inaccurate comparative sales data, lack of assessment tools, and absence of technically qualified personnel at the local level. Tax mapping is one solution for determining more accurate fair market values, as it ties up properties with its values, and undervalued properties are identified. However, investments in tax maps and computerization may require funds that cannot be financed by the local governments. Some local governments that managed to have tax maps are reliant on foreign sources of funding.

Land valuation procedures and estimates also vary considerably across government agencies. Llanto (2003) points out that the Bureau of Internal Revenue (BIR), the local government assessors, the Bankers Association of the Philippines and the different private realty appraisers’ associations all tend to apply different valuations to the same property. Furthermore, while the courts have been asked to resolve the disagreements on valuation, this has caused further delays given the slow pace at which land expropriation cases are resolved and the backlog of court cases that involve problems other than property-related ones.

As a case in point, agricultural lands, particularly those covered by CARP, face a different valuation procedure compared to those applied by local tax assessors. Interestingly, while declared values for tax purposes tend to be understated, in this case declared values tend to be overstated since landowners look forward to government compensation from redistributed lands.

The CARP law entitles landowners to just compensation for the lands acquired for distribution to agrarian reform beneficiaries. It further enumerates variables that are part of determining land valuation. The law, however, does not provide for explicit use of these variables in determining just compensation. This policy

66

loophole, and its grave implication to CARP’s implementation, has been pointed out by Lara (1986) in his succinct characterization of CARP as “neither revolutionary nor conservative,” to wit: “while CARP asks peasant beneficiaries to amortize payment for the landlord based on ‘affordability’, it provides an open-ended legal framework for land valuation interpretation for landlords.” 44 As such, computations have been amended several times to appease the landowners’ demand for higher valuation, thereby putting a great strain on the government’s fiscal situation. The land valuation formula has in fact been revised three times45 in the course of its implementation to minimize discord from landowners as well as to attain simplicity in computation.46

Furthermore, the ensuing implementation has put DAR and LBP under tremendous pressure in their land valuation work. In addition to the fact that land valuation becomes central in landowners’ resistance to CARP, the process of valuation takes time to accomplish, due to lack of information for proper assessment of the price of land and the need to conform to the valuation variables specified in the agrarian reform law. For example, the law requires the consideration of a number of factors, including the cost of land acquisition, the current value of similar properties, its nature, actual use and income, the owner’s sworn valuation, tax declarations, and appraisal made by government assessors which rendered the process complicated, cumbersome, ambiguous, as well as creating opportunities for graft and corruption (Balisacan 2003).

An accurate property valuation process has impact on the performances of land taxes not only in terms of potential revenues but also in terms of (i) undermining land use objectives, since property owners get away with not paying the appropriate tax liabilities; and (ii) equity since smaller and/or poorer property owners are most likely to report more accurately than their bigger/richer counterparts. Several measures can be undertaken to address the problem of accurate and fair valuation of properties. As an immediate step, the role of the Sanggunian in the review and approval of fair market value schedules have to be reassessed, largely since property prices can be ascertained through a technical and administrative process aided by information sharing, tax mapping, computerization and new technology. This will allow the fair market values to be adjusted regularly and even in real time.

44 Lara, Francisco Jr. ‘Francisco Lara Jr. ‘Land Reform in the Proposed Constitution: Landmarks and Loopholes’, Agricultural Policy Studies No. 1, Quezon City: Philippine Peasant Institute, 1986.

45 Land valuation under PD 27 became a starting point of land valuation under CARP. This was later done through Administrative Order No. 6 s. 1992, and again in 1998 through xxx, to take into account comparable sales, capitalized net income, and market value based on tax declaration. These new factors were used in land valuation in Latin America countries (Bravo and Pantoja 1998).

46 Land valuation formula takes into account various variables, some of which are not readily available. Likewise, opposition of landowners to the resulting land valuation has populated the case folders of DAR. In 2001, a DAR Special Order created a landowners’ assistance desk to handle their concerns on land compensation.

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An indexing of land values can be explored. Skinner (1991) suggested a crude index of land quality dependent on the soil type, distance from major roads, and irrigation facilities that can be determined for each plot of taxable land. The tax assessment could then be calculated by multiplying the year-specific tax rate by the permanent index, thereby avoiding the necessity for yearly reassessment. Such a procedure holds promise, especially as technological methods of mapping and soil quality assessment improve.

An inflation index based on increases in local land values can also be applied to base or pre-determined land market values of taxable properties. This will allow fair market values of properties to increase over time, depending on the average increase in the value of properties within a locality without need for yearly assessment or revaluation.

Coordination mechanisms among national and other local line agencies involved in various valuation activities should also be institutionalized and strengthened. Concretely, the mechanism should involve (i) DA and DAR offices since they deal with identification, assessment and valuation of agricultural properties; (ii) the DENR since it is conducts surveying, mapping and land use planning; (iii) the Registrar of Deeds since it is involved in land titling; and (iii) various authorities involved in the sale of properties.

The national government, in order to assist local governments and ensure the accuracy and fairness of land market values, should also consider providing technical assistance and capability building support to local taxing offices and authorities. Manasan (2004) relates how personnel assigned to local tax divisions are not well-equipped technically for their tasks, with very few of them having certified public accountants in their employ. The study also mentions that many local government units do not even have computers to aid them in their revenue generation efforts.

Land Tax Administration: Collection The local assessors submit their completed assessment roll to the local treasurers for tax collection. Before the actual collection, the treasurer posts notices and publishes dates of payment by January of each year. S/he may opt to deputize the barangay treasurer in the collection or property taxes. The local Sanggunian may prescribe the date of the collection. Tax payments are directly paid to the treasurer’s office of the municipality or city. When property owners fail to settle their tax liabilities, the local governments, under the LGC, are granted the power to sell delinquent properties through a public auction.47

47 Section 175, LGC, 1991.

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Section 249 of the LGC tasks treasurers of municipalities and cities with the responsibility of collecting real property and idle land taxes. The municipalities shoulder the costs related to the collection of these taxes (Loehr and Manasan as cited in PA-LAMP: 2002). The cost of collection of real property taxes, according to Loehr and Manasan (as cited in PA-LAMP: 2002) and Guevarra,48 is expensive, at times exceeding the actual revenues collected. It must be noted that revenues generated from land taxes are limited by the many problems discussed earlier in the paper, including the problems in identification limited coverage, the continuous undervaluation of properties, and the lack of technical support. These same reasons exacerbate the cost of collection.

Incentives for municipalities to actively collect land taxes, however, are weak since they are required to share the revenues from real property taxes with the provinces and barangays as follows: 35 percent to the province, 25 percent to the barangays, and only 40 percent for itself.49 In the case of idle land taxes, on the other hand, proceeds accrue wholly to the province in which the idle land is located.50

Not only is the valuation process politicized, but land tax collection per se is politicized as well. Part of the politicians’ maneuvers, which ultimately become a community expectation, is that when an election is due, amnesties will be given on the payment of back taxes, in part or in full. This leads to revenue loss on the one hand, and on the other, creation of impediments for land transfers, due to the rapid accumulation of back taxes (PA-LAMP: 2002). On the other hand, taxpayers sometimes shirk on their tax obligations. Income from land taxes are viewed as an additional kitty for public officials’ corruption.

Land tax collection within CARP-covered areas has also been troublesome. Landowners stop paying real property taxes when their lands are targeted for redistribution. There is confusion in terms of who shall be liable for property taxes for distributed lands. Landowners identify the Land Bank of the Philippines as the one liable for the tax payments since it is responsible for landowner compensation under the CARP. The provincial assessor of Rizal shared how in their province, real property tax collection in CARP covered areas are virtually nil because of unclear rules and regulations as to who should be liable for tax payments, whether it is the former landowner, the Land Bank, or the agrarian reform beneficiary.51

In the case of agrarian reform beneficiaries, some fail to pay for the real property tax. Sometimes, distributed lands are subdivided among family members, who, in paying for the RPT, wait for one another until the taxes become bigger with accumulated penalty interests. The penalty on delayed payment of RPT is seemingly an additional burden to CARP beneficiaries, who are already faced with the challenge of making their lands productive in the first place. As a result, there are cases when the lands distributed end up being auctioned. In the case of Sipalay City, for example, the

48 Downloaded from http://www.econ.hit-u.ac.jp/~kokyo/APPPsympo04/Philippine-Guevara.pdf March 2008.49 Section 271, LGC, 1991.50 Section 273, LGC, 1991.51 Notes from study session with Provincial Assessor of Rizal Province, April 2008.

69

penalties imposed by the Treasurer serve as a real threat for those who are already hard up—the farmer beneficiaries of CARP—to lose their lands since they cannot afford to pay these tax liabilities.

Both the NTRC (1998) and the DENR-LAMP (2002) studied the level of real property tax delinquency in the country. The collection rate rarely exceeded 60 percent during the period 1983 to 1997, while the current average real property collection efficiency ranges from 40 to 50 percent nationwide.52 A decline in collection efficiency was observed from the pre-LGC rate of 56.7 percent to the post-LGC rate of 53.8 percent. Most regions failed to post an improvement in their tax performance with respect to the basic real property tax, especially during the first year of the LGC. According to the DoF-BLGF, delinquent real property taxes is estimated at seven to 11 billion pesos annually.

LGU Revenue PerformanceThe many problems confronting land taxes in the country are reflected in the lackluster performance of local governments in terms of local revenue generation. Taxes on real properties should technically form the bulk of revenues generated by local governments. This, however, is not the case. Data strongly supports the performance of local governments in collecting real property, and idle land taxes have been weak as their implementation has been mired with policy, administrative and political obstacles.

Revenues of local governments consist of two main types: locally-generated revenues and externally-sourced revenues. Locally-raised income consists of tax revenues from real property taxes (including real property tax on idle lands) and business tax; and non-tax revenues from fees and charges, receipts from government business operations and proceeds from sale of assets. These local revenues are supplemented by external sources, including the Internal Revenue Allotment (IRA), other shares from special laws, grants and aids, and borrowings (NTRC: 2000 and 2006).

For the past 11 years, total LGU revenues, as shown in Table XIII, have been steadily increasing, except in 2001 and 2004 where a dip was observed. By 2006, total LGU revenues reached PhP 213.2 billion from PhP 76.1 billion over a decade ago, posting an average growth rate of 10 percent. It must be noted, however, that more than 60 percent of these revenues come from internal revenue allotments (IRA), and that the increase in LGU revenues is largely accounted for by more grants and transfers that are available from the national government. For the period in review, IRA rose from PhP 45.0 billion to PhP 137.7 billion, growing on the average by 11 percent.

52 From an interview with Teresita Solomon, Supervising Tax Specialist, Local Finance Branch of the NTRC dated March 28, 2008.

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LGU Revenues by source, in PhP ’000

YearGDP

(in constant prices)

Total LGU Revenues IRA

Ratio IRA to Rev

Total Local Taxes

Revenues from Other

Sources

Real Property

Tax

Ratio RPT to

Rev

RPT on Idle Lands

Ratio ILT to

Rev

1996 2,171,922,311 76,111,600 45,013,306 59.1 27,339,049 3,759,245 9,331,582 12.3 - -

1997 2,423,640,151 93,666,306 56,425,153 60.2 33,520,965 3,720,188 11,614,303 12.4 - -

1998 2,665,059,811 100,225,541 61,407,755 61.3 34,740,237 4,077,549 12,513,961 12.5 - -

1999 2,976,904,952 120,348,553 76,207,683 63.3 37,776,314 6,364,556 13,677,298 11.4 - -

2000 3,354,726,923 138,051,599 88,974,200 64.4 42,467,683 6,609,716 15,544,343 11.3 - -

2001 3,631,474,049 137,186,684 86,825,091 63.3 44,027,677 6,333,916 16,505,352 12.0 - -

2002 3,963,873,151 153,383,119 106,242,720 69.3 37,910,551 9,229,848 9,553,326 6.2 1,042.40 0.01

2003 4,316,401,957 171,184,512 113,328,931 66.2 43,124,084 14,731,497 11,244,146 6.6 1,042.40 0.01

2004 4,871,554,787 169,415,849 109,162,214 64.4 43,599,128 16,654,507 10,656,423 6.3 3,664.50 0.03

2005 5,437,905,392 191,266,880 121,391,413 63.5 49,727,957 20,147,510 12,234,649 6.4 23,090.83 0.19

2006 6,032,623,555 213,177,039 137,670,036 64.6 52,880,485 22,626,518 12,580,210 5.9 12,818.25 0.10

Source: From www.neda.gov.ph, Commission on Audit, downloaded from www.coa.gov.ph/Audit/AAR 2002-2006 and Commission on Audit, Local Government Sector1996-2001

Growth Rates of LGU Revenue Items (in percent)

YearTotal LGU Revenues IRA Local Taxes Others

Sources RPT RPT on Idle Lands

1997 23.06 25.35 22.61 (1.04) 24.46 na

1998 7.00 8.83 3.64 9.61 7.75 na

1999 20.08 24.10 8.74 56.09 9.30 na

2000 14.71 16.75 12.42 3.85 13.65 na

2001 (0.63) (2.42) 3.67 (4.17) 6.18 na

2002 11.81 22.36 (13.89) 45.72 (42.12) na

2003 11.61 6.67 13.75 59.61 17.70 na

2004 (1.03) (3.68) 1.10 13.05 (5.23) 251.54

2005 12.90 11.20 14.06 20.97 14.81 530.12

2006 11.46 13.41 6.34 12.30 2.82 (44.49)

Average Growth 10.1 11.1 6.6 19.6 4.5 67.0

Increasing IRA has made the LGUs more dependent on national government grants and serves as a disincentive for the LGUs to maximize their revenue-raising powers (NTRC 2000). Despite the guidelines and prescribed formula, the IRA system has come in various forms, become arbitrary, and is filled with uncertainty. It has been “perennially counter-equalizing and LGUs with more revenues, higher taxable capacity, and more expenditure outlays receive more grants” (Guevarra 2003). Likewise, IRA and subsidies in general have become subject to political patronage. Local governments are able to get away from bearing the costs of under-utilizing their taxing powers because of IRA, including dole-outs from the pork barrel system.

TABL

E XI

ITA

BLE

XIII

71

Average Distribution of Revenues by Source

Growth Rate of LGU Revenues

Revenues from local sources only account for a little less than 30 percent of LGU revenues, averaging PhP 40.6 billion for the period. Real property taxes, on the other hand, previously contributed above 11 percent of total LGU revenues, but since 2002 revenues from real property taxes only account for some six percent of the local government income. Income from real property taxes account for a third of total local revenues. Collection from real property taxes in 2006 totaling PhP 12.6 billion is just within the vicinity of the collection level in 1998, posting an average growth rate of only 4.5 percent for the period under review. Manasan (2004) cited that many provinces and cities have done a general revision of the schedule of market values only once since 1991, resulting in declining collections in real terms.

Monitoring of income from real property taxes on idle land only began in 2002.53 For that year, total idle land taxes collected totaled PhP 1 million. By 2006 collections from taxes on idle lands reached PhP 12.8 million, reaching a high of PhP 23 million in 2005. The growth in the collection from real property taxes on idle

53 Done by the Government Accountancy and Financial Management Information System of the Commission on Audit.

FIGU

RE II

IFI

GURE

IV

IRA64.1%

Local Taxes 28.6%

Others7.3%

40.00

20.00

-

(20.00)

(40.00)

(60.00)

(80.00)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

IRA Total LGU RevenuesRPT

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lands, however, can be largely attributed to: (i) the initiatives to monitor this revenue item; and (ii) the increase in the number of local governments implementing the measure.

Data from the case study sites amplifies the diminishing significance of real property taxes on local revenues. Income from taxes on real properties account for less than six percent of total revenues and only less than 30 percent of total revenues from local sources.

Among the case study sites, Davao City provides interesting data with its IRA accounting for a little over half or 55.5 percent of its total revenues, while revenues from local sources account for 36.0 percent. In the other case study sites, IRA accounts for at least two-thirds of total revenues. In the case of Sipalay, for example, LGU income from government transfers reached 94.4 percent for 2006.

Davao City also posted the highest revenues generated from real property taxes totaling PhP 163.9 million although this only represents 5.6 percent of its total revenues. On the other hand, Sipalay City only earned PhP 1.5 million from real property taxes representing 0.6 percent of its total revenues for the period. The minimal income generated by Sipalay from real property taxes may be due to the fact that it is a newly chartered city. Nevertheless, income from taxes on real property accounts for 26.6 percent of total local revenues, the highest among the case study sites.

There is no reported income from real property tax on idle lands in any of the case study sites, despite four them having existing ordinances on idle land tax. Only the municipality of Daet of Camarines Sur has no ordinance on tax on idle lands.

Summary of Revenues of Case Study Sites for 2006 (in PhP ‘000)Alaminos Daet Sipalay Davao Surigao

Total Revenues 225,694.79 95,705.51 251,691.98 2,930,081.73 351,041.52

from IRA 179,516.12 62,397.66 237,704.40 1,626,799.38 263,024.17

from Local Sources 31,069.75 19,986.13 5,495.92 1,056,186.03 39,013.12

From General Income Accounts 15,108.92 13,321.72 8,491.66 247,096.32 49,004.23

Revenues from RPT 5,801.33 4,155.17 1,463.02 163,890.94 8,931.63

Ratio: RPT to Total Revenues 2.6% 4.3% 0.6% 5.6% 2.5%

Ratio: RPT to Local Tax Revenues 18.7% 20.8% 26.6% 15.5% 22.9%

Source: www.coa.gov.ph/Audit/AAR 2006

TABL

E XI

V

73

EARMARKING IDLE LANDTAX PROCEEDS

Provisions of LGC regarding Distribution of Proceeds

Proceeds from the idle land tax, as stated in Section 273 of the LGC, accrue directly to the general fund of the province or city where the land is located. In the case of a municipality within Metro Manila, distribution of proceeds shall accrue equally to the Metropolitan Manila Authority (MMA) and the municipality where the idle land is located.

There is an ongoing initiative in the Senate led by Senator Aquilino Pimentel, Jr. to amend this particular provision of the LGC.54 The proposal seeks to provide municipalities and barangays shares in the proceeds from collections of taxes on idle lands. The matrix below summarizes the idle land tax distribution schemes under the LGC and as proposed by Senate Bill 1161.

Comparative Distribution of ILT Proceeds (LGC vs SB 1161)

Point of Accrual Distribution

Under 1991 LGC (in percent share)

Distribution Under SB 1161 (in percent share)

Province 100% 30 – 45 – 25: (Province – municipality – barangay)For barangays, 60 percent shall accrue to where property is located, 40 percent to be equally divided to other barangays

Cities 100% 70 – 30: (city – barangay)For barangays, 50 percent shall accrue to barangay where the property is located, 50 percent to be equally divided to other barangays

Municipalities within Metro Manila

50 – 50(Municipality – MMA)

70 – 30: (municipality – barangay)For barangays, 50 percent shall accrue to barangay where the property is located, 50 percent to be equally divided to other barangays

There is basis in providing municipalities and barangays a share of the proceeds from the idle land tax when the idle properties are located in their respective area of jurisdiction, and particularly since these local government units play a critical role in the administration of the tax on idle land. The study, however, further suggests that proceeds from the idle land tax or a portion thereof be earmarked for

54 Sen. Aquilino Pimentel filed Senate Bill 1161. He also authored the 1991 Local Government Code.

TABL

E XV

74

the development of the agriculture sector in the respective localities. Earmarking represents a public choice where taxpayers are able to pre-determine how their taxes will be spent and at the same time it exacts accountability from public officials.55

Patterns of LGU Expenditures Decentralization, as ushered in by the LGC, prompted the devolution of certain services to the local governments. Guevarra (2003) relates how the quantification of devolved services was done at the macro-level and how the revenue structure was formulated separately from expenditure assignment providing no opportunity to match resources with needs.

Services Devolved to the LGCSector Barangay Municipalities Provinces

Agriculture Agricultural support services including collection of produce and buying stations

Agricultural extension and on-site research services

Agricultural extension and on-site research services

Health Health care center Primary health care services and access to secondary and tertiary health services

Hospital and tertiary health services

Education • Day care center• Information and reading center

School building projectsInformation services

None identified

Social welfare Village justice system Social welfare services Social welfare services

Infrastructure Roads and infrastructure funded by the village

• Public works and infrastructure project funded out of local funds• Municipal buildings, cultural centers, public parks and sports facilities

• Infrastructure funded from provincial funds• Telecommunication services• Low-cost housing • Low-cost housing projects for provinces and cities

Environment Solid waste collection • Solid waste disposal system and environmental management system• Community-based forestry projects and management of communal forests

Enforcement of forestry laws

Investment Tourism facilities and promotion Investment support services, industrial research and development services for provinces

Source: As summarized in Guevarra (2004).

Local government expenditures had been increasing over the years. From PhP 75.5 billion in 1996, it had grown to PhP 192.9 billion in 2006, posting an average annual growth rate of 9.2 percent for the period in review. Spending for economic services (which include spending on agriculture, natural resources, industry, trade, tourism, power and energy, water resource development, transportation and

55 Notes from the study session with Dr. Milwida Guevarra dated May 2008.

TABL

E XV

I

75

communication) had also increased, albeit at a slower pace. Expenditures of local governments for economic services totaled PhP 20.0 billion in 1996, reaching PhP 29.0 billion by 2006. This represents an average annual growth rate of 4.3 percent. This particular expenditure item for the period 1996 to 2000 accounted for a little over 25 percent of total LGU expenditures. By 2006, expenses of local governments on economic services dropped to 15 percent of the total.

LGU Total Expenditures and Expenditures on Economic Services

Year

Total Expenditures

Economic Services

Percent of Economic

Services to Total Expenditure

Growth Rate (in percent)

Total Expenditures Econ Services

1996 75,462,552,000 20,074,499,000 26.6 - -

1997 94,933,146,000 24,629,453,000 25.9 25.8 22.7

1998 102,372,344,000 24,658,477,000 24.1 7.8 0.1

1999 114,946,242,000 28,952,675,000 25.2 12.3 17.4

2000 136,982,211,000 34,305,804,000 25.0 19.2 18.5

2001 136,889,894,964 25,393,331,531 18.6 (0.1) (26.0)

2002 140,816,716,174 23,566,394,605 16.7 2.9 (7.2)

2003 156,462,581,192 24,657,944,916 15.8 11.1 4.6

2004 160,818,432,572 25,339,068,667 15.8 2.8 2.8

2005 170,826,320,538 26,904,204,855 15.7 6.2 6.2

2006 192,909,138,554 29,011,997,011 15.0 12.9 7.8

Source: COA Annual Audit Report (1996-2000) and BLGF Summary of Income and Expenditures(2001-2006)

Looking further at the data on local government expenditures, as shown in Table XVIII, we find that the bulk of LGU spending, or some 40 percent, is accounted for by expenditures on general public services including expenses on public administration and on peace and order. Almost 26 percent go to expenditures on social services, which include spending on education, health, social welfare, housing and community development. Majority of social service spending of local governments or 12 percent goes to health services. Expenditures on economic services, on the one hand, represent almost 25 percent. More than half (53.7 percent) of the expenses for economic services goes to transportation and communication. Agrarian reform gets no financial support from local governments, since it is not a devolved function. Expenses for the agriculture sector, although minimal at 3 percent of total LGU expenditures, have improved in the post-LGC era from averaging at 1.3 percent of the total to a 3 percent average post-Code total.

TABL

E XV

II

76

Sectoral Distribution of Local Government Expenditures (in percent) Average

All LGUs 1985-1991

1993-2003 1991 1993 1995 1997 1999 2001 2003

Grand Total 100 100 100 100 100 100 100 100 100

Total Economic Services 32.9 24.6 35.8 25.5 27.6 26 25.2 24.6 22.4

Agrarian Reform 0 0 0 0 0 0 0 0 0

Agriculture 1.3 3 1.1 3.6 3 3 3.1 2.9 2.7

Natural Resources 0 0.6 0 0.4 0.4 0.5 0.6 0.6 0.8

Industry 0 0 0 0 0 0 0 0 0

Trade 0 0 0 0 0 0 0 0 0

Tourism 0 0 0 0 0 0 0 0 0

Power and Energy 1.1 0.5 1.2 0.7 0.6 0.5 0.6 0.5 0.1

Water Resource Devt/ Flood Control 0.6 0.3 0.5 0.3 0.3 0.3 0.3 0.3 0.2

Transportation and Communication 24.6 13.2 27.9 13.4 16.1 14.6 13.9 12.8 11.1

Others 5.3 7.1 5.1 7.1 7.3 7.1 6.8 7.4 7.4

Total Social Services 20.5 25.9 15.4 27.9 26.5 26.8 26.3 26.6 24.4

Education 7.5 7.1 3.6 7.2 7.2 8.1 7.4 7.6 6.3

Health 4.9 11.7 4.2 12.7 11.4 12.2 12.2 11.5 11

Social Welfare/ Labor/Others 2.7 2.3 2.8 2.3 2.1 2.3 2.2 2.5 2.3

Housing/ Community Development 5.3 4.7 4.8 5.8 5.8 4.3 4.4 5.1 4.8

General Public Service 42.8 40.7 44.5 40.8 38.4 39.2 39.9 40.6 41.3

Public Administration 40.3 40.3 44 40 37.8 38.8 39.6 40.2 40.8

Peace and Order 2.5 0.4 0.6 0.7 0.5 0.4 0.3 0.4 0.4

Others 3 6.6 3.5 4.7 5.1 5.4 6.5 5.9 9.2

Debt Service 0.9 2.3 0.8 1 2.4 2.6 2.1 2.2 2.8

Source: From Manasan (2004)

Table XIX indicates how local governments are financing their expenditures. Total income generated by local governments even slightly exceeds their spending by an average of 10.4 percent. Revenues from local sources, however, are only able to finance, on the average, 36.8 percent of total LGU expenditures. demonstrating that the rise in local government spending has been financed by continuing increase in IRA. Income from real property taxes only support about 12 percent of all LGU expenses. In fact, over the period in review, the ratio between RPT income and LGU expenditures have declined from 12.4 percent in 1996 to 11.7 percent in 2006. Interestingly, income from taxes on real property when compared to spending on economic services shows an average ratio of around 60 percent. This ratio has increased from 46.5 percent in 1996 to 77.9 percent in 2006. This is explained by the fact that RPT revenues have grown faster than expenses on economic services.

TABL

E XV

III

77

Ratio of LGU Expenditures versus Revenue Items (in percent)Year Expenditures vs Economic Services vs

Total Income Local Sources RPT Total Income Local Sources RPT

1996 141.7 77.1 12.4 532.8 289.8 46.5

1997 98.7 35.3 12.2 380.3 136.1 47.2

1998 97.9 33.9 12.2 406.5 140.9 50.7

1999 104.7 32.9 11.9 415.7 130.5 47.2

2000 100.8 31.0 11.3 402.5 123.8 45.3

2001 100.9 31.6 10.1 543.7 170.3 54.7

2002 113.4 35.3 11.3 677.7 210.6 67.4

2003 113.3 35.1 11.5 719.1 222.8 72.7

2004 111.2 36.0 10.9 706.0 228.3 69.2

2005 112.0 29.1 12.5 710.9 184.8 79.6

2006 119.8 27.4 11.7 796.8 182.3 77.9

Average 110.4 36.8 11.6 572.0 183.7 59.9

Source: Computed from COA Annual Audit Report (1996-2000) and BLGF Summary of Income and Expenditures (2001-2006)

Expenditure Patterns of Local Governmentsin the Case Study Sites Looking at the expenditures of the local governments that are subjects of the case studies, it is Davao City that posted the biggest expenditures for 2004 totaling PhP 1.71 billion; the municipality of Daet, with its total expenditures at PhP 113.7 million, is the smallest. Within the case study sites, allocation of local government resources for economic services (which include spending for agriculture related programs and activities) are way below the averages cited in Table XVIII. Only the municipality of Daet showed a significant allocation for economic services, spending almost 51 percent of its budget. The rest allocate less than 20 percent of their budget to this sector. Despite being largely agricultural economies with the expressed priority of the local governments being for the agriculture sector, actual expenditures along this budget line have not been significant.

LGU Expenditures per Case Study Site (2004)

Area Total Expenditures Economic ServicesPercent of Economic

Services to Total Expenditure

Alaminos City 176,134,067 20,669,797 11.74

Municipality of Daet 114,723,000 58,008,000 50.56

Sipalay City 211,533,410 24,241,550 11.46

Davao City 1,714,973,535 321,708,497 18.76

Surigao City 275,233,769 38,669,463 14.05

Source: BLGF Summary of Income and Expenditures (2004)

TABL

E XI

XTA

BLE

XX

78

Share of Economic Service to Total Expenditures (2004)

Reconsidering Financing the Requirements of Land RedistributionAt the onset of the research, the study sought to explore the possibility of earmarking the proceeds from idle land tax to land acquisition and development component of the CARP. The central research proposition is that a land tax can fund the budget for land redistribution and still contribute to the budget of local governments. Several considerations have been uncovered during the conduct of the research which lead us to re-evaluate this proposition.

First, the upcoming deadline of the CARP by June 2008. In several discussions with various experts, advocates and AR organizations, the issue of the CARP deadline/extension was deliberated on.56 The research posed the question: Does the June 2008 CARP deadline pertain merely to government’s allocation of funds for land redistribution, or does it pertain to DAR’s mandate to redistribute? Arguing that if the deadline merely pertains to government’s allocation of funds – therefore, national government will no longer allot funds for land acquisition and transfer–then there is room to argue that a fresh source of funds such as the idle land tax can finance the remaining requirements for land transfer. In particular, proceeds of an idle land tax can be earmarked for land transfers that have not been completed – for CARPable lands already covered (but CLOAs have not been awarded to agrarian reform beneficiaries), and for CARPable lands that have been recently issued notices of coverage. We received information that the DAR, in order to beat the June 2008 deadline, has in fact issued notices of CARP coverage left and right.

However, the growing consensus among AR advocates and practitioners is that unless the CARP Law is extended and/or a new law is adopted, DAR’s mandate to redistribute land will, at best, be legally contentious. In effect, the deadline “can” also be interpreted (and is in fact being interpreted by some sectors) as a deadline for the DAR’s mandate to redistribute land. In effect, all land transfers that were not

56 Notes from study session with Ed Pancho, Gerry Bulatao, Atty. Deng Tan and Atty. Fred Peñaflor.

FIGU

RE V

Surigao City

Davao City

Sipalay City

Daet

Alaminos City

0.0 10.0 20.0 30.0 40.0 50.0 60.0

14.1

18.8

11.5

50.6

11.7

79

completed will have to be stopped until a new legislation is in effect. Without new legislation that either extends the deadline for CARP or an altogether new law that defines a new CARP, any attempt of DAR to redistribute or even to complete ongoing land redistribution beyond June 2008 “can” be met with court cases. With only 14 session days left, both houses of Congress have not prioritized deliberation on the CARP extension, indicating that there is no time to beat the June 2008 deadline. The best case scenario is that the CARP extension or the new CARP law will be deliberated on after June 2008. This gives a transition period of until December, since the approved national government budget provides funding for the DAR up to December 2008.

These developments put to a new light the central proposition of the research. How can proceeds from an idle land tax be earmarked for land redistribution if the mandate to redistribute land, at this point, is legally contentious?

Second, the incongruence in the timing of the proposed reforms. Latest reports57 regarding the status of CARP extension within both houses of Congress point to a possible extension of the LAD component of CARP for another five years, allowing the DAR to redistribute another 1.1 million hectares of agrarian reform lands. Considering the policy reform requirements and the administrative challenges that need to be addressed, full maximization of revenues to be collected from taxes on idle land will take considerable time. In addition, amendments to the LGC will also have to be undertaken, since agrarian reform is not a devolved function. On the one hand, the LAD component of CARP requires immediate funding augmentation.

Third, insufficiency of potential revenues from the idle land tax. Financing requirements necessary for the completion of LAD within the five-year projected extension is estimated at a low of PhP 15 billion58 to a high of PhP 327 billion59. The 2006 to 2010 Medium Term Investment Plan released by the NEDA pegs the funding requirement for land tenure improvement at PhP 59.6 billion.60 In contrast, the highest reported income from real property taxes on idle lands was recorded in 2005, amounting to PhP 23.1 million. Even if this grew by five times (the highest recorded growth of revenues from idle land taxes posted in 2004 reached 530 percent ), it would only amount PhP 115.5 million. This amount will not create a dent in the funding required to complete LAD.

57 From http://newsinfo.inquirer.net/breakingnews/nation/view/20080515-136794/House-keen-on-approving-CARP-extension----Lagman. Downloaded May 21, 2008.

58 From House Bills 743, 1265, 2083, 1257, 2219, 2280 and 2948: Strengthening and Extending the Effectivity of CARP and Amending for the Purpose RA 6657 or the Comprehensive Agrarian Reform Law of 1988 as Amended by RA 7905 and RA 8532, Directing the Conduct of a Process for CARP Impact Validation. 2008.

59 From HB 3613 – Stengthening the CARP by removing the barriers to its effective implementation, amending pertinent provisions of RA 6657, as amended (Rep. Eduardo Joson). 2008.

60 From http://www.neda.gov.ph/progs_prj/mtpip_2006-2010/mtpip_2006-2010.pdf. Downloaded May 20, 2008.

80

LTI

Acc

ompl

ishm

ents

of

DA

R a

nd D

EN

RYe

arTa

rget

Acco

mpl

ishm

ent

Bala

nce

Perc

enta

ge

1997

385,

511

292,

629

92,8

8275

.9

1998

340,

511

219,

454

121,

057

64.4

1999

315,

511

179,

738

135,

773

57.0

2000

298,

917

112,

014

186,

903

37.5

2001

245,

829

112,

704

133,

125

45.8

2002

251,

428

201,

607

49,8

2180

.2

2003

250,

261

228,

284

21,9

7791

.2

2004

250,

557

231,

598

18,9

5992

.4

2005

270,

511

141,

782

128,

729

52.4

2006

270,

511

244,

297

26,2

1490

.3

2007

270,

511

163,

894

106,

617

60.6

Aver

age

Bud

get

for

Land

Acq

uisi

tion

and

Dis

trib

utio

n (i

n P

hP m

illio

n)FY

199

7FY

199

8FY

199

9FY

200

0FY

200

1FY

200

2FY

200

3FY

200

4FY

200

5FY

200

6FY

200

7

TOTA

L AR

F-Re

gula

r6,

033.

755,

222.

815,

019.

958,

015.

686,

680.

113,

428.

223,

422.

118,

942.

488,

146.

926,

974.

488,

670.

86

Land

Acq

uisi

tion

& Di

strib

utio

n2,

748.

472,

679.

751,

619.

304,

573.

773,

303.

253,

428.

221,

030.

096,

458.

254,

938.

843,

552.

854,

893.

67

EP/C

LOA

Gene

ratio

n &

Dist

ribut

ion

150.

0013

8.33

124.

4111

5.85

96.8

012

8.39

300.

0024

3.10

243.

1026

7.93

LO C

ompe

nsat

ion

2,59

6.20

1,95

2.04

1,01

4.46

4,01

3.23

2,88

5.15

2,85

4.65

516.

855,

344.

403,

874.

222,

534.

313,

664.

56

Othe

r LAD

Act

iviti

es8.

186.

618.

9620

.03

15.9

514

.45

92.2

169

.56

262.

7621

6.68

182.

97

Oper

atio

nal S

uppo

rt3,

285.

272,

543.

063,

400.

643,

441.

923,

376.

862,

498.

222,

392.

022,

484.

233,

208.

083,

421.

643,

777.

19

Pers

onal

Ser

vice

s43

2.89

1,77

3.23

2,37

9.79

2,02

2.27

2,03

1.86

1,97

0.62

1,81

9.90

1,81

9.45

1,97

7.23

1,97

2.14

2,01

2.55

MOO

E2,

852.

3876

9.83

1,02

0.86

1,41

9.64

1,34

5.00

527.

6157

2.12

664.

781,

230.

851,

449.

501,

764.

65

TABLE XXI TABLE XXIIS

umm

ary

of L

AD

Acc

ompl

ishm

ents

FIGURE VI

450,

000

400,

000

350,

000

300,

000

250,

000

200,

000

150,

000

100,

000

50,0

00 0

1997

1998

1999

2000

2001

Targ

etA

ccom

plis

hmen

t

2002

2003

2004

2005

2006

2007

81

Proceeds from taxes on idle lands should then be seen as a policy reform with potential benefits, in terms of revenues, improvements in land use and development of the agriculture sector, to be felt only in the medium term. Funds generated from this measure, while accruing to local government units, should still be earmarked to expenditures for the agriculture sector.

Stakeholders’ Views on Earmarking of ILTResults from the case studies and focus group discussions support the adoption of an idle land tax. Adoption, however, is not seen as being tied to the fate of CARP – particularly land distribution. From the case studies, local governments cannot yet imagine contributing to fund land redistribution. There is some openness, though, in terms of sharing the proceeds of an idle land tax for support services to agrarian reform beneficiaries and development of the agriculture sector. It was suggested that the funds be directly provided to agriculture offices of the local governments to finance activities such as support for agribusiness development, technology demonstration farms, microfinance support for small farmers, marketing support and local government investments in small scale rural infrastructure such as irrigation.

82

SUMMARY OF MAJOR FINDINGS

Keeping agricultural lands idle puts to waste a scarce and valuable economic resource necessary for the production of agricultural produce including staples such as rice and corn and other basic food items. And in the context of the current food and agriculture sector crisis experienced by the Philippines, ensuring productive use of the country’s agricultural lands is an urgent necessity. In conjunction with a national food security bill and with a national land and water use act, an idle land tax can contribute to a policy environment conducive to productive use of agricultural lands. Enhancing idle land tax can potentially curb the rise of idle agricultural lands and stimulate improved utilization of agricultural properties.

To date, estimates on the scope of idle agricultural land vary greatly. The estimates range from a measly one percent to a high of 94 percent of the total agricultural lands in the country. The varying working definition of idle lands and consequently the huge differences in estimated scope only highlight the emerging problem related to non-cultivation and under-utilization of otherwise productive agricultural lands in the country. And despite the governing law and various policy directives, which not only define the framework, parameters and mechanics of the idle land tax, adoption of local governments of this particular measure has been slow. The idle land tax remains largely unimplemented.

The study in assessing the prevailing policy environment on idle land tax and the current administrative practices with regards land taxes shows the various issues and concerns that impact on the implementation of the tax on idle lands. The many problems confronting land taxes in the country are reflected in the lackluster performance of local governments in terms of local revenue generation. Data strongly supports the performance of local governments in collecting real property, and idle land taxes have been weak as its implementation has been mired with policy, administrative and political obstacles. Highlights of the study’s findings are as follows:

Policy Issues and ConcernsThe legal definition as contained in the Local Government Code of 1991 limits itself to identifying idle lands based on the current use of the agricultural properties. The definition has also been criticized by local government taxing officials as unclear and difficult to implement. A review of the working definition of what idle lands are must be undertaken, considering the need to promote more intensive use of agricultural properties. In addition to the definition and coverage of the idle land

83

tax, the existing tax structure as it is designed does not create a clear and strong signal or bias in terms of land use – whether a property is idle or not. Since tax rates applicable to idle lands are set by local governments themselves, the rates differ greatly across provinces and cities. When LGUs have failed to adopt the idle land tax the actual idle land tax rate is zero. In some instances, LGUs who did adopt the idle land tax have set the rate at an insignificant level.

Exemptions are able to take into account unintentional reasons why agricultural lands are sometimes left unproductive. In effect, the exemption just leaves out properties intentionally left idle such as lands held for speculation purposes as targets for the idle land tax. In order to limit exemptions, however, considerations were put forward to review automatic exemption from the idle land tax for properties exempted from the basic real property tax.

Issues Related to Idle Land Tax AdministrationAdministration of land taxes in the country, whether for the basic real property tax or for the idle land tax, follows the same process and as has been reviewed remains largely problematic. The system relies heavily on self declaration, which is not suitable given our current socio-political realities. The key problem is the availability of accurate information that will allow for transparency and accountability in the administration of land taxes.

The lack of centralized, accurate and complete information on taxable properties undermines revenues that can be potentially generated from real property and idle land taxes. Incomplete information results in some level of discretion from local assessors in determining the assessed values and therefore tax liabilities of real properties. This has become a source of corruption.

The process of real property valuation for purposes of land taxes has also been politicized. What could have otherwise been a technical process of ascertaining the fair market value of a property for appropriate land taxation became a politicized process since the approval of the Sanggunian Bayan is required in revising the schedule of fair market values. Other factors affecting valuation include insufficient and inaccurate comparative sales data, lack of assessment tools, and absence of technically qualified personnel at the local level. An accurate property valuation process impacts on the performances of land taxes not only in terms of potential revenues but also in terms of (i) undermining land use objectives, since property owners get away with not paying the appropriate tax and evade tax liabilities; and (ii) equity, since smaller and/or poorer property owners are most likely to report more accurately than their bigger/richer counterparts.

Collection has been limited by local political realities. But more critically, incentives for municipalities to actively collect land taxes are weak since they are required to share the revenues from real property taxes with the provinces and barangays as

84

follows: 35 percent to the province, 25 percent to the barangays, and only 40 percent for itself. On the one hand, proceeds from the collection of the idle land tax redound wholly to the province.

Lack of Cooperative Institutional ArrangementsIn the context of the Philippines, while the role of land taxes in local resource generation has been widely accepted, its role, however, in spurring productivity, better use and management of agricultural properties and rural development in general has not been well established. Land taxation in the Philippines, in practice, has rarely been integrated as a policy instrument in rural development; or conversely, agrarian reform, agriculture sector and rural development programs rarely take into account land taxation.

The lack of one harmonized definition including full sharing of available information leads to serious difficulties in identifying which agricultural properties are actually idle. One property can be categorized as idle or not idle depending on who is evaluating it. This creates confusion in terms of which properties can be covered or not covered by the idle land tax. In terms of easing the confusion, coordination among local governments and national line agencies becomes necessary for harmonizing the definition of and what constitutes an idle land and consequently which properties are actually idle,. This cooperative arrangement is also important in terms of assisting local governments in tax mapping and land valuation.Cost related to identifying idle agricultural lands that can be subject to taxes will be significantly reduced if coordination and information sharing are institutionalized. Different executive agencies with various mandates, expertise, data and information base, personnel and resources when taken together can contribute and share in assisting local governments, particularly local taxing offices, in terms of undertaking the basic requirement of idle land identification, land mapping and land valuation.

LGU Expenditures for the Agriculture Sector and Earmarking of Idle Land Tax Proceeds More than 60 percent of LGU revenues come from internal revenue allotments (IRA), and the rise in LGU revenues is largely accounted for by increasing grants and transfers available from the national government. Increasing IRA has made LGUs more dependent on national government grants and serves as a disincentive for the LGUs to maximize their revenue-raising powers. In fact, revenues from local sources only account for a little less than 30 percent of LGU revenues, with RPT revenues contributing less and less to total LGU income. Data from the case study sites amplifies the diminishing significance of real property taxes on local revenues. Furthermore, local government expenditures have been increasing over the years.

85

The bulk of LGU spending or some 40 percent is accounted for by expenditures on general public services which include expenses on public administration and on peace and order. Expenditures on economic services, on the one hand, represent almost 25 percent. Agrarian reform gets no financial support from local governments, since this is not a devolved function. Expenses for the agriculture sector, although minimal at 3 percent of total LGU expenditures, have improved in the post-LGC era from averaging at 1.3 percent of total to a 3 percent average post-Code. Total income generated by local governments even slightly exceeds their spending by an average of 10.4 percent. Revenues from local sources, however, are only able to finance, on the average, 36.8 percent of total LGU expenditures, demonstrating that the rise in local government spending has been financed by continuing increases in IRA.

Proceeds from taxes on idle lands should be seen as a policy reform with potential benefits, in terms of local government revenues, improvements in land use and development of the agriculture sector, to be felt in the medium term. Funds generated from this measure, while accruing to local government units, should be earmarked to expenditures for the agriculture sector. Moreover, there is basis in providing municipalities and barangays a share of the proceeds from the idle land tax when the idle properties are located in their respective area of jurisdiction, and particularly since these local government units play a critical role in the administration of the tax on idle land.

Insufficient Stakeholders’ Awareness and Public AcceptabilityLocal government’s adoption and carrying out of idle land tax also faces resistance from local land owners who are either supporters of local politicians or are politicians themselves. This suggests the need for a strong national government push, political will of local chief executives, consultations and consolidation of support among the various stakeholders before the promulgation and full implementation of the tax on idle agricultural lands.

86

SUMMARY OF RECOMMENDATIONS

Addressing the limitation of the tax on idle lands as it is currently defined in policy as well as its implementation requires a set of policy and administrative reforms. Popular understanding and support including incentives and assistance from the national government is also necessary for idle lands tax to be completely adopted by local governments. The summary of the study’s recommendations are presented below.

Adoption of Complementary Legislation• Two key legislations currently pending in Congress can be complemented by an

improved policy on taxing idle lands. These are the Food Security Bill and the Land and Water Use Act. Passage of these proposed legislations along with a revised idle land tax will create a policy environment where land, particularly agricultural lands, are utilized to their maximum potential.

Coming up with an Operational and Practical Definition of Idle Lands • The current definition of idle lands within the LGC have to be reviewed and

stricter definition would have to be adopted in order to have a significant enough tax base, and more importantly so as to seriously promote more intensive land use. The definition should be based on optimal use of the land rather than just on its current use.

• As adopted by the study, idle lands should be defined and identified beyond the current use of the property. The study suggests that idle lands be redefined as properties/lands classified and/or zoned as agricultural lands which are (i) uncultivated; (ii) or in cases where cultivated, cultivation is limited to less than 75 percent of its area/scope - underutilized; and/or (iii) utilized for purposes outside agricultural use.

• To further improve on the current definition of idle agricultural lands, the NTRC (1977) suggested considering that lands suitable for plant cultivation but not being used for such purpose will have to be declared as idle, arguing further that agricultural lands that have not been cultivated or used according to their land use classification will have to be subject to the idle land tax. This definition relates the actual use of the land with its land-use classification.

87

Pursuing Policy Reforms in the Idle Land Tax Law• The policy on idle land tax is due for review, apart from taking into consideration

changes in policy and context; advances in information technology can also further inform and improve a revised law.

• The tax on idle lands should be kept as a local fiscal instrument, even keeping its optional character. Amendments to the range of tax rate (currently at zero to five percent) can be applied to idle lands specifically defining a minimum applicable tax rate of one percent or even higher. The upper range of the tax should also be raised to 10 percent.

• There is a need to amend the assessment level matrix within the LGC, to remove the bias for residential land use. At the minimum, the assessment level should be equalized. Preferential treatment for lands devoted to agricultural use can be considered.

• Properties exempt from the basic real property tax should not be automatically exempt from the idle land tax, particularly when these properties can be utilized for agricultural purposes and considering that these properties are not necessarily productive.

Dealing with Idle Land Tax Administration Issues• An inventory of properties that are classified as idle or not idle must be

undertaken. This must be incorporated in the assessment roll of each assessor. Technical assistance for tax mapping and land use classification from the national government, particularly from the DENR and NAMRIA, must be explored.

• Innovations can be adopted to complement the self declaration system, if not completely do away with it. In particular, involvement of members of the community such as public school teachers, parent-teacher associations, barangay officials and other local line agencies in the identification of and even in the appraisal of taxable properties can be considered.

• Regular posting and publication of declared and assessed values of taxable properties must be undertaken by the offices of the local assessors.

• The role of the Sanggunian in the review and approval of fair market value schedules have to be reassessed, largely since property prices can be ascertained through a technical and administrative process aided by information sharing, tax mapping, computerization and new technology. This will allow the fair market values to be adjusted regularly and even in real time.

88

• An inflation index based on increases in local land values can also be applied to base or pre-determined land market values of taxable properties. This will allow fair market values of properties to increase over time, depending on the average increase in the value of properties within a locality without need for yearly assessment or revaluation.

Developing Institutional Mechanisms for Coordination and Cooperation• The national government, in order to encourage local governments to adopt

the idle land tax, can provide incentives, technical and grant assistance to local governments who will adopt the measure. The central government should consider matching funds generated by local governments from the idle land tax. For every peso collected by local governments from the idle land tax, the central government can provide an additional peso or even just a proportion thereof in grants or transfers.

• Land use classification as well as land mapping for purposes of tax collection including computerization of tax information is also an important arena for cooperative institutional mechanisms. Technical assistance and capability building activities can be provided by the DoF and the DENR.

• Coordination mechanisms among national and other local line agencies involved in various property valuation activities should also be institutionalized and strengthened. DA and DAR offices deal with identification, assessment and valuation of agricultural properties. Various authorities involved in the sale of properties can also be included. The national government, in order to assist local governments and ensure the accuracy and fairness of land market values, should also consider providing technical assistance and capability building support to local assessors.

89

Earmarking of Idle Land Tax Proceeds• The study supports the adoption of the proposed revised distribution of

proceeds as presented in Senate Bill 1161. The proposed bill provides for municipalities and barangays where taxable idle lands are located a share of the income generated from this local fiscal measure.

• The study further suggests that proceeds from the idle land tax or a portion thereof be earmarked for the development of the agriculture sector.

• Similar to the Special Education Fund which receives earmarked funds from a one percent levy imposed over and above the basic real property tax by local governments, the idle lands tax can be treated as a “Special Agriculture Fund” where tax collected by local governments from idle agricultural lands are directly allocated for development projects related to improving the locality’s agriculture sector.

Developing Popular Support for the Idle Land Tax• A campaign among LGUs for the adoption of the idle land tax must be initiated

by the national government in partnership with various stakeholders in order to inform them of the availability of this particular fiscal instrument. Many LGUs are unaware of this measure, and those who are aware use it sparingly.

• There is a need to popularize the benefits of an idle land tax among ARRD stakeholders, particularly its impact in stimulating rational land use and in encouraging productivity.

• A complete understanding and comprehensive analysis of why idle agricultural lands proliferate is an important follow through action research activity from this study. Undertaking an in-depth study on the reasons and factors affecting the utilization of otherwise productive agricultural lands is an important arena of policy and program inquiry that can provide a more comprehensive and sustained solution to the country’s current agriculture and rural sector dilemma.

90

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Varanyuwatana, Sakon. 1999. Property tax in Thailand. In Property tax: An International Comparative Review, ed. William McCluskey. Aldershot, UK: Ashgate

CONFERENCE PROCEEDINGS

Guevarra, Milwilda M. 2004. The Fiscal Decentralization Process in the Philippines: Lessons from Experience. In Fiscal Decentralization in Asia Revisited, ed. Hitotsubashi University. Tokyo, Japan.

Habito, Cielito F. and Roehlano M. Briones. 2005. Philippine Agriculture Over the Years: Performance, Policies, and Pitfalls. In Policies to Strengthen Productivity in the Philippines. Makati City.

Legislative Executive Development Advisory Council. 1999. In Second Meeting of the Legislative-Executive Development Advisory Council. State Dining Room, Malacañang.

ELECTRONIC SOURCES

Based on the Revised Revenue Code of Island Garden City of Samal City Ordinance no. 2004-083. 2008. IGACOS Official Website. Accessed April 2008.

Beck, Hanno T. 1999. Land Value Taxation and Ecological Tax Reform. Accessed April 01 2008. Available from http://www.taxpolicy.com/etrbeck.htm.

Briones, Roehlano. Please Pass the PALT. Accessed 15 February 2008. Available from http://rationalchoice.blogspot.com/search/label/Agrarian%20reform.

Bureau of Local Government Finance. Accessed April 2008. Available from www.blgf.gov.ph.

Chapter 7: Macroeconomic Framework and Development Financing. 2004. Accessed. Available from http://www.neda.gov.ph/Subweb/MTPDP_Angat_Pinoy_2004/AngatPinoy/ch7/chapter7-VII.htm.

City Information Office. 2007. Alaminos Eyes Enhancement on Tax Collection Scheme. Alaminos City Official Website. Accessed March 2008. Available from http://www.alaminoscity.gov.ph/news/newsdetails.aspx?newsid=289.

Department of Finance - National Tax Research Center. Accessed April 2008. Available from http://www.ntrc.gov.ph.

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Heavy Taxation on Idle Lands to Serve the Economy, the Environment and Social Justice. Accessed 15 March 2008. Available from http://soriano-ph.com/archives/381.

Henry George. Accessed 01 March 2008. Available from http://en.wikipedia.org/wiki/Henry_George.

Idle Land Tax Rates Scheduled to Increase. 2004. Accessed 15 March 2008. Available from http://www.thailawforum.com/news-jan04-march04.html.

Ismail, Faezah. 1998. Should Idle Land be Confiscated? Accessed 15 April 2008. Available from http://161.139.39.251/akhbar/land&admin/1998/ns98226.htm.

Land Tenure Service in Rural Development Division. 1998. Contemporary Thinking on Land Reforms. Accessed 15 March 2008. Available from http://www.landcoalition.org/docs/odfaomon1.htm.

National Economic and Development Authority. 2004. Medium-Term Philippine Development Plan 2004-2010. National Economic and Development Authority. Accessed April 2008. Plan. Available from www.neda.gov.ph/ads/mtpdp/MTPDP2004-2010/PDF/MTPDP2004-2010.html.

Philippine Forest Corporation. Accessed April 2008. Available from www. forestry.denr.gov.ph/dmc2007-05.

Philippines: Tax and Legal Environment. 2007. Accessed 15 March 2008. Available from http://www.pwc.com/extweb/service.nsf/docid/589961B022B2B1DCCA256F9D0030446A.

Public Relations and Information Department. 2008. Nograles Proposes 5-point Action Plan to Achieve Food Security. Congress of the Philippines - House of Representatives Official Website. Accessed April 5 2008. Available from http://www.congress.gov.ph/press/details.php?pressid=2197.

Republic Act No. 7900. 1995. Republic Act No. 7900: An Act to Promote the Production, Processing, Marketing and Distribution of High-valued Crops, providing funds therefore, and for other purposes. Accessed. Available from http://www.chanrobles.com/republicactno7900.htm.

Tagum City. 2007. Background on Real Property Tax. The Official Website of Tagum City. Accessed March 2008. Available from http://www.tagumcity.gov.ph/business.html.

JOURNALS

Botha, Mark. 2000. The New Land Tax and Possible Environmental Effects. IUCN Policy Think Tank Series 4.

Hoff, Karla. 1991. Land Taxes, Output Taxes, and Sharecropping: Was Henry George Right? The World Bank Economic Review 5, No. 1.

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Llanto, Gilberto M. 2003. Land Issues in Poverty Reduction Strategies and the Development Agenda: Philippines. PIDS Discussion Paper Series 2003, no. 03.

Manasan, Rosario G. 1992. Fiscal Implications of the Local Government Code of 1991. Journal of Philippine Development XIX, No. 34-1.

________________. 2000. Improving Tax Administration: A New View from the Theory of Tax Evasion in a Corrupt Regime. PIDS Policy Notes 2000, no. 11.

________________. 2003. Tax Administration Reform: (semi-) Autonomous Revenue Authority Anyone? PIDS Discussion Paper Series 2003, No. 05 (Revised).

_________________. 2004. Local Public Finance in the Philippines: In Search of Autonomy with Accountability. PIDS Discussion Paper Series 2004, No. 42.

Morales, Horacio R., Jr. 1998. Agrarian Reform Agenda of the Estrada Administration: Completing the Foundation for Sustainable Development and Democratic Governance in the 21st Century. Philippines International Review 1, No. 2.

Reyes, Celia M. 2002. Impact of Agrarian Reform on Poverty. PIDS Discussion Paper Series January 2002, No. 02.

Skinner, Jonathan. 1991. If Agricultural Land Taxation is so Efficient, Why is it so Rarely Used? The World Economic Review 5, No. 1.

Tanzi, Vito and Howell H. Zee. 2000. Tax Policy for Emerging Markets: Developing Countries. National Tax Journal.

MAGAZINES, NEWSPAPERS, AND CORRESPONDENCES

Bordadora, Norman. 2008. Speaker mulls takeover of idle property. Philippine Daily Inquirer. Accessed April 15, 2008. Available from http://newsinfo.inquirer.net/breakingnews/nation/view/20080415-130616/Speaker-Mulls-Takeover-of-Idle-Property.

Sugino, Tomohide. 2005. FTA and Rural Poverty Alleviation. CGRPT Flash, December 2005, 4.

The National Tax Research Center. 1977. Idle Land Taxation, ed. Dr. Gerardo P. Sicat.

REPORTS

Bureau of Agricultural Statistics. 2008. Rice and Corn Situation and Outlook. Quezon City: Bureau of Agricultural Statistics.

Cainglet, Truman T. 2001. Rural Poverty Alleviation under Changing Economic Conditions in the Philippines.

Collas-Monsod, Solita. 2002. The War Against Poverty: A Status Report.

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Commission on Audit. 2002. 2002 Annual Financial Report of Local Governments. Quezon City: Commission on Audit.

_________________. 2003. 2003 Annual Financial Report of Local Governments. Quezon City: Commission on Audit.

_________________. 2004. 2004 Annual Financial Report of Local Governments. Quezon City: Commission on Audit.

_________________. 2005. 2005 Annual Financial Report of Local Governments. Quezon City: Commission on Audit.

_________________. 2006. 2006 Annual Financial Report of Local Governments. Quezon City: Commission on Audit.

Green, Elloit. 2002. The Role of Case Studies in Development Research.

Land Equity International and Department of Justice. 2002. Land Laws and Regulations Policy Study. Australia: Land Equity International.

Legislative Affairs Section. 2007. CARP Extension Bills. Quezon City: House of Representatives.

Lim, Ernesto Jr. 2006. 2004-2010 MTPDP Assessment: Agrarian Reform. Accessed April 2008. Available from http://www.geocities.com/phildhrraweb/mtpdp_2006_ar_final_draft.doc.

Multi-Sectoral Conference on the Rice Crisis. 2002. People’s Declaration Against the Rice Crisis.

Philippine Forest Corporation. 2002. Economic Productivity Out of Idle Lands. Quezon City: Powerpoint presentation.

Rural Development and Natural Resources Sector Unit. 2006. Rural Development Sector Strategic Priorities. Philippines: The World Bank Group in the Philippines.

Rural Theology Association. 2004. Land Tax and Henry George. United Kingdom: Rural Theology Association.

MANUSCRIPTS

Alabado, Roberto P., III. 2005. Managing Vacant Lands within Central Business Districts: Implications of Implementing Idle Land Taxation.

Balisacan, Arsenio M. 2007. Agrarian Reform and Poverty Reduction in the Philippines. Policy Dialogue on Agrarian Reform Issues in Rural Development and Poverty Alleviation, Quezon City.

Bernardo, Romeo and Marie-Christine Tang. 2007. The Philippines: An Introductory Report. Global Source.

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Bird, Richard M. 2000. Local and Regional Revenues: Realities and Prospects. Annual World Bank Conference on Development in Latin America and the Caribbean, Valdivia, Chile.

Bird, Richard M. and Enid Slack. 2002. Land and Property Taxation: A Review.

Bryson, Phil and Gary C. Cornia. Fiscal decentralization and the property tax. Brigham Young University.

De Venecia, Jose Jr. 2001. A Program for Economic Take-off Toward Sustained Growth, Quezon City.

Deininger, Klaus, Pedro Olinto, and Miet Maertens. Redistribution, Investment, and Human Capital Accumulation: The Case of Agrarian Reform in the Philippines.

Foldvary, Fred E. 2006. The Ultimate Tax Reform: Public Revenue from Land Rent. Civil Society Institute Policy Study, Santa Clara, California.

Glaeser, Edward L. 1995. The Incentive Effects of Property Taxes on Local Government. NBER Working Paper Series, Cambridge, MA.

Guevarra, Milwida. The Fiscal Decentralization Process in the Philippines: Lessons from Experience.

______________. 2003. Real Property Taxation in the Philippines. The Ford Foundation, Manila.

Hentschel, Jesko. Integrating the Qual and the Quant: When and Why? The World Bank, Madagascar.

Morales, Horacio R., Jr. 1999. When Does Agrarian Reform Work for the Poor? Manila Social Forum: The New Social Agenda for East and Southeast Asia.

Paderanga, Cayetano, Jr. 1984. Real Property Taxation in the Philippines: Issues and Research Directions. Staff Paper Series.

Quisumbing, Agnes R. and Scott McNiven. 2005. Migration and the Rural-Urban Continuum: Evidence from the Rural Philippines. Discussion Paper BRIEFS, Washington D.C.

Tan, Editha A. Income Distribution in the Philippines. Unpublished.

Weinhold. 2002. Brief Review of Background Concepts in Statistics and Regression Analysis.

STATUTES AND BILLS

Adoption of Strategic Agriculture and Fishery Development Zones (SAFDZ) and The Network of Protected Areas for Agriculture and Agro-Industrial Development (NPAAAD) as the Prime Natural and Economic Resource Endowments for the Modernization of Agriculture and Fishery Sectors in the Philippines and Providing Institutional Mechanisms for their Sustainable Utilization, Management and Protection. 1999. In Department Administrative Order, 38.

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Amending Presidential Decree No. 464 by Granting Special Authority to the President to Provide Flexibility in the Real Property Tax System to Meet Economic Exigencies and/or Promote The General Welfare. 1981. In Presidential Decree, 1812.

An Act Amending the Laws Governing Local Governments by Increasing their Autonomy and Reorganizing Provincial Governments. 1959. In Republic Act, 2264.

An Act Creating a National Land Use Code, Providing Implementing Mechanisms Therefore and for Other Purposes. 2007. In HB 1540:9.

An Act Creating Local Housing Boards in Every City and Municipality, Providing for its Powers and Functions, and for Other Purposes. 2004. In Senate Bill, 1295.

An Act Granting Further Autonomous Powers to Local Governments. 1967. In Republic Act, 1585.

An Act Increasing the Tax on Idle Lands, Amending for the Purpose, Section 236 of RA 7160, Otherwise Known as the Local Government Code of 1991. 2007. In SB 163.

An Act Instituting a National Land Policy, Providing the Implementing Mechanisms Therefore, and for other Purposes. 2007. In HB 971:23.

An Act Instituting a National Land Use Policy, Providing the Implementing Mechanisms Therefore and for Other Purposes. 2007. In HB 64:24.

An Act Instituting a National Land Use Policy, Providing the Implementing Mechanisms Therefore, and for Other Purposes. 2007. In HB 2190:38.

An Act Instituting a National Land Use Policy, Providing the Implementing Mechanisms Therefore, and for Other Purposes. 2007. In HB 1956:26.

An Act Instituting a National Land Use Policy, Providing the Implementing Mechanisms Therefore, and for Other Purposes. 2008. In HB 3637:26.

An Act Institutionalizing a National Land Use Policy, Providing the Framework and Mechanism for Implementing Thereof. 2007. In HB 3175:23.

An Act Institutionalizing the State Policy on Food Production and Security, Establishing the National Food Security Council, Appropriating Funds Therefore and for Other Purposes. 2008. In HB 3870:14.

An Act to Improve the Environmental Conditions of Residential and Industrial Zones in the Country. 2008. In HB 3745:3.

An Act to Institutionalize State Policies on Food Security, and for Other Purposes. 2008. In HB 3711:4.

An Act to Streghthen Local Government Units by Amending Certain Provisions of Republic Act No. 7160, Otherwise Known as The Local Government Code of 1991. 2007. In SB 1161.

An Ordinance Enacting the Revenue Code of the Province of Bohol. 1996.

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An Ordinance Prescribing the Policies, Conditions and Guidelines for the Reclassification of Agricultural Lands. 1997. In City Of Naga Ordinance, 1997-050.

An Ordinance Prescribing the Policies, Conditions and Guidelines for the Reclassification of Agricultural Lands. 1997. In City Of Naga Ordinance, 1997-050.

An Ordinance Providing for a Comprehensive and Continuing Development Program for the Urban Poor Sector and Appropriating Funds for the Purpose. 1998. In City Of Naga Ordinance, 98-033:14.

Guidelines for the Inventory and Identification of Lands and Sites for Socialized Housing. In RA 2729.

Guidelines in the Inventory and Sketching of Foreshore Areas. 2002. In DAO, 29-91.HB 3613: Strengthening the CARP by Removing the Barriers to its Effective Implementation, Amending Pertinent Provisions Of RA 6657, as Amended. 2008.

House Bills 743, 1265, 2083, 1257, 2219, 2280 and 2948: Strengthening and Extending the Effectivity of CARP and Amending for the Purpose RA 6657or the Comprehensive Agrarian Reform Law of 1988 as Amended by RA 7905 and RA 8532, Directing the Conduct of a Process for CARP Impact Validation. 2008.

RA 7279: An Act to Provide for a Comprehensive and Continuing Urban Development and Housing Program, Establish the Mechanism for its Implementation, and for Other Purposes. 1992. Accessed. Available from http://www.chanrobles.com/republicactno7279.htm.

Real Property Tax Code. 1974. In Presidential Decree, 464.

Real Property Tax Code. 1978. In Presidential Decree, 1446.

Republic Act No. 7900. 1995. Republic Act No. 7900: An Act to Promote the Production, Processing, Marketing and Distribution of High-Valued Crops, Providing Funds Therefore, and for Other Purposes. Accessed. Available from http://www.chanrobles.com/republicactno7900.htm.

The Real Property Tax Ordinance of 1993. 1993. In City Of Naga Ordinance, 93-042.

Urban Development and Housing Act of 1992. 1992. In Republic Act, 7279.

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PART TWO

CASE STUDIES:IDLE LAND TAX AND

LOCAL GOVERNMENTS

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LUZONDAET, CAMARINES NORTE

Exploring the Possibility of Collecting an Idle Land Tax in the Municipality of Daet1

1 Daet: a First Class Municipality and Surfing Destination

The sand bottom and kilometer-long coastline of the Municipality of Daet has made it home to the 61st international surfing and dodgeball competition. Daet is where the first monument of Rizal, the country’s national hero, was erected. It is located 365 kilometers south of Manila – an eight-hour ride by public utility bus or a 45-minute trip by plane.

Approximately 112°54´ to 123°1´East Longitude and 14°2´ to 14°10´

North Latitude, the town is bounded in the east by the Municipality of Basud, Camarines Norte; in the southwest by the Municipality of San Vicente, Camarines Norte; in the northwest by the Municipality of Talisay; and in the northeast by the Pacific Ocean. A first class municipality, Daet is made up of 25 barangays, eight of which are urban. It is the second smallest municipality of the province of Camarines Norte. The town’s topography is flat, with an average elevation of 10 meters above sea level.

Daet’s climate is the same all year round, with no dry season and more pronounced heavy rains from November to December.

1 Andres Rapisura, Fellow, La Liga Policy Institute. Edited by Joanne Michaela Arriola, Fellow, La Liga Policy Institute.

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In 2000, total population was 80,632, majority of which (66 percent) is found in the rural areas. It has a population growth rate of 1.76; a household population of 16,257 (2000); and a population density of 13.75 or 14 person per hectare.

Bikol and Tagalog are the primary languages of the people of Daet.

Daet is the provincial seat of Camarines Norte. It serves as service center from where the needs of neighboring towns are administered. As the province’s commercial center, economic activity is busiest in the eight urban barangays. It has no identified industrial zone, although light industrial establishments engaged in iron works, bakery, food processing and iron mills can be found there.

2 An Agriculture-based EconomyThere are three different estimates of the land area of the Municipality: The Daet Public Land Subdivision (PLS) 488-D Case 1 and 2, approved in September 16, 1958, estimates total land area at 8,241.275 hectares, while a Geospatial Information System (GIS) registered a total land area of 5,105.35 hectares. The GIS was used as a reference for municipal land use planning. Finally, a simple DENR certification dated March 5, 1989 and still currently being used registers 5,861 hectares. At present, all of Daet is considered alienable and disposable. Uses of land include: residential, commercial, agricultural, and other miscellaneous purposes; 66.47 percent of the total area is agricultural. Fisheries and wetlands cover five percent; rivers and creeks, four percent; and built-up areas, 24.54 percent.

Fishponds are found in the northeastern and northwestern parts of the municipality, totaling 179.75 hectares. While these are classified in some studies as agricultural, the municipality has classified them with NIPAS and swamp areas because of their ecological similarities. Mangroves, swamps and NIPAS containing brackish waters are found along the ocean coast and the lower river basins, making up 62.22 hectares, mostly situated in the northeastern delta of the Daet River and in Barangay Bagasbas. Total land classified under fisheries and wetlands is 241.97 hectares.

Built-up areas consist of lot parcels for residential, commercial, industrial, utility, institutional, park and recreational use. Since the urban population growth rate has been much higher in the urban barangays, they have more extensive built-up areas than the rural barangays, although there are urban barangays that still have lands devoted to general uses such as agriculture, fisheries and mangroves.

The built-up areas are predominantly found in the center of the municipality and spread outward through the major radial roads. Patches can also be found in the area surrounding the airport and along the other major roads. In the rural barangays, the built-up sections coincide with the location of barangay centers.

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There are 1,252.63 hectares of built-up areas, which make up about 24.54 percent of the entire municipality. Table 1 below shows land use hectarage based on the GIS derived total land area.

Table 1. Hectarage per land use category in DaetLand Use Category Existing (Has.) %

Agricultural 3,393.59 66.47%

Fisheries & Wetlands 241.97 5%

Rivers and Creeks 217.16 4%

Built-Up Areas 1,252.63 24.54%

TOTAL AREA 5,105.35 100%

The Municipality of Daet basically has an agricultural economy. There are about 1,195 agricultural farms distributed throughout the rural barangays. (See Table 2 - Number of Agricultural Farms per Barangay). Major agricultural products are rice, coconut, and livestock and poultry. Other crops produced are corn, citrus, garlic, vegetables, root crops and coconut. It is estimated that agricultural farms cover 3,270.77 hectares of total agricultural land.

Table 2. Number of Agricultural Farms per Barangay

Barangays Agricultural Farm Barangays Agricultural Farm

1. Barangay I 9. Alawihao 445

2. Barangay II 10. Awitan 2

3. Barangay III 11. Bagasbas

4. Barangay IV 12. Bibirao 94

5. Barangay V 13. Borabod 1

6. Barangay VI 14. Calasgasan 95

7. Barangay VII 15. Camambugan 120

8. Barangay VIII 1 16. Cobangbang 15

17. Dogongan 130

18. Gahonon 5

19. Gubat 11

20. Lag-On 152

21. Magang 13

22. Mambalite

23. Mancruz 13

24. Pamorangon 98

25. San Isidro

TOTAL 1,195

Source: GEODATA

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In terms of crops, rice land covers 49.73 percent of the total; coconut land covers 47.51 percent, diversified crops are planted on 0.95 percent of total agricultural land; and corn, 0.40 percent. An estimated 47.43 hectares of land were classified as idle. Table 3 shows the distribution of agricultural lands by crop.

Table 3. Distribution of Agricultural lands by CropCROP HECTARAGE % of TOTAL

Irrigated rice paddies 1,423.38 41.94

Rain-fed rice paddies 264.46 7.79

Coconut 1,612.48 47.51

Corn 13.71 0.40

Diversified crops 32.13 0.95

Idle agricultural land 47.43 1.40

TOTAL 3,393.59

Note: The 1998 data of the DENR recorded 3,590.63 hectares of agricultural lands based on the certified 5,861 hectares of total land area of the Municipality of Daet. In 2002, the Municipality of Daet conducted a GIS and recorded 3,393.59 hectares of land classified as agricultural land. Below is the distribution of these lands.

Idle Lands in a Fertile Soil

The Municipal Agrarian Reform Officer and the Municipal Agriculture Officer of Daet declared there are no idle lands in the municipality, except that there are landowners who have left their properties idle on purpose because they want their land use classification converted. The proposed land use plan of the municipality cites this situation as a problem, since around 47.43 hectares of agricultural lands have reportedly been left idle.

The proposed land use plan of the municipality (revised June 2004) declared as a matter of policy that prime agricultural lands must be protected. The declaration was made in view of the increasing number of landowners who want the classification of their agricultural lands converted to other uses. The declaration, however, runs counter to the plan of the municipality to establish a government center in a site currently devoted to rice production.

The proposed Municipal Land Use Plan (revised June 2004) cited that agricultural lands in Daet are highly productive.

The soil of Daet is also suitable for the diversified crops. A multi-tier type of agricultural production can be practiced in coconut lands. The kind of crops to be planted depends on the density of the foliage of the coconut trees for the penetration of light. Diversity of crops associated with coconut plantation are banana, pineapple, cassava, abaca, squash, root crops, and other diversified vegetables.

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Land fertility in Daet makes it almost impossible for landowners and farmers to let lands go unproductive. The types of soil of Daet are all good for agriculture. The San Manuel soil types are good for coconut, abaca, vegetables, corn, sugarcane, watermelon, melon and root crop production, while Indan clay is best for rice culture.

Despite its rich natural resources, Daet’s poverty incidence is at 39 percent. In the poorest barangay of Bibirao, the average resident, with a family of 7-10 members, earns an average of PhP 2,000-3,000 a month as a scavenger or casual laborer on coconut, rice, and vegetable farms.

Other social indicators include: low enrollment rate in basic education, malnutrition rate of 3.42 percent among children aged 0-5 years, child mortality rate of 51 out of 13,042, maternal mortality rate of 7 out of 1,936, and 11.92 percent of total households without potable water.

3 CARP Implementation in the AreaThe office of the Department of Agrarian Reform in Daet identified 1,273.49 hectares of land for CARP coverage. Of these, around 119.83 hectares are subject to exclusion, in recognition of the landowner’s right to retain a portion of their property. This redounds to a working scope of 1,153.66 hectares for distribution. As of January 2008, 673.83 hectares of land have been distributed, leaving a balance of 479.83 hectares. Of the balance, there are 269.05 hectares of land identified by the MARO as problematic. Obstacles to land distribution include pending legal cases; operational problems such as identification of critical area, landowner resistance, and reconstitution of titles; and errors in survey/technical descriptions.

A total of 210.77 hectares comprise the workable balance for agrarian reform. Of these, 54.35 hectares are pending at the MARO, 71.79 hectares at the PARO and 84.64 hectares at the Land Bank of the Philippines. The following are respondents’ accounts of their own experiences of CARP implementation.

A Landowner’s Story Lena (not her real name) is a teacher at a kindergarten school her family put up. At the same time, she acts as the administrator of her family’s landholdings. She was excited to hear we were doing a research related to agrarian reform and started telling her own story.

Lena’s family lost some of their properties to the land distribution program of the government. Like many landowners in the town, Lena’s family has yet to receive a single centavo in compensation for the land the government acquired

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from them years back. To make matters worse, the farmer beneficiary sold the property to a neighbor who is also a landowner.

Lena narrated how the government’s agrarian reform program affected landowner tenant-relations. She recounts that before CARP implementation, landowners would simply wait for their share of the harvest from their tenants. Landowners could rely on the honesty of tenants then. Things changed when CARP was implemented. Under the new arrangement, landowners had to wrestle their way to their property to ensure a share of the harvest. In the process, Lena’s family discovered that part of the coconut harvest was hidden from them in a hole covered with leaves, and other fruits and vegetables were being planted in the property, from which they got no share. They also found out that the practice has been going for quite some time.

Lena feels that her family benefits more now than they used to do prior to the implementation of the agrarian reform mainly because they now actively monitor the yield of their remaining properties.

Lena’s family also witnessed the benefits to the farmers. The program turned the former tenants into small-owner cultivators. The farmers’ families collectively cultivated the acquired lands. With income from the harvest, farmers were able to improve their houses, sustain their children’s schooling, and produce enough food for the table.

But as time passed, said Lena, the situation changed. The farmer started to spend extravagantly. Even after his children married, they remained dependent on the land. Unable to fully develop the land to meet the growing needs of his expanded family, the farmer later mortgaged the land.

Sustaining the Benefits of the Program

The Municipal Agrarian Reform Officer (MARO), Ave Borja, said that the land distribution program of the municipality could be traced back to Presidential Decree 27 issued in October of 1972, which covered rice lands. Borja noted that most of the land in the municipality is devoted to rice and was thus covered under PD 27. The Comprehensive Agrarian Reform Law consolidated and expanded the scope of the government’s land reform program to include coconut and other crops from small landholdings to large plantations.

Prior to the implementation of the program, the landowner covered the cost of land production. With the implementation of CARP, the farmer beneficiary had to manage the production by himself. He now had to contend with the high cost of agricultural inputs, low farm gate prices and marketing.

“Besides the lack of funds to compensate landowners for land acquired under the program, the problem was that not many of the farmer beneficiaries were

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able to sustain land production because of lack of skills, capital and support services. This is a major weakness in the sustainability of the program – farmers were not ready to manage their newly owned land,” said Borja.

Lena pointed out, “farmers remained poor despite the opportunities the program offered”

Land Distribution for the Past 35 Years

Mr. Gil Del Barrio, Chairman of the Municipal Agricultural Fisheries Council2 in Daet and a beneficiary of PD 27, argued that many of the farmers in the municipality benefited from the governments’ agrarian reform program. “But there are still a lot of lands that have not been given to the farmers,” he pointed out in Tagalog. “The farmers, having no knowledge of the time-consuming documentation process, are totally dependent on the assistance of the Municipal Agrarian Reform Office (MARO),” the farmer leader added.

Based on the report of the Provincial Agrarian Reform Office, as of January 2008, 479.83 hectares of land have yet to be distributed; total accomplishment for the municipality of Daet stands at 58.41.

The summary of accomplishment (Table 4) prepared by the Provincial Agrarian Reform Office of Camarines Norte recorded an accumulated land distribution accomplishment in 1989 covering rice lands distribution was expanded to cover coconut lands in 1994. The 1989 record of accomplishment of the DAR-Daet office showed an accumulated total of 175.47 hectares of rice lands benefiting 144 farmers. Accomplishments in the years that followed—i.e. 18 years– reached 132.85 hectares covering 146 farmer beneficiaries. This means distributing 673.72 hectares of land to 471 farmer beneficiaries in a span of 35 years. As indicated in the report, very few were covered under the voluntary offer to sell. The report also showed that those covered were small landholdings. Even those listed as target for coverage were of small sizes.

2 This body is part of a nationwide network of agricultural and fishery councils created under Executive Order 116 Series of 1987 to serve as a forum for consultative discussions within the agricultural and fishery sector, with the Department of Agriculture as its Secretariat.

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Table 4. Summary of Accomplishment for Daet

YR

RICE COCONUT TOTAL

OLT CA VOS GFI VLT

AREA FB AREA FB AREA FB AREA FB AREA FB AREA FB

1972-1986 -

1987 - -

1988 - -

1989 175.4690 144 175.4690 144

1990 17.3912 14 17.3912 14

1991 - - - -

1992 - - - -

1993 0.3290 1 0.3290 1

1994 - - 0.5283 1 0.2300 1 0.7583 2

1995 2.0806 2 27.9343 11 10.3620 5 40.3769 18

1996 2.7453 1 2.6657 2 5.4110 3

1997 3.7669 2 100.5592 45 5.7562 2 110.0823 49

1998 2.4365 4 4.3879 2 6.0266 5 12.8510 11

1999 0.5776 2 - 0.5776 2

2000 4.3344 7 25.3263 11 11.5863 4 5.8255 5 47.0725 27

2001 13.6693 19 5.9982 4 2.2800 1 1.3786 3 23.3261 27

2002 3.1290 3 8.6919 7 10.4050 5 30.5002 11 52.7261 26

2003 5.9850 4 7.6018 4 9.9320 5 23.5188 13

2004 6.8268 7 20.5846 11 4.6559 2 6.3645 4 38.4318 24

2005 30.7216 28 18.9618 9 8.9485 5 58.6319 42

2006 16.3296 30 9.1308 6 3.3542 2 28.8146 38

2007 22.4977 22 4.7071 2 10.7466 6 37.9514 30

TOTAL 308.2895 290 233.8839 112 23.6254 11 11.5863 4 96.3344 54 673.7195 471

MARO Ave Borja says that, of the remaining 479.83 hectares (see Attachment D), around 269.05 hectares are classified as problematic either because landowners contested the coverage in court or the lands were located in conflict areas3. This means a workable balance of 210.77 hectares.

Wrong coverage also led to cases where distributed properties were returned to the original owner.

Mrs. Aguilar, a landowner, recalled how her family suffered because of the wrong coverage. “Many times my sisters were rushed to the hospital because of heart attacks caused by the threat of losing our property. We made an appeal in 1983 and received the decision with finality in 2007. The next problem,” she said, was that “the farmer did not want to vacate the property despite the court ruling.” To

3 Conflict areas are those in which the New Peoples Army – Communist Party of the Philippines hold their operations.

108

amicably settle the matter, Mrs. Aguilar’s family paid the tenant to surrender the property. “It’s as if we bought back the property which we legitimately own in the first place!” she said.

Extending the comprehensive agrarian reform program: Issues and concerns

The CARP was scheduled to end on June 2008, and the soundness of the next steps relies on understanding the issues that beset the program. Several issues and concerns were raised by respondents.

On the implementation side, four major concerns were raised: improper land documentation; pending land cases, budget constraints, and illegal land conversion.

Data inconsistencies in land documentation and the lack of sufficient program funds delay land distribution and payment to landowners by the Land Bank of the Philippines. Documentation-related cases, including problematic identification of legitimate owners and boundaries, are pending at various levels – from the provincial courts all the way to the Court of Appeals. Illegal land use conversion is resorted to by landowners to eject tenants from the land.

The Agrarian Reform Fund for the implementation of the program technically ended with the expiry of the CARP. Should there be a decision to extend the program, a new budget will have to be drawn up by Congress.

Sustaining the gains of the program is hobbled by another set of problems. Among them are the lack of beneficiaries’ skills in land development and agricultural production, the lack of capital and credit facilities, the high cost of agricultural inputs coupled with the lack of government subsidy for agriculture, and the very low farm gate prices of agricultural produce. Table 5 presents a summary of issues raised by the respondents.

Table 5. CARP Issues and Concerns Issues and Concerns

Implementation budget constraints

land documentation

pending cases

illegal land use conversion

Post land distribution farmers lack skills in land development and agricultural production

lack of capital /credit

high cost of agricultural inputs

absence of government subsidy

low farm gate prices of agricultural produce

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Those who oppose the extension of CARP cite alleged wrong coverage and low productivity due to the parceling of lots. Two landowners raised the wrong coverage issue, while the municipal planning officer believes that parceling of lots leads to low productivity.

On the issue of wrong coverage, landowners assert that some properties, including their own, should have been exempt from CARP coverage. One of the landowners who opposed the extension actually won a case against DAR on land coverage. The other is a small landowner who bought his piece of land from savings he earned while working as an OFW; he alleged that the CARP does not recognize the right of landowners and that the government did not consult him before subjecting his land to CARP.

On the issue of low productivity, the municipal planning officer argues that the governments’ land distribution program affects agricultural productivity. She believes that large-scale farming would lead to increased productivity of the land. His argument, however, runs counter to the farmers’ contention that a lack of post-distribution support services is the cause of low productivity. In addition, the proposed municipal land use plan (revised June 2004) cites poor marketing and the lack of processing plants as other causes.

Despite these issues and concerns, majority of those interviewed expressed openness to the extension of the program, citing the substantial balance of distribution targets. They also claimed that implementation in the Municipality of Daet, although problematic at present, could be improved and is relatively uncontroversial. The NGO respondent suggested that when an idle land tax is implemented, the land distribution component could be devolved to the local government unit, although other respondents felt it best to keep the function with the DAR.

Corollary to the issues raised, the respondents identified several needs to be addressed: a) training and capacity building for farmers;b) support services to include farm-to-market roads, farm inputs, farm

facilities;c) livelihood;d) credit facilities/government subsidy; ande) program on coastal resource management and rehabilitation of mangrove

and coral reef.

The Program Beneficiary Development (PBD) Officer of DAR in Camarines Norte explained that they provide trainings and other capacity building activities to program beneficiaries. Support services such as farm–to-market roads, post harvest facilities, etc., are concentrated in highly developed agrarian reform communities or ARCs. She explained that by organizing ARCs, support services

110

such as farm to market roads and postharvest facilities are utilized at the optimum level. The PBD Officer explained that there is not much intervention in Daet because of the low level of CARP implementation in the area.

Table 6. Issues and Problems in CARP ImplementationRESPONDENT ISSUES AND PROBLEMS

MARO inconsistencies of data among government agencies: ROD, Assessor’s Office, CENRO

most of the original landowners, especially of those properties covered under PD 27, are already dead, making it difficult for DAR and the Land Bank of the Philippines to facilitate the land distribution, and secure additional budget for the publication of the death

insufficient fund for land survey

long period of processing the approval of land survey applications

pending cases at the central office

illegal land conversion

many farmer beneficiaries mortgage their lands due to lack of capital for production and other support services and facilities

there were lands wrongly covered by DAR which were later returned to the original owner

there are many unpaid landowners

untitled lands

Small Landowner distributed lands failed to develop further because of high prices of agricultural input, absence of capital, high interest loan, absence of government subsidy, inad-equate land development skills of farmer beneficiaries

non-recognition of landowners’ rights

Farmer Leader inadequate capacity of farmers to develop their lands due to lack of skills and resource capital

problems in processing land distribution, pending and appealed agrarian cases, and lack of skills on the part of the farmers in processing applications for land coverage

NGO absence or lack of support mechanisms after land distribution

MPDO selling of lands acquired through CARP because of poverty

Mayor inadequate post transfer program

MAO illegal land conversion

FDG-SB selling of distributed lands

non-coverage of big lands

Big Landowner non-payment of landowners compensation by the government

some lands were distributed even without the consent of landowners

wrong coverage

long period of case resolution

lack of capital to develop the land acquired through the CARP

farmers do not comply with leasehold contract

land acquired through the CARP are either sold or mortgaged

illegal CARP coverage

the good relationship developed through the years between the landowner and the tenant was destroyed and became imbued with suspicion and dishonesty

lands were abandoned because of change in residency on the part of the landowner

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4 The Strategic Direction of the Municipality of Daet

The municipality’s proposed strategic direction4 is to find a balance between eco-tourism and food security. The Proposed Land Use Plan (revised June 2004) declared the strategic direction of Daet as follows:

The potential of Daet to be a tourist destination spot can not be discounted. The vast and productive agricultural lands can not also be discounted. Tourism and agriculture should be the mainstay of Daet’s economy. To support these two industries, competitive commercial establishments and well-organized light manufacturing or service-oriented industrial complex are deemed necessary to spiral economic progress. With such diversified and scattered development activities, an efficient system of circumferential and radial roads (are) envisioned to facilitate flow of people, transport, products and services into, around, and/or out of Daet.

Majority of Daet is agricultural land. Food production is a national priority and its sustainability should be protected from the rampant conversion of prime agricultural land to urban land use. It is anticipated that Daet will remain one of the three rice granaries of Camarines Norte because of the natural richness of its soil and the relatively flat slope conducive to agriculture. Moreover, continuing programs on irrigation, farm-to-market roads, higher yields, and better grain varieties will assure Daet of a continuous source of food supply.

This direction addresses some of the farmers’ and agricultural workers’ issues discussed earlier. Daet being an agriculture-based economy where farmers and agricultural workers represent a major sector, financing the plan is a major concern.

5 Financing the Municipal Plan

Daet’s Revenue Base

Daet’s sources of funds are classified into two major categories: revenue taxes and general income accounts. Revenue taxes include amusement, real property, business, occupation, franchise, amusement, community and special education taxes. General income accounts cover revenues from permits and licenses, service, business, and others. The Internal Revenue Allotment from the national government falls under the Other Income classification. Figure 1 shows the income of Daet. Attachment D shows Daet’s Statement of Income for 2002-2007.

4 Proposed Municipal Land Use Pland (Revised June 2004).

112

The top five income contributors to the municipality are the IRA, business tax, real property tax, rent income and permit fees. Figure 2 shows the major sources of income, with the Internal Revenue Allotment (IRA) contributing more than half of the total income of the municipality. Figure 3 below shows the increasing role of IRA in the income of the municipality. See also attached report on the income of Daet from CY 2002-2007.

120,000,000.00

100,000,000.00

80,000,000.00

60,000,000.00

40,000,000.00

20,000,000.00

0.00

Local Taxes

Permits and Licenses

Service Income

Business Income

Other Income

Total Income

Fiscal Year

Inco

me

Figure 1. Income of Daet (2002-2007)

2002 2003 2004 2005 2006 2007

120,000,000.00

100,000,000.00

80,000,000.00

60,000,000.00

40,000,000.00

20,000,000.00

0.00

Business Tax

Real Property Tax

Permit Fees

Rent Income

Internal Revenue

Allotment

Total Income

Fiscal Year

Inco

me

Figure 2. Major sources of income in Daet

2002 2003 2004 2005 2006 2007

120,000,000.00

100,000,000.00

80,000,000.00

60,000,000.00

40,000,000.00

20,000,000.00

0.00

Internal Revenue

Allotment

Total Income of the

Municipality

Figure 3. IRA contribution to total income

2002 2003 2004 2005 2006 2007

113

According to Eduardo Naing, Assistant Municipal Assessor, the municipal government of Daet implements only tax measures passed by the provincial board. There is no legislation on other forms of revenue generation passed by the Sanggunian Bayan.

The Provincial Assessor Office explained that the level of real property valuation is based on assessed value, which is lower than the maximum allowable level provided by law. He said this allows for a more realistic collection target. Twenty-five percent of total collection goes to the barangay, and 40 percent goes to the municipal government. The province gets the remaining 35 percent.

Table 7. Consolidated Income Statement of Daet, Camarines Norte 2002 2003 2004 2005 2006 2007

TAX REVENUE

Local Taxes 15,261,199.73 14,428,860.43 17,405,182.07 19,446,892.21 19,986,140.79 22,395,505.57

Amusement Tax 400,000.00 177,825.00 78,069.79 635,173.47 117,762.50 510,552.00

Business Tax 7,288,846.77 7,013,339.13 7,597,618.36 9,292,475.38 9,777,813.79 9,363,878.36

Community Tax 1,072,340.87 1,035,764.47 1,288,095.73 1,259,955.67 1,303,809.54 1,336,805.64

Franchise Tax 739,515.00 792,900.00 776,170.00 803,841.39 846,975.00 800,900.00

Occupation Tax 44,724.50 34,750.00 7,242.10 6,100.00 3,454.00 2,400.00

Real Property Tax 3,560,432.46 2,801,233.15 4,869,861.80 3,856,398.13 4,155,170.39 5,208,378.68

Special Education Tax 1,934,039.38 2,150,733.33 2,545,591.57 2,555,564.44 3,096,512.95 4,127,156.88

Tax on Sand, Gravel and Other Quarry Products

221,300.75 104,781.28 73,742.25 819,027.30 127,511.00 615,910.67

Other Local Taxes 240,680.71 0.54

Fines and Penalties - Local Taxes

76,853.36 168,789.93 218,356.43 557,131.62 429,523.34

GENERAL INCOME ACCOUNTS 62,592,490.08 64,851,538.48 62,485,953.44 65,962,315.10 75,719,365.45 85,103,083.59

Permits and Licenses 2,649,053.99 2,720,335.57 2,524,840.80 2,463,019.88 2,773,631.91 2,445,735.81

Fees on Weights and Measures 28,170.00 27,800.00 29,226.00 24,610.00 48,275.00 24,010.00

Permit Fees 2,256,167.43 2,248,238.57 2,035,857 2,100,129.88 2,371,010.91 2,045,330.01

Registration Fees 364,716.56 444,297.00 459,758.00 338,280.00 354,346.00 376,395.00

Service Income 3,939,053.79 6,088,401.88 5,949,532.97 5,779,332.09 5,396,720.93 5,657,503.79

Clearance and Certification Fees

682,795.00 837,533.25 1,007,245.90 1,071,153.00 1,039,033.50 1,272,763.35

Garbage Fees 615,495.00 614,798.80 569,271.50 627,412.50 629,775.50 627,875.00

Inspection Fees 579,964.00 629,768.79 643,582.50 707,797.00 751,961.00 658,244.40

Medical, Dental and Laboratory Fees

285,700.00 212,093.88 190,380.00 169,850.00 165,240.00 174,300.00

Other Service Income 1,638,226.41 3,704,600.84 3,446,016.83 3,018,068.79 2,675,993.82 2,643,645.13

Fine and Penalties - Service Income

136,873.38 89,606.32 93,036.24 185,050.80 134,717.11 280,675.91

Business Income 3,984,486.86 5,882,882.00 4,588,593.22 4,153,183.65 4,958,174.04 11,244,815.91

Income from Markets 929,265.00 1,016,983.00 599,243.00 797,043.00 803,532.00 4,195,116.50

Income from Slaughterhouses 710,652.00 2,497,795.00 2,426,572.00 1,887,492.75 2,141,946.00 2,519,883.00

Rent Income 2,344,569.86 2,368,104.00 1,562,778.22 1,455,836.25 2,004,764.50 3,339,367.91

114

2002 2003 2004 2005 2006 2007

Other Businesses Income 1,174,250.00

Sales Revenue 12,811.65 7,931.57 16,198.50

Other Income 52,019,895.44 50,159,919.03 49,422,986.45 53,566,779.48 62,590,838.54 65,755,028.08

Income from Grants and Donations

462,645.00 63,300.00 14,800.00 67,840.00 9,500.00 20,500.00

Interest Income 113,924.16 78,444.03 97,168.45 77,596.48 108,478.04 51,857.08

Internal Revenue Allotment 51,183,046.00 50,018,175.00 49,311,018.00 53,421,343.00 62,397,659.50 65,012,876.00

Share from Expanded Value Added Tax (EVAT)

658,042.00

Share from National Wealth 1,753.00

Miscellaneous Income 260,280.28

TOTAL INCOME 77,853,690 79,280,398.91 79,891,135.51 85,409,207.31 95,705,506.24 107,498,589.16

* Data secured from the Office of the Municipal Administrator of Daet, Camarines Norte on February 6, 2008

Real Property Tax Collection

The municipal treasurer’s office asserts that real property taxes (RPT) contribute significantly to the income of Daet. Most of the respondents pay their taxes diligently because of affordability and fear of penalties. Sanggunian Bayan member Ely Avecilla, who is the Chairman of the Ways and Means, Finance, Budget, and Appropriations Committee, said Daet recorded a 92 percent accomplishment in real property tax collection from July 2007 to December 2007.

Avecilla claimed that there were no funds in the municipal treasury when the new local officials assumed office, such that the salaries of government employees were delayed. To address the situation, the new administration launched a tax campaign that people responded to positively. The municipality imposed a new RPT rate equivalent to the provincial government’s, but no complaints were received.

To further boost the campaign, tax amnesty was offered to delinquent taxpayers. Taxpayers who religiously pay their taxes were also recognized.

The Possibility of Implementing an Idle Land Tax

The Local Government Code of 1991 (Republic Act 7160), provides that the local government can collect four types of real property taxes, or a combination of these, provided they are covered by appropriate ordinances:

• basic real property tax (at most one percent of assessed value in provinces and two percent in cities and Metro Manila);

• additional real property tax for the special education fund (one percent for provinces and one percent for cities and Metro Manila municipalities);

115

• idle land tax (at most five percent in provinces and cities); and• special levy on land used for local public works (at most 60 percent of the

actual cost of the projects and improvements in provinces in cities).

Republic Act 7160 defined idle lands to include the following:

a) agricultural lands, more than one hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which remain uncultivated or unimproved by the owner of the property or persons having legal interest therein. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare shall not be considered idle. Lands actually used for grazing purposes shall likewise not be considered idle;

b) lands other than agricultural, located in a city or municipality, more than 1,000 square meters in area, one-half of which remain unutilized or unimproved by the owner of the property or person having legal interest therein.

This definition was laid down for the purpose of real property taxation, and an annual tax on idle lands shall be in addition to basic real property tax.

Table 8 shows the base unit market value for agricultural land in Daet. The market value for bulas in Daet is PhP 13,700.00 per hectare, and is used to compute the taxable value of property.

The LGC of 1991 provides guidance on property tax assessment. The Sangguniang Panlalawigan, Sangguniang Bayan or Sangguniang Panlunsod, on the other hand, fixes the assessment value at rates not exceeding those prescribed by the Code. The assessment level is the percentage applied to the fair market value to determine the taxable value of the property, which should not exceed 40 percent for agricultural lands.

116

Table 8. Schedule of Base Unit Market Value for Agricultural Land of Daet5

Calendar Year 2006-2008

Type of Crops Class Amount

Irrigated Riceland 1 181,300.00

2 145,040.00

3 108,780.00

Unirrigated Riceland 1 90,650.00

2 72,520.00

3 54,390.00

Coconut 1 45,660.00

2 36,630.00

3 27,400

Citrus ( Lemon) 1 42,090.00

2 33,670.00

Source: Schedule of Base Unit Market Value for Agricultural Land in the Province of Camarines Norte for Calendar Year 2006-2008, Office of Provincial Assessor

The Provincial Assessor Office explained they do not collect idle land tax despite its being provided for in the Local Government Code of 1991. “Not one among the members of the Provincial Board wanted to sponsor a provincial ordinance on the imposition of an idle land tax,” the Assistant Provincial Assessor revealed. Respondent Sangguniang Bayan members of Daet expressed the same position: They are not willing to sponsor an ordinance for the implementation of an idle land tax because the tax would be an additional burden to the people.

The Provincial Assessor, however, said the local government collects taxes on cogon lands, which vary from municipality to municipality and which could be considered a form of idle land tax.

Developing a Consensus for an Idle Land Tax

The MARO and the MAO suggested that lands left unproductive, especially agricultural lands for the purpose of land use conversion, be classified idle. The opinion is shared by other respondents, and was implied in the proposed land use plan of the municipality (revised in June 2004) when it cited 47.43 hectares of idle agricultural land.

The incumbent mayor said an idle land tax would be welcome as an additional source of income for the municipality. He cautioned, however, that such a policy could generate public resistance, and a people’s consultation would have to be carried out before its promulgation. Landowners are likewise open to the tax suggested, provided they are properly consulted and that the government

5 The schedule of base unit market value according to the Provincial Assessor of the province of Camarines Norte changes every three years as provided by the Local Government Code of 1991.

Calendar Year 2006-2008

Type of Crops Class Amount

Citrus ( Lemon) 3 25,250.00

Fishpond 1 155,170.00

2 124,140.00

3 93,100.00

Swamp 1 28,310.00

Bulas/Cogon 1 13,700

Pineapple 1 103,480.00

2 82,780.00

3 62,090.00

Orchard 19,130.00

Pasteur 1 13,700

117

provides assistance to landowners who want make their land productive but lack the necessary capital to do so.

Issues were raised, however, regarding its eventual implementation:

Purpose. Respondents said an idle land tax, like any other tax, would be an additional burden, especially since the subject lands do not earn any income. To compensate, landowner respondents said they would approve of an idle land tax if the income would go towards landowners’ compensation under the CARP. The municipal planning officer, the Sanggunian member, and the mayor believe, on the other hand, that income from idle land tax should be used to address other priority needs of the municipality. Whatever the case, respondents suggest that the tax be justified as a measure to promote democratic rights and social welfare.

Incentive. Some respondents pointed out that owners of idle lands are working towards having the classification of their lands converted to non-agricultural use. A sufficiently low idle land tax rate would not encourage them to make their lands productive, as they could easily pay the tax while waiting for the approval of their land use conversion applications.

Management. Respondents believe that the local government is better at tax collection than the national government. Therefore, the task of collecting idle land tax should fall on the LGU. As such, they argued that should income from an idle land tax be used to fund land distribution, some functions of the Department of Agrarian Reform would need to be devolved to local government units.

Other respondents raised the need to address corruption in the bureaucracy and for more efficient utilization of government income.

In order to understand the political economic interests within Daet that could influence the decision on whether or not to implement an idle land tax, an appraisal of the family backgrounds and social connections of the mayor, vice mayor and members of the Sangunian Bayan was conducted. This was done through interviews with some of the subjects as well as key informants.

Landlords and businessmen dominate the local government of Daet, with four of them coming from the traditional elite. One came from the civic group while two are from highly educated families. A table of results is summarized in Attachment E.

118

Position in the Proposed Idle Land Tax

Of the 11 officials, one expressed medium support for the proposal for an idle land tax, seven expressed low support, while three opposed the idea. The Mayor has an influence over that of the Sanggunian members – particularly those who expressed low support. Their stand on the matter may also change depending on the influence of the provincial government of Camarines Norte. Being the capital town of Camarines Norte, Daet is home to most of most of the landed and business elite in the province; local policies are greatly influence by these groups. The fact that none of the members of the Provincial Board of Camarines Norte are willing to sponsor a local ordinance for an idle land tax would indicate that the municipality of Daet would likely take a similar stance.

The elite clans of Daet include: the Jarencio Family with a consolidated property of about 190.1 hectares; the Pabico Family with 179.1 hectares of lands; and the Li Seng Giap & Co. with 162.79 hectares of lands. Other families include the Kings, Lopezes, Davids, Del Rosarios, Delos Santoses, Ivascos, Velezes, Timoners, Garcias, Maganas, and Pimentels, who together own a total of 29-66 hectares of land. These are among the big families who contribute substantially to Daet’s real property tax income and are also the targets of an idle land tax.

119

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6 Summary and ConclusionThe Comprehensive Agrarian Reform Program officially ended in June 2008, but accomplishment in Daet as of January 2008 stood at only 58.41 percent of the target.

For distributed lands, many former landowners have not been compensated mainly because of problems in land documentation. The Land Bank of the Philippines refused to process payments to landowners or their heirs whose properties cannot be validated because of incomplete and inconsistent documentation. Many landholdings covered under PD 27 were affected and provide cases for other landowners to oppose CARP extension.

Questions on sustaining the gains of the program present another set of problems. Many farmer beneficiaries do not have the capacity to develop and sustain the productivity of their newly acquired lands. Trainings to equip farmers to manage their lands, as well as support services such as farm-to-market roads, credit windows, and post-harvest facilities would minimize the possibility that farmer beneficiaries would mortgage or sell their lands.

Budgetary constraints hamper the local government’s capability to address these problems. The revenues of Daet are not enough for the financial requirements to fulfill the local government’s plan; national subsidy through the Internal Revenue Allotment remains the biggest source of funds.

Although the option of collecting an ad valorem tax on idle lands is in the Local Government Code of 1991, neither the municipal government of Daet nor the provincial government of Camarines Norte do so. Although key stakeholders – i.e., the local government, farmers, and landowners– are in favor of collecting an idle land tax to boost income, Sangguniang Bayan members both at the provincial and the municipal levels are reluctant to pass the prerequisite ordinance on the grounds that the tax would place an additional burden on people, be unrealistic or defeat its purpose:

The local legislators have said that an idle land tax, together with an extension of the agrarian reform program, would face strong resistance from landowners and small owner-cultivators. They cited the non-payment by the government for confiscated lands as the basis of their argument.

Another argument put forward against an idle land tax is that it would not significantly contribute to total income, especially since the real property tax rate of Daet is low to begin with. In addition, if the collection target for the new tax is added to existing real property taxes, an unrealizable target may result.

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Finally, local legislators cited the fact that there are about 47.43 hectares of idle agricultural lands in Daet whose owners want converted for other uses. They argue that a sufficiently low idle land tax would not encourage these landowners to make their lands productive while waiting for their land use conversion applications to be approved. It should be noted, however, that there are currently no incentives in place for increasing productivity or penalties against keeping lands idle.

More information on the province’s tax on cogon lands will have to be gathered to determine whether this can indeed be considered a form of idle land tax that can be expanded. Further research will have to be done on the origin and legal basis of this tax.

The devolution of some functions of the DAR is hinged on the capacity of the local government to address the fiscal requirements that go with it. An idle land tax, which could potentially contribute to the local coffers, has not been implemented by the LGU mainly because it is perceived as a threat to the political careers of elected officials. Also, income from an idle land tax to fund land distribution may not be enough given the rate cap laid down by the Local Government Code of 1991, which is five percent of the assessed value of the property.

However, if DAR’s budget for support services is combined with the agricultural budget of the local government unit, the post-distribution needs of rural development could be met towards addressing poverty , inequity, and food security in the municipality of Daet.

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References

e- copy of Table 4 Land Acquisition and Distribution Status (As of January 2008), Department of Agrarian Reform Provincial Office, Daet, Camarines Norte

Consolidated Statement of Income and Expenditure (2002-2007), Office of the Municipal Administrator, Daet Municipal Hall, Daet, Camarines Norte, February 2008

www.neda5.net/rdr/fiscal strength, “Resource Generation Performance of Region 5 in 2006”

www.nscb.gov.ph, “Poverty Statistics: Annual Per Capita Poverty Threshold by Province, 2004-2005”

“Will Job Generation Impact on Environment,” Magdalena C. Monge, Dante Bismonte, et.al, Social Watch Philippines 2006

e-copy of the Daet Comprehensive Land Use Plan , March 30, 2003 revised June 2004

Result of the Community Based Monitoring System Core Indicators (CBMS Survey 2005), MPDO Office, Municipal Hall, Daet, Camarines Norte

Comprehensive Agrarian Reform Law, (Republic Act 6657)

“LGU Daet Names 2007 Best Taxpayers” by Annie M. Cruz, Daet on the Go, Vol. II Issue # 1, February 2008

Daet on the Go Newsletter, vol. 1, Issue # 1, November 2007

Schedule of Base Unit Market Value for Agricultural Land in the Province of Camarines Norte for Calendar year 2006-2008, Office of the Provincial Assessor

Presidential Decree 27

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Coastal - 10

Upland - 10 Lowland - 19

Figure I. Alaminos City Topography

LUZONALAMINOS CITY, PANGASINAN

Probing into the Potentials of Idle Land Tax as a Local Government Strategy to Boost Agriculture1

1 Alaminos City, A City of Hundred Possibilities

1.1 The Land and the People

Alaminos City is a land of many possibilities. The multifaceted character of the land provides many opportunities for the people’s socioeconomic well being. It has both urban and rural areas that allow agriculture and trade to thrive and flourish. The terrain, which is a composite of upland, lowland and coastal areas, gives the City a cutting edge in agricultural production. As an added value, the City, at 257 kilometers away from Manila, is the tourism capital of the Province of Pangasinan.

The City is in the heart of the First District of Western Pangasinan. The land is generally flat plain with an elevation of less than 20 meters above sea level. The geographical boundaries of Alaminos City are Lingayen Gulf in the north; Municipality of Sual in the east; the Municipality of Mabini down south; and Municipality of Bani in the west. Alaminos is primarily an agricultural city. Of its 39 barangays, only seven are classified as urban. Thirty-two barangays, which cover 12,774.80 hectares of the land, are classified as rural areas. Ten of the barangays are located in coastal and upland areas. Meanwhile, 19 barangays are situated in lowland areas.

1 Roja E. Salvador and Hazzel Maranan-Ronquillo, Fellows, La Liga Policy Institute.

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The total administrative land area of 166.23 sq.kms. has complete features that provide the local government unit many opportunities for agricultural development: a coastline of 20 kilometers; alienable and disposable lands totaling 14,486.144 hectares; forest area that measures 555.955 hectares; fishpond development that measures 1,581.300 hectares; and roads with a total length of 463.08 kilometers and density of three kilometers per square kilometer. Its pride, the Hundred Islands, measures 45 kilometers, with the coastal waterfronts measuring 37 kilometers and river fronts 30 kilometers.

Based on data from the Community-Based Information System (CBIS) in 2007, the average annual population growth is 0.92 percent. Meanwhile, statistics from the City Planning and Development Office show that Alaminos City has a population density of five covering a total land area of 15,424.40 hectares.

Eighty percent of the 78,167 people living in Alaminos City belong to the fishery and agricultural sectors. About 34 percent of the total population live in the urban part of the City, while 66 percent reside in the rural areas.

A total of 17,821 household reside in Alaminos City. On average, the families live on a monthly income of P 1,000.00. The total indigence rate based on households is 37 percent. About 46 percent of the poor families live in the rural areas while 22 percent are in the urban areas. Significant portions of the total household are classified as indigents in both the rural and urban part of the City. However, a small portion of the total number of families belongs to the food threshold poor. (Table 1)

Table 1. Number of Households and Indigence RateTotal

Number of Household

HH Core Poor

HH Subsis-tence Poor

HH Food Threshold

Poor

Total HH Indigent

Indigency Rate

Alaminos City 17,821 2,853 2,075 1,743 6,671 37%

Urban 6,356 598 399 389 1,386 22%

Rural 11,465 2,255 1,676 1,354 5,285 46%

Source CBIS 2006

1.2 Agriculture-Oriented Land Use Towards a First Class City

Based on the City’s topography and demography, it is indeed rational for the local government of Alaminos to prioritize programs on land use that will boost agricultural development.

As shown in Tables 2, 3 and 4, a large portion of the City’s total land area is devoted to agriculture. Under the General Category, 61 percent of the total land area is agricultural. Under the Urban Category, 91 percent comprises agricultural lands. Meanwhile, 63 percent are considered Agro-Industrial Zones under the Zonation Category.

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Table 2.General Category by Area as of 2007

General Category Area in hectares Percent of the total land area

Urban 2,649.60 15%

Build-up 219.85 1%

Industrial 3.95 .02%

Agricultural 10,163.27 61%

Fishpond 1,581.30 9%

Special Use 1.67 .01%

Tourist 201.70 1%

Parks and Playgrounds 3.27 .01%

Road Right of Way 815 4%

River/Creeks/Swamps 613.76 3%

Forest 369.99 2%

TOTAL 16,623.36

Table 3. Urban Category by Area as of 2007

Urban Category Area in hectares Percent of the total land area

Residential 44.25 1%

Commercial 16.44 .62%

Institutional 44.39 1%

Industrial 1.5 .05%

Agricultural 2,433.68 91%

Special Use 5.66 .21%

Parks and Playgrounds 2.28 .08%

Road Right of Way 77.74 2%

River/Creeks/Swamps 16.84 .63%

Tourist Zones 6.77 .25%

TOTAL 2,649.55

Table 4. Zonation Category by Area as of 2007

Zonation Category Area in hectares Percent of the total land area

Tourism Zone (Hundred Islands) 1,844 9%

Tourism Zone (Lucap Wharf) 56.81 .30%

Commercial Zone 59.71 .32%

Residential Zone 971.44 5%

Agro-Industrial Zone 11,767.31 63%

Forest Protection Zone 1,962.63 10%

Industrial Zone 160.55 .86%

Aquaculture Development Zone 1,627.29 8%

Cemetery and Memorial Park 17.56 .09%

TOTAL 18,467.30

Source: Office of the City Planning and Development, Alaminos City

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Figure 2. Alaminos City, Development and Investment Plan The City government ensures that their development and investment plans cover all the barangays. These plans guarantee the improvement of each barangay and growth of Alaminos into a First Class City.

The LGU formed clusters of adjoining barangays to accommodate the different agricultural plans of the government. The groupings were based on the geographical location of each cluster.

A cluster of 15 barangays is being used for the livestock and orchard industry. Ten barangays are being developed for rice, corn and high value commercial crops. Five barangays and the two islands - Alo and Hundred Islands -- are being developed as the center for tourism. The aqua-marine industry is situated in four adjoining barangays in the northern part of Alaminos City. The commerce and trade is at the heart of the city, covering three barangays including the Poblacion. Two barangays are being developed for light industry.

The agricultural area in Alaminos City is largely composed of rice land, as shown in the pie graph below.

Figure 3. Alaminos City, Agricultural Area

Rice land - 8,020.0 Ha. Irrigated - 2,338 Ha.

Rainfed - 5,682 Ha.

Upland - 504 Ha.Fruit trees - 286 Ha.Pasture - 806.5 Ha.Inland fisheries - 1,236.0 Ha.Freshwater - 2.0 Ha.

11%

7%

3%

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A total of 74 percent of the City land area is devoted to rice lands, which is about 8,020 hectares. About 2,338 hectares of the total rice land are irrigated lands, while 5,682 hectares are rainfed. Meanwhile, seven percent of the area is allotted to pasture lands. Three percent are programmed for fruit bearing trees.

About 11 percent of the land is devoted to inland aquaculture which mainly focuses on bangus, lapu-lapu, tilapia and catfish. In addition, two hectares of fresh water are being used for oyster culture and mangrove reforestation.

As part of the benefits of becoming a city in 2004, the national government vested the management and development of the Hundred Islands National Park in the City of Alaminos. The City Mayor takes into account the balance between agriculture, tourism and industry to attain economic stability. He pointed out four aspects of productivity, namely, sustainability of the city (land vs. people), environmental protection, water supply, and special economic zones in the City of Alaminos. Based on the 10-Point Agenda of the City, agriculture is the primary program.

1.3 A Revolutionary Strategy for Agricultural Development

The City Government of Alaminos calls its agricultural development program the “Agri-volution Program” or the Bayanihan Integrated Program for Sustainable Agriculture (BIPSA). Spearheaded by City Mayor Hernani Braganza, the program is a joint cooperation among the offices of the City Agriculture, the City Veterinary and the City Cooperative.

The Agri-volution Program is composed of farming, livestock and fishery projects. Colors represent the type of crops, livestock and fishery products being produced. On farming, Green Revolution refers to a Pinakbet farm, ube, cassava, soya, orchard, spices and mushroom. Corn production is called the Yellow Revolution while rice production is dubbed as the Golden Revolution. On livestock production, Red Revolution refers to goat, sheep and hog raising; Brown Revolution is for egg laying and sasso raising; and White Revolution refers to dairy.

Activities under aquaculture are grouped under the Blue Revolution. This includes the culture of oysters, lapulapu and mud crab. The objectives of the “Agri-volution Program” are as follows: 1. Improve the quality of life of farmers by increasing the net income of the

farmers from P12,000 to P84,000 annually; 2. Create business and job opportunities that would provide 1,000 enterprises

and 10,000 job opportunities as well as develop service cooperatives;

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3. Develop sustainable farms and enterprises that would establish four Bayanihan Production Areas and 1,000 Bayanihan Production Farms;

4. Produce Affordable, Quality, Universal standard, Available and Accessible (AQUAA) agricultural products that would establish the AGRO-AQUA Processing Center and Bagsakan Center or Pasalubong Center;

5. Establish a Clean, Accessible, Safe and Affordable (CASA) tourism project that would attract and increase tourist arrivals;

6. Create additional income for the city government that would increase real property tax and business tax collection;

7. Establish partnerships and linkages with the different government agencies, non-government agencies and socio-civic groups that would encourage Multi-Sectoral Participation (Bayanihan Venture); and

8. Establish food sufficiency and security.

The Agri-volution Program is being implemented through the system of Ocho-Ocho , or the clustering of farms into larger units of eight hectares each. Ocho-ocho is implemented to achieve a collective, entrepreneurial approach that ensures higher productivity, farm management efficiency, competitiveness and greater gains from farming2 (Figure 4). Each cluster may concentrate on the production of rice, corn, soya, cassava or forage under the farming category; swine or poultry industry under the livestock category; and mari-culture or aqua-culture under the fishery category. The project targets the City’s 10,000 farmers, although priority is given to the marginalized segments comprising about 5,000 farmers. Prior activities for credit assistance mobilization, technology generation and promotion, cluster farming has already commenced. The city government has allocated PhP30 million for the program for 2005.”3

1.4 LGU-Civil Society Partnerships for Agriculture

The city government of Alaminos recognizes the important role of people’s organizations, non-government organizations and cooperatives in the effective implementation of its development projects. It conducts regular dialogues and consultations with various sectors, especially with the farmers and fishers’ groups, to ensure that these sectors are included in the planning, implementation and monitoring of LGU projects.

The City Cooperative Office is tasked with accrediting associations, organizations and cooperatives to make them eligible to participate in City Government projects. At present, there are 62 accredited sectoral organizations in Alaminos City.

2 http://www.alaminoscity.gov.ph.3 http://www.alaminoscity.gov.ph.

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Figure 4. Lands Covered by Agrarian Reform

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1.5 Land for the Agriculture Sector

All the innovative local government programs for agriculture would be most effective if the agriculture sector had its own lands to toil and develop. The state’s Comprehensive Agrarian Reform Program (CARP) is the mechanism that will help the LGU fully realize its thrusts of giving its farmers and farm workers the competitive edge in production and income generation.

In Alaminos City, there 671.78 hectares of land covered by the CARP. A significant number of land acquisition and distribution efforts under the CARP occurred during the years 1989 to 1995. Yet the growing problems in land acquisition and distribution and the capacity of the government to financially sustain the program slowed down the distribution of lands in the succeeding years. Although sizable lands have been distributed, there are still CARP-able lands that have not been distributed.

Table 5 and Figure 4 provide data on the CARP-able lands per barangay. Vast lands from the eastern part of Alaminos City have been covered by the CARP.

Table 5. CARP lands per barangay, Alaminos CityBarangay Area (hectare)

1. Poblacion 28.21

2. Alo 58.69

3. Amandiego .09

4. Amangbang 11.83

5. Balayang 43.63

6. Bued 2.56

7. Cabatuan 3.37

8. Cayucay 32.63

9. Dulacac 40.42

10. Inerangan 6.35

11. Landoc 43.46

12. Lucap 11.07

13. Palamis 13.56

14. Pandan 35.16

Source: Office of the City Planning and Development, Alaminos City

As of 2007, 241.2628 hectares of land in Alaminos City remain undistributed. Out of the 14 percent distributed or cancelled land, 98 percent has been distributed but not yet paid, and the two remaining percent were cancelled because the landowner has the intention to retain the area.

Barangay Area (hectare)

15. Pocalpocal 28.56

16. Pogo 98.92

17. Polo 66.05

18. Quibuar 22.57

19. Sabangan 7.02

20. San Jose 9.26

21. San Roque 29.11

22. San Vicente 24.14

23. Sta.Maria 48.38

24. Tanaytay 2.28

25. Tangcarang 3.26

26. Tawintawin 1.21

TOTAL 671.78

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Deductible lands (river, creek or cultivated land) may be covered by CARP if the landowner will subject it to voluntary land transfer (VLT). Data on Table 8 shows that the landowners of the 49 percent deductibles have the intention to retain the land.

Five percent of the CARP lands are considered problematic because there is a pending case or under court litigation or there is no response from the owner. In Alaminos City , the five percent problematic land is due to the absence of response to the notice of coverage.

Meanwhile, 31 percent have been distributed in the years 2005 to 2007; however, the landowners have not yet been paid for just compensation. The remaining one percent potential land is coverable; however, corrections on papers need to be made.

Table 6. Status and balance of CARP lands as of 2007, Alaminos CityTotal CARPable land area 671.78 has

Undistributed LH Area 241.2628 has. 36 %

Distributed/Cancelled 33.8111 has. 14 %

Deductible 117.2229 has. 49 %

Problematic 11.2121 has. 5 %

Workable 75.387 has. 31 %

Potential 2.6297 has. 1 %

Source: Municipal Agrarian Reform Office, Alaminos City.

2 Perceptions on Agrarian Reform in Alaminos City

2.1 Local Government Propels CARP’s Implementation

There is no special municipal interagency coordinating team that particularly focuses on the implementation of CARP in Alaminos City apart from the offices and agencies that are originally tasked for this. However, there is continued interaction among several local government offices and local agencies and the Municipal Agrarian Reform Office (MARO) in the implementation of agrarian reform. All the concerned offices should coordinate with the MARO in carrying out its functions for CARP.

The Office of the City Mayor implements livelihood projects concerning the Agrarian Reform Communities (ARCs). The City Planning and Development Office identifies the lands covered by the CARP and provides support service to these areas as part of the agricultural program of the local government. The

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City Agriculture Office takes charge of infrastructure projects in ARCs. The City Treasurer handles the filing of leasehold agreements. The City Assessor handles requests for the tax declarations of certain lands. The Community Environment and Natural Resources Officer (CENRO) of the Department of Environment and Natural Resources (DENR) facilitates the Memorandum of Agreement (MOA) between the DENR and DAR. The MOA is being followed as guidelines by the MARO and CENRO in the implementation of CARP.

To fast-track the awarding of titles through the issuance of a Certificate of Land Ownership Agreement (CLOA) to farmer beneficiaries, the local government also supports the local activities of DENR in implementing CARP. One of these programs is the “Handog Titulo Program,” which is operated in cooperation with the Department of Agrarian Reform (DAR) and funded by the World Bank (WB). Among the interventions are patent drive and information/education campaigns on land titling in different barangays. The program primarily covers rice lands.

In delivering her duties, the Municipal Agrarian Reform Officer experiences the usual harassment from some landowners who do not agree with the implementation of CARP. They purposely withhold important documents that can fast track the processing of land transfers.

Yet, there are also landowners who sincerely cooperate when it comes to CARP. Some landowners even voluntarily submit their lands for CARP coverage, and in doing so, they are provided the benefit of a free land survey and land transfer fees. Ultimately, they get the sense of satisfaction that they are helping the small farmers to have their own land to till.

To encourage more landowners to cooperate in CARP’s implementation, the family-owned agricultural lands of Mayor Hernani Braganza have been covered by CARP and were distributed to many farmers in Alaminos City. Being a former Secretary of DAR, Mayor Braganza wants to continue the implementation of some projects in relation to CARP that he started in DAR. He, however, admitted that being a former DAR Secretary also raises greater expectations not only in terms of effective implementation of CARP, but also of managing and promoting agricultural development for the city.

2.2 People’s Views on CARP

This study revealed that the people are willing to cooperate for CARP. At the same time, they demand reinforcement on implementation from the local government, including more information, support services and political will.

All of the respondents agree that the agricultural sector of Alaminos City must be strengthened. They believe that through this, the lives of farmers and fisher folk will greatly improve and, in the long run, the whole economy of the city will benefit from this.

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A major factor in this development is the cultivation and development of agricultural lands, not only through CARP, but also through other LGU-initiated agriculture development projects.

Agrarian Reform Beneficiaries Call for Support Services

The President of the Bolo Development Cooperative Inc. and the Telbang-Pandan Communal Irrigators Association is a farmer beneficiary from Barangay Pandan. The village is about 6.5 kilometers east of the town proper.

He and the other Agrarian Reform Beneficiaries (ARBs) in their community are thankful for the land they received under CARP and personally attend to its development. They are also very supportive of the city government’s agricultural development projects. They have even adopted the agricultural project of the city government on high value commercial varieties of rice, which has increased their yield from 60 to 118 cavans of palay per hectare.

Yet, the ARBs in his community believe that the support services are not enough to fully realize the objectives of CARP. They also believe that CARP should be extended to continue the support services projects for the ARBs.

For example, he noted that irrigation projects are still lacking in rain fed agricultural areas, including his land. Water supply continues to be a major problem for the farmers. Also, there is a need for local production of natural fertilizers to help the small farmers survive, given the continuously rising costs of commercial fertilizers.

Farmers Want to be CARP Beneficiaries

Meanwhile, a resident of Barangay Macatiw (7.4 kms. south of the town proper) is very unsatisfied with CARP and even thinks of himself as a victim of CARP. He emotionally narrates that he is supposedly a bonafide beneficiary of CARP, having tilled the land for years. However, the land he tilled was not awarded to him. Instead, he only holds a leasehold contract for this land, which is less than three hectares.

Since he was determined to own land of his own, he bought the land received by his mother-in-law under CARP. He has also been paying for the real property tax of the said land. But until now, the CLOA has yet to be released by DAR, so his mother-in-law cannot transfer the land title to his name.

Even with his depressing predicament, he continues to be an active participant in the city government’s projects on agriculture. He is a member of the Otso-Otso Cooperative, organized by the city government for one of its agriculture development projects. The cooperative covers eight contiguous barangays forming a cluster of beneficiaries for its high value vegetable farm project.

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In general, he favors the extension of CARP, through which more lands can be distributed to farmer beneficiaries and the awarding of CLOAS can be fast tracked.

Another landowner from Brgy. Telbang, which is about 8.7 kilometers east from the town proper, is not a farmer beneficiary but experiences the same problems as ARB’s. He is not even aware of CARP, even though its implementation started in 1988. His family acquired their agricultural land through inheritance. He is also unaware of any of the support services project from DAR in relation to CARP.

Their main problem is water irrigation, since they are dependent on rains and deep well water to augment the often scarce rainfall. As a result, the risks and expenses in the two cropping seasons, September and January, are greatly increased.

Another problem they face is the lack of access to certified seeds. The seeds they use must be certified in order to ensure that their buyers offer a good price for their yield; uncertified seeds will not reap a favorable price. Since they lack access to certified seeds, they use leftover seeds from previous planting seasons. This practice of recycling leftover seeds greatly decreases their yield per season, thus decreasing their income. Hence, there is a demand for greater access to certified seeds.

The continued increases in the cost of fertilizers also pose a big problem for them. Likewise, the farmers in this barangay suffer from their limited access to information. Because of their remote location, they lack the necessary information on technology and other support services that the local government provides, which also limits their opportunities to improve their land. Thus, a more rigorous information drive must be undertaken. Farmer Leaders Call for Political Will and “Cleaner” CARP Implementation

The chairman of the Provincial Agriculture and Fisheries Council (PAFC), a policy-making body for agricultural development composed of representatives of civil society groups, believes that the implementation of CARP in Alaminos City has been a failure mainly because rich and influential landowners were able to circumvent the law and retain their properties.

According to the PAFC Chair, the CARP is a good law, but the implementation is a failure. He believes that the agency tasked to implement it should not be plagued with corrupt officials that favor the landowners.

He also recommends that the government provide more support services to the farmers in order to fully develop their land. Water irrigation in Alaminos should be intensified for rice, corn and vegetable production. Moreover, the price of

136

the farmers’ products should be improved. This will encourage the farmers to produce more and will put an end to rice smuggling and importation.

Meanwhile, the president-chairman of the Alaminos City Integrated Multi-Purpose Cooperative said that CARP is a good law, but there are provisions that are vague, such as the specific rights of the tenants. She faces many land dispute cases before the MARO against her tenants. She pointed out that the DAR-MARO should have a stronger political will to resolve the land transfer and dispute cases before them.

As a landowner, she prefers to keep her lands and invest in them, renting out her buildings and other structures/facilities and cultivating her lands rather than selling them. She said she supports the extension of CARP but the provisions on the rights and benefits of the landowners, tenants and farmer beneficiaries should be amended.

3 Idle Land Tax As An Agricultural BoosterAs CARP is about to end, the local government is exploring more options on resource generation to support and develop the agricultural sector as the main sector that pumps life into the local economy. The City Mayor candidly declared that the City Government can only provide support services to the people through its “agri-volution programs.” Given all the plans and areas of development in Alaminos, the local government cannot carry on the land acquisition and distribution and the agrarian justice components of the CARP. It is better to leave the two latter components to the DAR.

Moreover, given the weight of the functions of MARO, it would be impossible for the local government to absorb the management and funding of its operations. The respondent government officials believe that there are offices that can absorb the certain functions of the MARO. The DENR-CENRO can take charge of land tenure improvement. Meanwhile, the City government has instructed the City Agriculture and the City Cooperative offices to offer agricultural services to all the farmers, both ARBs and non-ARBs, as part of the agricultural program of the local government.

There have been shortfalls in support services projects for ARBs to provide farmers opportunities to develop their lands. Because of this, some ARBs have resorted to selling either part or all of their land. Also, in the absence of sustained support services, vast tracks of land have become unproductive and idle.

137

The Merriam-Webster dictionary provides a definition of the word “idle,” which means worthless, useless or inactive. Different laws provide different meanings to the concept on idle land.

Under the CARP Law (RA 6657),Sec.3(e) Idle or Abandoned Lands refers to any agricultural land not cultivated, tilled or developed to produce any crop nor devoted to any specific economic purpose continuously for a period of three (3) years immediately prior to the receipt of notice of acquisition by the government as provided under this Act, but does not include land that has become unproductive by reason of force majeure or any other fortuitous event: Provided, that prior to such event, such land was previously used for agricultural or other economic purposes.

On the other hand, the Local Government Code states,

Sec. 237 Idle Land, Coverage – For purposes of real property taxation, the land shall include the following:

(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. Agricultural lands planted to permanent or perennial crops with at least fifty (50) trees to a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall likewise not be considered idle land.

(b) Lands, other than agricultural, located in a city or municipality, more than one thousand (1,000) square meters in area, one-half (1/2) of which remain unutilized or unimproved by the owner of the property or person having legal interest therein. Regardless of land area, this Section shall likewise apply to residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax: Provided, however, that individual lots of such subdivisions, the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or operator.

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Table 7. City Ordinance No. 05-001, Revenue Code of the City of Alaminos

ARTICLE D: TAX ON IDLE LANDS

SEC. 52. IDLE LANDS, COVERAGE

For purposes of real property taxation, idle lands shall include the following:

(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. Agricultural lands planted to permanent or perennial crops with at least fifty (50) trees to a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall likewise not be considered idle lands.

(b) Lands, other than agricultural, located in the city, more than one thousand (1,000) square meters in area one-half (1/2) of which remain unutilized or unimproved by the owner of the property or person having legal interest therein.

Regardless of land area, this Article shall likewise apply to residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax. Provided, however, that individual lots of such subdivisions, the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or operator.

SEC. 53. IMPOSITION OF TAX

There is hereby levied an annual tax on idle lands at the rate of one percent (1 %) of the assessed value of the property which shall be in addition to the basic real property tax. SEC. 54. EXEMPTIONS

The idle land tax shall not apply to idle lands wherein the landowner is physically or legally prevented from improving, utilizing or cultivating the same by reason of force majuere, civil disturbance, natural calamity or any justifiable cause or circumstance.

Any persons having legal interest on the land desiring to avail of the exemption under this section shall file the corresponding application with the City Treasurer. The application shall state the ground(s) under which the exemption is being claimed.

SEC. 55. COLLECTION AND ACCRUAL OF PROCEEDS

The annual tax on idle lands shall be collected at the same time and in the same manner as that of the basic real property tax. The proceeds shall accrue to the General Fund of the city.

SEC. 56. LISTING OF IDLE LANDS BY THE ASSESSOR

The City Assessor shall make and keep an updated record of idle lands located within his area of jurisdiction. For purposes of collection, the City Assessor shall furnish a copy thereof to the City Treasurer who shall notify, on the basis of such record, the owner of the property or person having legal interest therein of the imposition of the additional tax.

SEC. 57. ACCRUAL OF SPECIAL LEVY ON IDLE LANDS

The special levy shall accrue in the first day of the quarter next following the effectivity of the ordinance imposing such levy.

SEC. 58. PENALTY

If the tax is not paid within the time prescribed above there shall be added to the unpaid amount of twenty-five percent (25%) per annum or fraction thereof from the due date plus two (2%) percent interest on the amount due until the same is fully paid.

139

The law on idle land tax has been incorporated in the Local Government Code. Ironically, it is seldom or never implemented in some cities or municipalities. The existence of this law is barely known to the general public.

In Alaminos City, the LGU has incorporated the idle land tax in the City Revenue Code (Section 52, Article D) (see Table 7, City Ordinance No.05-001). It has adopted the definition of idle land as provided for in the Local Government Code. The City Ordinance which clearly describes the idle land tax, its purposes, benefits and schemes will help establish acceptance of the new tax. The local government ensured that the tax is clearly defined; and the procedures of collection and the use of the proceeds are properly identified. The issuance of the ordinance will be supported by rigorous information dissemination.

3.1 More Opportunities from Idle Land Tax

The implementation of the idle land tax would generate additional revenues for the City, which may be used for the implementation of more local projects and programs.

From the point of view of the respondent landowners, the potential revenues must be spent on land redistribution to other farmers in order to enhance production. Revenues may also be spent as technological and technical support for agriculture such as machineries in farming, fertilizers and funds to buy the palay seeds for the farmers at a very reasonable price, titling of lands, construction of additional irrigation systems or as financing capital for the NGOs in their production and micro businesses.

Respondent government officials believe that funds from idle land tax may be allocated for developmental projects on idle lands, special education fund, agricultural subsidy, or for improvement of the coastal areas to boost tourism. It can also be used for housing improvement along the coastal areas.

Respondent farmers believe that proceeds should be used either in the improvement of idle lands, for additional financial support to small farmers or for additional support services on agriculture development.

However, for the City Government of Alaminos, the idle land tax is not primarily implemented as a source of income. It is used as a strategy to encourage more economic activities by providing support programs so that those with idle lands could have the capacity to make their lands more valuable instead of paying for something unproductive.

140

3.2 Support Programs for Idle Land Owners

Since idle land tax is seen as a strategy to boost agriculture and encourage more economic activities, the LGU equips itself with programs and projects that will support the small farmers and provide opportunities to avoid economic inactivity.

For example, respondents of this study saw three major problems on why some farmers could not avoid having idle lands:

First, water supply is a major problem in the City. Some areas experience extreme weather changes. During the rainy season, heavy rains drench these areas. During summer, these areas experience extreme heat, to the point where agricultural lands become cracked and dry. An irrigation system is very much needed in the City to sustain a year-round cropping season. The farmers can plant rice up to the third cropping season in areas with an abundant supply of water and irrigation system. But in areas depending only on rainfall, farmers can only plant once or at best twice a year with a reduced yield. No irrigation system and declining rainfall means more uncultivated and undeveloped agriculture lands.

Second, despite the efforts of the City government to economically boost the agriculture of Alaminos, some farmers tend to stick to the old fashioned way of farming. They purposely ignore the high grade seedlings being offered by the City Agriculture Office. As a result, their lands become idle for a time, instead of being used productively by planting high grade seedlings and high value commercial crops on them. Without a regular income for the farmers, the tax on idle land will be futile.

Third, for some farmers who are poverty stricken and cannot afford to cultivate and develop their lands, paying an idle land tax is an extreme burden. They would rather think of providing food for their table than paying tax on their unproductive land. Again, the idle land tax will be futile.

To address these, the City Government implements the “Agri-volution or the Bayanihan Integrated Program for sustainable Agriculture (BIPSA) through the Ocho-ocho (8-8) system” to encourage the farmers to plant high value commercial crops which require less amount of water during the off-season.

Also, in cases where the farmers are unable to sustain the development of their lands or are no longer interested in cultivating their lands – like overseas workers or those who reside abroad – the government provides options such as renting out the lands to the government for developmental projects or to other farmers who do not own land but are willing to till and invest in other agricultural lands.

141

Table 8. RP-China Project in Western Pangasinan; Identified Idle Lands

Consolidation Barangay Area (in hectares)

Area A Mona 1.20

Cayucay 6.90

San Jose 18.00

Polo 4.90

TOTAL 31.00

Area B Sabangan 44.80

Telbang 74.80

Victoria 11.00

Pandan 133.80

TOTAL 264.40

Area C San Roque 61.76

Amangbangan 2.35

Sta.Maria 11.10

Dulacac 218.25

Bisocol 9.80

Balayang 58.50

Maawi 28.20

TOTAL 389.96

Area D Amangdiego 5.57

Alos 24.00

Tangcarang 9.00

Macatiw 3.50

Bolaney 31.80

Cabatuan 16.50

TOTAL 90.37

Area E Magsaysay 9.0

TOTAL 9.0

GRAND TOTAL 784.73

One of the LGU’s best means of support for those with idle lands is legislative and technical assistance for the planting of high value commercial crops, such as sweet sorghum, on idle lands in order to provide additional and increased income for farmers.

3.3 Sweet Sorghum on Idle Lands, Alaminos City

The City Agriculture Office conducted an experiment on high value commercial crops on lands identified as idle lands. These idle lands, which where identified under the RP-China Agreement, have no indication of agricultural development, no trace of plowing, have never been cultivated and are undisturbed. The said Agreement targets areas that are under utilized and even idle lands, in terms of agricultural and fishery development with specific commodity.

Instead of abandoning the developmental plan in the RP-China Agreement, the city government locally adopted the idea in the agreement. Through the plan, the local government can develop the idle lands as part of the City’s agricultural area expansion.

The program is focused on developing a specific crop within a development area. According to the RP-China Agreement Project in Western Pangasinan, as shown in Table 8, there are a total of 784.73 hectares identified idle lands in Alaminos City alone. The City Planning and Development Office plans to have these idle lands mapped. The exact sites of these idle lands were properly located.

The City Agriculture and the City Cooperative offices spearheaded the effort of the city government to pursue the developmental plans of the RP-China Agreement. The City Agriculture Office

142

has planted “sweet sorghum” to some identified idle lands both with abundant and rainfed water supply.

The sorghum plants are tall annuals or perennials with flat leaf blades. A cane-like plant, sweet sorghum has high sugar content. It will flourish under conditions that are drier and warmer than those of many other crops. It is grown primarily for forage, silage, and sugar production. The sorghums have four principal uses: as grain, forage, syrup or sugar. The tough stems and fibers of the sorghums have industrial uses i.e., making brooms.

From sorghum, the people of Alaminos have so far produced a fine quality of molasses, good tasting basi (local wine) and good quality vinegar. The City Agriculture Office has conducted experiments on the survival viability of the sweet sorghum plant on rainfed lands only.

The sweet sorghum has many uses; it can be processed as biofuel; its grains can be used as feeds and processed as flour; its juice will be converted into sugar, vinegar and basi (low grade wine) and is a good substitute for corn, in terms of calories and sugar.

Aside from the sweet sorghum plant, the LGU also experimented on the possibility of planting high value commercial crops on the idle lands. In the case of privately owned idle lands, the City Agriculture Office, in cooperation with the City Cooperative Office, provides assistance to farmers who are willing to try planting the sweet sorghum plant. The development of idle lands may be a partnership between the local government and landowner, or the local government can provide technology and financial assistance to the landowner. They encourage the people, especially those who are interested in their projects, to join the cooperative organizations so that they can avail of financial assistance. In case of success, the income will redound to the benefit of the farmers, and half of the cost of the seedlings will be refunded to the City Agriculture Office. The ultimate goal is to develop the idle lands as an orchard or as fruit-bearing trees development areas.

3.4 Idle Land Tax Helps Spread the Wealth Within

One of the visions of Mayor Braganza is for the farmers to develop the agriculture lands in Alaminos City rather than sell it to foreign investors. The objective of the government in its projects is to “spread the wealth within Alaminos.” The focus should be directed on maximizing the use of land, whether agricultural, commercial or industrial.

In case the farmers who own idle lands and opt to develop them instead of paying the idle land tax, the City government is ready to provide support services to the farmers, under the “Agri-volution” program.

143

The City government formulated a system that would encourage the farmers to cultivate their lands and become entrepreneurs through the “farm-to-market scheme.” The farmers may have an opportunity to earn a competitive income from what they have agriculturally produced.

Clustering the agricultural products is one of the major components of the ocho-ocho program. According to the City Planning and Development Office, after harvest they can help the farmers in selling their products. The local government can buy the products from the farmers wholesale and sell it to retailers. This will ensure the retailers of the regular supply of agricultural products, and they will not be forced to buy many, which may result in spoilage of the products if they are not sold on time.

They also help the farmers sell their products in retail by allotting an area in the market for them, such as the Bagsakan Center or Food Court and Pasalubong Centers. They also set up a food court at the plaza, where the wives of the farmers can sell various local snacks or kakanin, including the famous bibingka made from coconut. The target of the local government is to sell their products locally so that the retailers need not get their merchandise from the biyaheros that sell at much higher prices, thus forcing them to also sell at higher prices. This contributes to ensuring food sustainability in the city and helps in boosting its local economy.

4 Feasibility of an Idle Land Tax in Alaminos

4.1 The Value of Land

In assessing lands for the payment of Real Property taxes, the City Assessors Office has been using the 1997 Schedule of Market Values on lands that are still assessed based on their original land use. In cases where land has been converted to other uses, the 2001 Schedule of Market Values applies. As Table 6 indicates, there was an increase in the market values of all the real property. All the lands classified as urban lands, except for residential lands with a constant 100 percent increase, have different percent increases, depending on their class. The City Assessor is planning to propose a market value on institutional lands, which has no market value under both the 1997 and 2001 schedules. All the lands classified as agricultural lands—except for lands intended for mango, cogon and orchard with varying percent increases depending on their class–have uniform percent increases. Noticeably, there is a sizeable increase in salt beds of 400 percent. There were minimal increases in terms of improvements on mango, banana, bamboo and coconut trees.

144

4.2 Alaminos’ Strategic Edge in Land Tax Collection

For the past 10 years, the revenues of the local government of Alaminos City have increased yearly. The major sources of income are the real property tax, transfer tax, business tax and licenses, economic enterprises, other local sources of income and the Internal Revenue Allotment (IRA).

RA 9025, an Act Converting the Municipality of Alaminos, Province of Pangasinan into a Component City to be known as the City of Alaminos, has been enacted into law. More than 85 percent of Alaminians voted affirmatively in making Alaminos the fourth city of the Province of Pangasinan on March 28, 2001. There was a notable increase in the collection during the year 2002 that was almost three times higher than the collection in 2001. From 1995 to 2006, except in 1999, the budget of Alaminos City was mainly sourced from its IRA. After its cityhood was declared in 2001, a remarkable increase in its IRA was enjoyed by the city. This increase continued and by 2006, the IRA of Alaminos City was close to P200 million, as shown in Table 9.

A portion of the actual collection is being allocated for the Special Educational Funds (SEF) and the remaining amount goes to the general funds.

Majority of the landowners in Alaminos City perceive the real property tax as being affordable and reasonable. Many have worked doubly hard to increase their land’s productivity. They use the income to support their families and pay for the taxes. Regarding their land as their greatest wealth, paying taxes is part of maintaining it, aside from cultivating and investing to make it productive.

145

Tabl

e 9

. A

lam

inos

Cit

y In

com

e an

d Ta

x C

olle

ctio

ns, 1

99

5 -

20

06

AC

TUAL

COL

LECT

IONS

- GE

NERA

L FU

ND

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1. R

eal P

rope

rty Ta

x

C

urre

nt

B

asic

382,

104.

4442

1,80

1.02

859,

038.

9293

0,23

5.46

1,03

7,35

1.29

1,17

6,63

8.86

1,23

3,82

6.72

3,08

4,63

8.83

3.42

7,45

7.08

3,89

1,21

5.21

5,69

4,57

5.39

5,48

8,12

0.85

Su

b-To

tal

382,

104.

4442

1,80

1.02

859,

038.

9293

0,23

5.46

1,03

7,35

1.29

1,17

6,63

8.86

1,23

3,82

6.72

3,08

4,63

8.83

3,42

7,45

7.08

3,89

1,21

5.21

5,69

4,57

5.39

5,48

8,12

0.85

P

revi

ous

B

asic

155,

048.

0217

0,34

9.10

167,

116.

6329

1,32

5.47

277,

247.

9235

4,46

9.07

373,

529.

52

Su

b-To

tal

155,

048.

0217

0,34

9.10

167,

116.

6329

1,32

5.47

277,

247.

9235

4,46

9.07

373,

529.

52

P

enal

ties

B

asic

75,7

38.1

166

,913

.31

90,3

29.7

717

2,62

3.41

135,

215.

5610

6,23

9.87

193,

238.

1954

9,87

2.85

380,

877.

1150

1,33

9.33

838,

381.

2347

5,88

0.15

Su

b-To

tal

75,7

83.1

166

,913

.31

90,3

29.7

717

2,62

3.41

135,

215.

5610

6,23

9.87

193,

238.

1954

9,87

2.85

380,

877.

1150

1,33

9.33

838,

381.

2347

5,88

0.15

Tr

ansf

er Ta

x

C

urre

nt21

2,82

5.52

373,

838.

2441

2,95

3.36

568,

036.

2658

9,56

4.19

P

revi

ous

Su

b-To

tal

212,

825.

5237

3,83

8.24

412,

953.

3656

8,03

6.26

589,

564.

19

To

tal f

or R

PT61

2,89

0.57

659,

063.

431,

116,

485.

321,

394,

184.

341,

449,

814.

771,

637,

347.

801,

800,

594.

433,

847,

337.

204,

182,

172.

434,

805,

507.

907,

100,

992.

886,

553,

565.

19

2. B

usin

ess

Tax a

nd

Lice

nses

1,75

0,08

3.71

2,01

0,41

2.41

3,05

6,46

3.37

4,54

1,93

5.57

4,70

6,17

8.08

4,52

2,47

3.31

4,30

7,91

3.23

4,83

2,52

8.91

6,30

9,25

4.25

6,71

6,69

4.92

10,2

11,1

08.4

113

,203

,378

.77

3. E

cono

mic

Ent

erpr

ises

5,07

9,43

7.17

5,78

7,88

3.52

6,76

3,12

0.20

7,51

0,66

8.05

15,2

22,7

17.8

34,

727,

823.

544,

738,

060.

484,

879,

327.

144,

805,

693.

043,

210,

325.

192,

973,

238.

751,

459,

236.

02

4. O

ther

Inco

me

2,66

2,70

8.91

4,00

0,96

7.50

3,81

3,57

7.43

5,19

7,37

3.99

5,09

0,38

4.39

6,22

6,29

7.22

6,27

7,59

7.76

9,22

8,24

1.45

11,3

95,5

69.7

611

,278

,164

.53

12,5

72,1

59.8

415

,331

,659

.63

5. IR

A16

,898

,337

.22

18,1

31,8

59.0

822

,760

,300

.81

24,8

72,7

52.1

131

,179

,806

.00

34,8

05,3

84.0

041

,994

,037

.00

147,

236,

348.

0015

3,69

9,92

3.00

153,

723,

874.

0016

3,09

4,37

8.00

179,

516,

124.

00

CAPI

TAL

REVE

NUE

1. S

ale

of F

ixed

Asse

ts70

2,00

0.00

TOT

AL27

,003

,457

.58

30,5

90,1

85.9

438

,211

,947

.13

43,5

16,9

14.0

657

,648

,901

.07

51,9

19,3

25.8

759

,118

,202

.90

170,

023.

782.

7018

0,39

2,61

2.48

179,

734,

566.

5419

5,95

1,87

7.88

216,

063,

963.

61

ACTU

AL C

OLLE

CTIO

NS

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Inte

rnal

Rev

enue

Allo

tmen

t16

,898

,337

.22

18,1

31,8

59.0

822

,760

,300

.81

24,8

72,7

52.1

131

,179

,806

.00

34,8

05,3

84.0

041

,994

,037

.00

147,

236,

348.

0015

3,69

9,92

3.00

153,

723,

874.

0016

3,09

4,37

8.00

179,

516,

124.

00

Loca

l Sou

rce

of In

com

e10

,105

,120

.36

12,4

58,3

26.8

615

,451

,646

.32

18,6

44,1

61.9

536

,469

,095

.07

17,1

13,9

41.8

717

,124

,165

.90

22,7

87,4

34.7

026

,692

,689

.48

26,0

10,6

92.5

432

,857

,499

.88

36,5

47,8

39.6

1

TO

TAL

27,0

03,4

57.5

830

,590

,185

.94

38,2

11,9

47.1

343

,516

,914

.06

57,6

48,9

01.0

751

,919

,325

.87

59,1

18,2

02.9

017

0,02

3,78

2.70

180,

392,

612.

4817

9,73

4,56

6.54

195,

951,

877.

8821

6,06

3,96

3.61

146

Alaminos’ City’s strategic edge in ensuring an efficient tax collection system is a fruit of the chief executive’s efforts to establish an accurate database of tax payments in the city, invest in technologies to improve tax collection, and implement tax reforms.

One of the Office of the Mayor’s major projects is to invest in tax mapping by employing a technology using satellites to acquire an aerial shot of the whole city. The resulting tax map helped determine the status of land ownership and land tax payment in the City. This investment helped establish an accurate system of monitoring revenues from lands.

Moreover, the LGU invested in information technology so that all citizens are aware of land values in the City. For instance, some poverty-stricken farmers sell parts of or the entire land they own for a price that is higher than the average selling price of land in the area. This fact affects the correct assessing of land for real property tax. Consequently, one of the plans of the local government, as part of their information technology upgrading scheme, is to encourage the prospective buyers of lands to buy only the lands to be posted on their website. This would provide them the opportunity to monitor the selling and transferring of lands and to properly assess them for tax purposes.

Mayor Braganza has also compelled the City Assessor, City Treasurer and the City Accountant to come up with the data to determine the total amount of real property tax delinquency in Alaminos City. This would update the tax collection status and would ensure the proper collection of the real property tax delinquency. As of December 31, 2007, they have determined the real property tax delinquency by barangay and by age of delinquency, as shown in Table 10. A total of 49 percent of Real Property Tax (RPT) delinquents have been delinquents since 2003 or earlier. Only eight percent are delinquent RP taxpayers from 2004. About 18 percent of RPT delinquents were determined since 2005. By 2006, the RPT delinquents increased to 25 percent. The most number of RPT delinquents are located in the Poblacion, with a total of 1,684. There are 12,227 RPT delinquents that have been identified, and as a result, a P40 million tax delinquency has been determined.

147

Table 10. RPT Deliquency As of Dec. 31, 2007

Brgy.Age

Total RPTs1 2 3 >=4

1 Alos 81 64 25 189 359

2 Amandiego 64 50 28 145 287

3 Amangbangan 50 52 17 163 282

4 Balangobong 60 38 13 99 210

5 Balayang 26 12 6 28 72

6 Baleyadaan 19 41 6 128 194

7 Bisocol 75 55 18 105 253

8 Bolaney 252 118 31 139 540

9 Bued 110 87 65 194 456

10 Cabatuan 42 33 15 132 222

11 Cayucay 55 49 19 59 182

12 Dulacac 37 30 9 74 150

13 Inerangan 29 48 21 89 187

14 Landoc 34 24 24 88 170

15 Linmansangan 38 30 12 87 167

16 Lucap 151 110 45 422 728

17 Maawi 48 17 6 62 133

18 Macatiw 45 34 18 84 181

19 Magsaysay 84 61 27 155 327

20 Mona 39 39 4 84 166

21 Palamis 153 86 50 266 555

22 Pandan 44 42 11 89 186

23 Pangapisan 52 32 23 119 226

24 Poblacion 399 277 150 858 1,684

25 Pocal-Pocal 69 34 29 128 260

26 Pogo 79 53 20 90 242

27 Polo 58 105 33 405 601

28 Quibuar 80 35 19 132 266

29 Sabangan 39 21 10 95 165

30 San Antonio 30 28 8 34 100

31 San Jose 62 31 11 79 183

32 San Roque 70 54 29 81 234

33 San Vicente 116 124 43 386 669

34 Sta. Maria 51 18 10 51 130

35 Tanaytay 62 34 17 62 175

36 Tangcarang 86 71 41 278 476

37 Tawin-Tawin 36 27 15 126 204

38 Telbang 95 48 17 121 281

39 Victoria 78 52 68 126 324

Total 2,998 2,164 1,013 6,052 12,227

25% 18% 8% 49%

Source: Office of the City Planning and Development

148

They have also determined the data of real property delinquency on CARP lands per barangay, with lands covered by the agrarian reform as shown in Table 12. There are a total of 799 tax declarations in the areas covered by the CARP, and 26.90 percent of these have been declared RPT delinquents. Out of the 24 barangays, only three barangays have no RPT delinquents. One barangay has 100 percent RPT delinquents.

Table 11. RPT Delinquency on CARP land in Alaminos City

Barangay with CARP Lands Total Tax Declaration

Total RPT Delinquency

% RPT Delinquency

1. Balayang 17 7 41.17 %

2. Bued 61 16 26.22 %

3. Cabatuan 5 - 0 %

4. Cayucay 13 3 23.07 %

5. Dulacac 23 3 13.04 %

6. Inerangan 13 2 15.38 %

7. Landoc 67 21 31.34 %

8. San Roque 54 18 33.33%

9. Quibuar 27 7 25.92 %

10. Lucap 33 5 15.15 %

11. Alos 31 6 19.35 %

12. Palamis 86 35 40.69 %

13. Pandan 7 - 0 %

14. Poblacion 104 32 30.76 %

15. Pocalpocal 16 4 25 %

16. Pogo 87 19 21.83 %

17. San Jose 24 3 12.5 %

18. Polo 79 21 26.58 %

19. Sabangan 14 - 0 %

20. San Vicente 15 4 26.66 %

21. Sta.Maria 8 2 25 %

22. Amangbangan 10 3 3 %

23. Tangcaran 3 3 100%

24. Tawin-tawin 2 1 50 %

Total 799 215 26.90 %

Source: Office of the City Planning and Development. Alaminos City

From the records of the actual collection, the performance of the city government in the collection of taxes is successful and satisfactorily increasing. Despite the Php40 million delinquency tax, the actual collection in the City of Alaminos for the past 10 years (1996-2006) keeps increasing every year.

149

The thrust of the City Mayor to boost and establish a stable economy in the City of Alaminos significantly contributes to the continuing increase in the collection of taxes. They are offering tax incentives to the taxpayers. There is a 20 percent discount for those who pay their taxes in advance (December) and a 15 percent discount for prompt payments (January). More than what the city government expected, many taxpayers have availed of these tax incentives in the form of discounts. Filipinos are fond of discounted prices.

Some of the respondent taxpayers who availed of the said tax incentives mentioned that the discounts they get help them to buy other agricultural supplies for the next cropping season. However, even with the tax incentives, some respondent farmers still cannot avail of the discounts as much as they want to. One of the respondent farmers from Barangay Pandan, 6.5 km. away from the poblacion, revealed that they would rather use the money for the family or for agricultural needs during the months when the incentives are being implemented. Limited financial resources hinder the farmers from taking advantage of such discounts. Paying the tax is not their priority, especially when the needs of the family arise.

By April 2008, the City of Alaminos will enforce civil remedies against the delinquent taxpayers by offering the delinquent properties for auction.

4.3 The Legislative Environment for Idle Land Tax

As in other municipalities and cities, Alaminos City is ruled by the people who come from political clans and have political track records as public servants. They are also land owners and have different businesses to manage in Alaminos City. Despite the political and economic status of the local officials, it is interesting to note that only a few are supportive of having an idle land tax in Alaminos City.

The idle land tax is now included in the revised revenue code of Alaminos. The Mayor is supportive of the idle land tax. However, he considers it to be a last resort in terms of income generation.

Meanwhile, only one of the 12 City Councilors supports the passage and implementation of an idle land tax in Alaminos City.

It is important to know the interests being protected by the local executive and legislative officials of Alaminos City, which could affect the passage of a new ordinance on the idle land tax:

The local chief executive of Alaminos City is a fourth-generation public servant from the political clan of the Braganzas. He was a student leader during his college years. He first entered politics as a Sangguniang Kabataan (SK) Chairman, then made his way to being elected twice as Representative of the 6th

150

District of Pangasinan. On February 2001, he was appointed by President Gloria Macapagal Arroyo as Secretary of the Department of Agrarian Reform (DAR). He had many plans for DAR, but because of his short stint as Secretary, most of his plans were never realized. On 2001, he was elected City Mayor of Alaminos City and was reelected in 2004. Upon his assumption into office, he improved the information technology (IT) capability of the City primarily to increase revenue as well as to provide service to his constituents. His main thrust is agricultural development. Being the former secretary of DAR, he includes all his unfulfilled plans in DAR in Alaminos City’s development plans.

Vice Mayor Teofilo G. Humilde Jr., a law graduate, was the former Provincial Planning and Development Officer. He also served as Municipal Mayor for three terms.

Out of the 12 City Councilors, six of them came from political clans in Alaminos City. Some are second and fourth generation public servants of their political family. The other Councilors include a former SK chairman; a former mayor of Alaminos who was appointed as chief executive in 1986; and re-elected City Councilors.

Nine out of 12 City Councilors belong to the same political party as the Mayor and Vice Mayor. This is the same ruling party in the national political arena.

Majority of the City Councilors are professionals. Most of them are graduates of Bachelor of Science in Commerce. Others are holders of Bachelor of Laws, Accountancy, Engineering, Business Accountancy and Doctor of Medicine. Almost all of them have their own businesses to manage aside from being City Councilors. These businesses include construction, appliance center, LPG retailing, fertilizer supplier, law firm, medical clinic and management of high school. Almost all of them are owners of parcels of land. However, compared with the huge landholdings of the Braganzas, their lands are small. Their lands are not covered by CARP, unlike the Braganzas’ landholdings. Some of the landholdings of the Braganzas were covered under CARP. Until today, the notion of the people who were the ARBs of the land of the Braganzas is that the lands were given to them through the kindness of the Mayor.

151

4.4 LGU Capacity to Handle the Idle Land Tax

Yet, the imposition of a new land tax is always a big challenge both to the government and to the people. It is a question of the capacity of the government to collect and manage the new land tax. On the part of the people, it is their capacity to grasp and to pay the new land tax. The highly systematic tax monitoring and collection scheme in Alaminos certifies the LGU’s capability to implement a new tax such as the idle land tax.

The city government plans to collect the idle land tax at the same time as that of the annual basic real property tax. It is still the duty of the City Assessor to update and keep the record of idle lands in the area. The City Treasurer is bound to notify the landowners regarding the imposition of an additional tax on idle lands.

The LGU does not need to create a new body for the new land tax. The City Assessor and the City Treasurer are competent to handle and perform their assigned tasks. The City Assessor has personally said that their office, as well as the City Treasurer’s Office, can manage the additional tax on idle land collection. This would not compromise their collection of the other forms of taxation.

The respondent landowners opined that it should be the task of the City Assessor and the City Treasurer to collect taxes, seeing that it is better to leave the collection to the offices that are familiar with tax collections rather than creating a new body. Creation of a new body entails additional fund allocations. Moreover, it is easier for land owners to deal with few government offices rather than several offices or agencies.

5 ConclusionThe idea of imposing the tax on idle land is noble. It does not just open a new window to broaden the revenue base and provide an opportunity to generate additional income for the government. It can also make the owners of idle lands realize that land is a precious asset and must therefore be developed and used for their benefit and that of the localities.

In the case of Alaminos City, idle land tax is seen as an effective strategy to boost agricultural production and spread the wealth within Alaminos.

The City government already has a proposal for idle land taxation that is currently undergoing deliberations before the City Council. If the ordinance is passed, it shall be incorporated in the proposed new City Revenue Code.

152

The idle land tax is not considered primarily as a source of revenue. It is a strategy to fuel local economic activities in the city by driving owners of idle lands to make their lands productive instead of paying taxes on unproductive properties.

But to achieve this objective, the LGU should provide the necessary support services and programs with options to the owners of idle lands – technical support for high value crops, land leasing programs, marketing support, cooperatives, and others.

While the city government is focusing its projects on rice lands, they are also exerting efforts to develop the unproductive lands within the city. They are experimenting on various crops that can survive on these lands. They believe that to encourage investors to come and invest in the city, they need to have a stable and competitive agricultural base.

Another success factor in implementing the idle land tax is the local government’s technical and technological capability to monitor and implement the tax schemes. This will entail that the LGU is able to properly identify idle lands and assess its potentials for production.

A holistic idle land tax program – complete with the proper monitoring and collection schemes and the support services to help owners of idle lands – can also contribute to the agrarian reform situation. The support programs – those that were made possible from revenues from idle land tax, or those that are put in place to support land owners and farmers—actually help in partly easing DAR of its obligation to the landowners and farmer beneficiaries under CARP, hence freeing up resources that can be re-channeled to CARP’s land acquisition and development component.

Local governments, having a new revenue base from the idle land tax, can now seriously focus their efforts in developing their agricultural base, specifically in terms of providing support services to ARBs. In effect, LGUs have a bigger stake in the development of their areas, and at the same time greater accountability is assigned to LGUs for their immediate constituencies. In turn, the implementation of CARP at the national level can now be concentrated more on the distribution of the remaining undistributed lands and hopefully towards its completion.

153

References

City Programs and Projects, “The Ocho-Ocho Project,” The Official Website of the Municipality of Alaminos, the Home of the Hundred Islands, [http://www.alaminoscity.gov.ph/thecity/ cityproject.aspx?id=2&agenda=Agriculture]. Accessed 1 March 2008.

Office of the City Planning and Development. (2007). Alaminos City Profile. Alaminos City Pangasinan.

Office of the City Planning and Development. (2006). Number of Households and Indigency Rate. Alaminos City Pangasinan.

Office of the City Planning and Development. (2007). Alaminos City Development and Investment Plan. Alaminos City Pangasinan.

One Pangasinan Foundation for Rural Development, Inc. (2007). Agri-Volution Projects. Alaminos City Pangasinan.

Office of the City Assessor. (2001) Market Values Schedules. Alaminos City Pangasinan.

Office of the City Accountant. (2006) Alaminos City Tax Collections, 1995-2006. Alaminos City Pangasinan.

Office of the City Planning and Development. (2007). Lands covered by CARP. Alaminos City Pangasinan.

Municipal Agrarian Reform Office. (2007). Status and balance of CARP lands. Alaminos City Pangasinan.

(R.Anonuevo, personal communication, February 4, 2008)

(E.de Leon, personal communication, February 4, 2008)

(C.Tirao, personal communication, February 5, 2008).

(H.Braganza, personal communication, February 6, 2008)

154

VISAYASSIPALAY CITY, NEGROS OCCIDENTAL

The Feasibility of Idle Land Tax Implementation in the Land of Mines and Beaches: A Case of Sipalay City, Negros Occidental1

1 Profile of Sipalay

A. Demographic and Geographic Facts and Figures Sipalay is a coastal town that faces the beautiful expanse of the northern area of

Sulu Sea, as the second southernmost town of the Province of Negros Occidental; it is bounded by the municipalities of Cauayan in the north, Hinobaan in the south, and Candoni in the east.2

1 Atty. Florisa Almodiel, Fellow, La Liga Policy Institute, Co-Convenor, Counsels for the Defense of Liberties, and Founding Member, National Union of People’s Lawyers.

2 Executive and Legislative Agenda of Sipalay, 2004-2007.

155

Based on the 2006 census, Sipalay has a land area of 42, 770 hectares of land area and a total population of 66,157 inhabitants consisting of 12,921 families. The average population density in 2005 is estimated to reach 1.5 persons per hectare.

Sipalay started as a sixth class municipality, which grew to become a first class municipality by its recent income reclassification. The enactment of Republic Act 9027 on March 5, 2001 established Sipalay as a city.

The city has struggled and triumphed over more than a dozen years of conflict and recession. The years 1988 up to the present have been years of harsh economic reversals and dismaying socio-political upheavals. Social conflict arising from the nationwide rebellion and political struggle of the ideological National Democratic Movement flung the municipality into a violent laboratory of protracted people’s war. This was met head on by the Armed Forces as it conducted its Operation Thunderbolt in 1989, blanketing the entire municipality with bombs, bullets and cannon fire. No hinterland barangay was spared from air and land warfare, and Sipalay had the dubious distinction of landing in the front pages not only of the local but also the international tri-media as a war zone. Massive evacuation of farming families left crops abandoned and farms in distress. War set back agricultural development for years after. The people of Sipalay, who were never affluent to begin with, strongly felt the economic crunch.3

3 Comprehensive land use plan of Sipalay, draft, final report.

It is a land blessed with natural resources in its mountains, forests and coastal zones. Fishing grounds yield a major source of blue marlins, its waters are teeming with marine resources of diverse species; fishes, sea grasses and coral formations. It is also endowed with unique landscapes highlighted with

a panoramic view of the sunset along its 45 kilometer coastline. This alone makes for an interesting tourist attraction. Coupled with dive sites at Barangay 4 and Campomanes Bay including coralline sand beaches, Sipalay is fast becoming a popular alternative eco-tourism destination in the country, next to Boracay and Palawan.

156

B. Land Use and Area

Sipalay is politically subdivided into 17 barangays, five of which comprise the poblacion area or the urban core of the City (Barangays 1 to 5). Surrounding the poblacion are the barangays of Nauhang, Gil Montilla, Mambaroto and Maricalum, while the barangays of Cabadiangan, Camindangan, Manlucahoc and Nabulao form the hilly to mountainous outskirts. On the northwestern side of the City are the barangays of Cartagena and Canturay, which are traversed by the national road leading to Bacolod. The last barangay in the southwestern portion is Cayhagan, which is linked to the southernmost municipality of Hinobaan via the national road. Barangay San Jose, commonly referred to as the mining town, lies in the upper portion of Gil Montilla across Canturay and Cartagena.

Table 1. Land Area by BarangayBARANGAY AREA IN HECTARES %

Brgy. 1 – Poblacion 15.52 00.04

Brgy. 2 – Poblacion 68.53 00.16

Brgy. 3 – Poblacion 177.16 00.41

Brgy. 4 – Poblacion 606.18 01.42

Brgy. 5 – Poblacion 56.44 00.13

Brgy. Cabadiangan 3464.37 08.10

Brgy Camindangan 5239.33 12.25

Brgy Canturay 1052.14 02.46

Brgy Cartagena 1411.41 03.30

Brgy Cayhagan 1103.47 02.58

Brgy. Gil Montilla 1804.89 04.22

Brgy. Mambaroto 1368.64 03.20

Brgy. Manlucahuc 9405.12 21.99

Brgy. Maricalum 3537.08 08.27

Brgy. .Nabulao 9182.72 21.47

Brgy. .Nauhang 911.00 03.30

Brgy. .San Jose 3366.00 07.70

TOTAL 42,770.00 100

The seventeen (17) barangays can be classified into agricultural, coastal and agri-coastal barangays. A detailed profile for each barangay follows:4

4 Expanding the Agenda for Reducing Poverty: The Poverty Reduction Plan of Sipalay City, 2006.

157

Tabl

e 2

. K

ey C

hara

cter

isti

cs o

f th

e A

gric

ultu

ral B

aran

gays

in S

ipal

ayCa

tego

rySa

n Jo

seCa

min

-dan

gan

Caba

-dia

ngan

Mal

cua-

hoc

Gil M

ontil

laM

amba

roto

Nabu

lao

Brgy

. Thr

eeTO

TAL

Tota

l Lan

d Ar

ea34

8554

2435

8797

3518

6914

1795

0517

735

200

Tota

l agr

icul

tura

l la

nd24

3923

8620

8054

7677

299

257

099

1481

4

Tota

l No.

of H

Hs14

4514

7356

489

111

0266

113

3230

677

95

Popu

latio

n68

4749

7331

5048

6053

7929

8770

4915

2036

812

Soci

o-ec

onom

ic

Stat

us (i

n %

)

Rich

110

10

15

10

5

Mid

dle

Clas

s75

2030

629

1510

2025

Poor

2070

5065

6060

5070

56

Very

Poo

r4

10

2910

2040

14

Maj

or C

rops

Rice

, Cor

n,

Bana

naRi

ce, C

offe

e, C

orn,

Su

garc

ane

Rice

and

Cor

nRi

ce a

nd C

orn

Rice

Rice

Rice

and

Cor

nRi

ce

Pre

and

Post

Ha

rves

t Fac

ilitie

s1

Publ

ic M

arke

t2

thre

sher

s, 1

0 ric

e m

ills,

9 s

olar

dr

yers

, 1 ir

rigat

ion

syst

em, c

over

ing

30%

of r

ice

land

, 2

powe

r till

ers,

2

mar

kets

and

10

irrig

atio

n pu

mps

9 th

resh

ers,

5

rice

mill

s, 5

sol

ar

drye

rs, 2

irrig

atio

n sy

stem

s se

rvic

ing

25%

of r

ice

land

, wa

reho

use,

4

powe

r till

ers,

10

irrig

atio

n pu

mps

, an

d 1

mar

ket

16 th

resh

ers,

10

rice

mill

s, 6

sol

ar

drye

rs, 1

irrig

atio

n sy

stem

(44

.0 h

a),

3 wa

reho

uses

, 16

powe

r till

ers,

8

irrig

atio

n pu

mps

, an

d 1

mar

ket

14 th

resh

ers,

4

rice

mill

s, 1

2 so

lar

drye

rs, 3

irrig

atio

n sy

stem

s se

rvic

ing

60%

rice

land

, 4

ware

hous

es, 1

7 po

wer t

iller

s, 1

1 irr

igat

ion

pum

ps,

and

1 m

arke

t

1 tra

ctor

, 9

thre

sher

s, 4

rice

m

ills,

7 s

olar

dr

yers

, 2 ir

rigat

ion

syst

ems

(4.0

ha

serv

ice

area

), 3

ware

hous

es, 9

po

wer t

iller

s, 5

irr

igat

ion

pum

ps,

and

1 m

arke

t

8 th

resh

ers,

8

rice

mill

s, 8

so

lar d

ryer

s, 3

irr

igat

ion

syst

ems,

2

ware

hous

es, 1

9 po

wer t

iller

s, 1

0 irr

igat

ion

pum

ps,

and

2 m

arke

t

4 th

resh

ers,

1

rice

mill

, 2

sola

r dry

ers,

1

ware

hous

e, 4

po

wer t

iller

s, 2

irr

igat

ion

pum

ps

Maj

or S

ourc

e of

In

com

eEm

ploy

men

t, al

l ar

ound

labo

rers

Farm

ing,

cha

rcoa

l m

akin

g, ll

all

arou

nd la

bore

rs

Fa

rmin

gFa

rmin

g, a

ll ar

ound

labo

rer

Farm

ing

Farm

ing,

all

arou

nd la

bore

rFa

rmin

g,

empl

oym

ent,

and

serv

ices

pro

vide

rs

Aver

age

Hous

ehol

d in

com

eP7

,833

P5, 4

24P3

587

P315

6P3

779

P485

6P5

396

P692

4

158

Table 3. Key Characteristics of the Coastal Barangays in SipalayCategory Name of Coastal Barangay

Barangay 1 Barangay 2 Barangay 4 Barangay 5 TOTAL

Total Land Area 15.52 175.45 628.28 56.44 875.69

Total No of HHs 117 777 327 658 1879

Population 615 3720 1981 2761 9077

Socio-economic Status

Rich 4 1 2 1 2

Middle Class 75 30 10 8 31

Poor 21 64 50 40 44

Very Poor 5 38 51 23

Distance from the Sipalay Center

0.5 0.45 6 0.8

Accessibility Very accessible Very accessible Access to barangay is quite difficult because of its poor road condition and rolling terrain

Very accessible

Major Sources of Income

Employment Fishing and Trading

Fishing Fishing and Employment

Average Household Income

P11,000 P2,883 P4,077 P4,250 P5,552

2004 Development Fund

P82,895 P178,418.99 P133,067.20 P161,538.90

159

C. Land Classification/Use

As shown in the existing land use plan of the city’s urban zone areas, 49.54 percent of the urban zone areas in Sipalay are agricultural land:

Table 4. Existing General Land Use Plan for Urban Zone Areas5

Classification1999 – 2008

Land Area (in Hectares)

Percentage of Total Area

Agricultural Land 157.3654 49.54

General Residential Land 56.0392 17.64

Socialized Housing 13.8614 4.37

Open Space/Park/Tourism/Conservation Area 15.1656 4.78

Institutional Land 9.1908 2.89

Commercial Land 14.9982 4.72

Special Use/Cemetery 3.0000 0.94

Light Industrial 1.5000 0.47

Fishpond (SFDZ) 15.0590 4.74

Buffer Zone 2.7950 0.88

Roads 28.6754 9.03

Total 317.65 100.00

Sadly however, it is the farmers of the city—numbering about 32,500 (in the year 2000), or 50 percent of the population—that earn income below subsistence level, with 20 percent having less than one hectare and 64 percent having less than three hectares of land.6

D. Industries in Sipalay

i. MINING INDUSTRY. Due to tectonic and volcanic activity, mineral deposits in Negros Occidental are ample. Sipalay City accounts for most of it, with the presence of two mining companies operating previously in the area, i.e., Maricalum Mining Corporation and Philex Gold Philippines Inc., which mine and process copper and gold, respectively. The operations of these big mining companies have essentially transformed this municipality into a booming town and altered its natural landscape from the upland down to the coastal areas.7 When these two mining companies winded down their operations and put away their machines and equipment because ore prices could not support the costs of mining, among other reasons, this also marked another trying period for the city.

5 Sipalay’s draft Comprehensive Land Use Plan.6 PCARRD, 2003.7 Supra.

160

ii. AGRICULTURE AND FISHERY PRODUCTION Although Sipalay is considered an agricultural city, it is not dependent on the sugar industry, unlike most cities and towns in Negros Occidental. Thus, its economy has not been affected by the declining prices of sugar in the world market. Lowland agriculture in Sipalay consists largely of rice and corn farming, with fruit production/orchards gradually being developed in the uplands in conjunction with agro-forestation. Banana, coconut, mango and coffee are already produced in Sipalay, as well as pineapple, guava and citrus. Planting of rootcrops, vegetables, and legumes are also done using the Bio-Intensive Gardening System (BIGS) and Communal Garden approaches. The areas along the river delta, which cover Barangay 3-Poblacion, Gil Montilla, Manlucahoc, Cabadiangan, Mambaroto, and Nauhang, are suitable for the planting of these vegetables.

Aside from farming, fishing is also a major source of income for the people of Sipalay. Some 2,548 households, or 21.31 percent, of the total households, are engaged in fishing in Sipalay. Municipal fishing vessels fish along the stretch of the city coastline facing the western side of the Sulu Sea while Barangay 4, Maricalum, and Cayhagan are frequented by commercial fishers.

Table 5. Percentage of irrigated land over total agricultural landArea of irrigated land 2,900 hectares

Total area of agricultural land 6,344 hectares

Percentage of irrigated land over total (A/B x 100%) 45.71%

Table 6. Crop YieldTop 3 Crops Name of Crop Number of Hectares Average Yield in Tons

Crop 1 Rice 4, 877.8 4.8

Crop 2 Corn 1,334.92 2.0

Crop 3 Vegetables 92 12.0

Total 6,304 16.8

iii. TRADE AND COMMERCE Trade and commerce are gradually developing in the City. The following is a listing of the existing number of business and commercial establishments and their classifications.

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Inventory of Commercial and Business Establishments (2003):8

Classification:1. Manufacturing: 5 Hollow block makers, etc. 2. Services: 153 Food services, health services, beauty parlors, contractors,

photocopiers, etc. 3. Agricultural Services/ Supplies: 66 Rice and corn dealer, rice and corn

mills, butcher, etc. 4. Retail/ Wholesale: 421 Sari-sari stores, grocery stores, appliance dealers,

etc5. Entertainment: 21 Billiard halls, video houses, etc. 6. Transportation: 329 7. Public Utility Vehicles, Pump boats, Gas stations, etc. 8. Cottage industries such as furniture making and native crafts production

also thrive in the city

iv. TOURISM. The people of Sipalay have decided to reconfigure their City primarily for sustainable tourism—quite the opposite of its former developmental thrust as a progressive mining town in Southern Negros. The City is now committed to developing the tourism industry as its economic base and bringing about the various infrastructure and support facilities needed to ensure its speedy growth. Its intention is to move in the direction of a community-based, regulated and sustainable tourism development that provides livelihood opportunities to a great majority of its people and that nurtures the local culture.

2 Sipalay’s Local Development Plans and Investment Plans on Agrarian Reform, Support Services for Agrarian Reform and Agricultural DevelopmentDespite land primarily agricultural in nature, and with farmers comprising half of Sipalay’s population, agriculture is not a priority program of the city. The budget allocated for the agricultural sector is a mere 16 percent of the 2007 investment program, as revealed in Table 7:

8 Source: Socio-Economic Profile of the City of Sipalay (2002-2004).

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Table 7. 2007 Annual Investment Program Sector Proposed Programs/ Projects Location Cost

(Php’Million)

Agriculture Agriculture-Intensified Rice Production Program

Agricultural Zones of Sipalay City. Pilot cluster sites (contiguous 50 hectare per site) will be established in Manlucahoc, Cabadiangan, Camindangan, Gil Montilla, Mambaroto, Maricalum, & Nabulao.

0.41

Agriculture Agriculture-Integrated Corn-Based Poultry & Livestock Farming System Program

Corn-growing areas in Camindangan, Cabadiangan, Manlucahoc & Nabulao

1.88

Agriculture Banana and Calamansi Agribusiness Program

Barangay Agro-forestry zones – Manlucahoc, Camindangan, Cabadiangan, Nabulao, Canturay and Cartagena

1.00

Forestry Forestry/Upland Watershed Development Program – In-Situ Biodiversity Protection & Conservation cum Bird Sanctuary

Sitios Omas, Calatong & Dung-i 0.50

Forestry Integrated Hilly Land Farming Systems Development Project

Manlucahoc, Camindangan and Nabulao

0.50

Tourism Information Handling Program City-wide 0.24

Tourism Basic Meteorological Stations Coastal 0.23

Tourism Roadside & Viewpoint Regulations

Specific tourism clusters 0.90

Tourism Greening Program Specific tourism clusters 0.67

Tourism Development of Eco-Tourism Sites

Specific priority areas 1.00

Infrastructure Comprehensive Disaster Management Plan

0.75

Infrastructure Management Study and Detailed Design of Solid Waste Facility

1.25

Infrastructure Slope Protection and Stabilization Works - Phase 1

1.50

Infrastructure City Drainage Improvement Project

City Proper 0.50

Coastal/ Marine Comprehensive Resource Assessment and Management Planning Project

City-wide coastal/ marine waters 3.00

Coastal/ Marine Marine Protected Area Network and Management Program

MPA Julians Wreck; Anauayan Island; Sunken Island; Campomanes Bay SW Edge; Black Wall;

2.50

Social Construction of City Hospital City Proper 2.50

Administration Sipalay Training Institute (DED) City Proper 1.00

Administration Establishment of Web Site 0.10

TOTAL 20.43

(Chargeable Against the 20 percent Economic Development Fund for CY 2007)

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Nor will agriculture be a priority in the future plans of Sipalay. Based on the Medium Term Development Plan of the City, the thrust in the next 10 years involves tourism and infrastructure development.

Table 8. Summary of Project Costs and Identified Development Projects

SectorNumber of Identified Projects

Total Project Cost (Php’Million)

Total Years 1-3 Years 4-6 Years 7-10

Agriculture 4 33.2 27.6 5.6 0.0

Forestry 5 28.0 2.5 18.0 7.5

Tourism 17 150.0 98.0 43.8 8.2

Infrastructure 24 820.4 281.2 299.8 239.4

Coastal/Marine 5 43.2 20.2 21.4 1.6

Social* 1 30.0 30.0 0.0 0.0

Local Administration 4 26.0 13.0 6.5 6.5

T O T A L 60 1,130.8 472.6 395.1 263.2

*The City’s regular program is expected to be the main source of social services for the People of Sipalay. The social program here refers only to tourism related projects.

It must be noted, however, that the city has identified Barangay Gil Montilla as a tourism cluster, where Agri-Tourism will be promoted. Today, this barangay is where rice cultivation is concentrated and where an agricultural school is located. It is proposed that a Rice Museum and Agricultural Training Center be located in this cluster, as it is very accessible from the urban areas of Sipalay. The manufacture of crafts and delicacies, in addition to activities that can enhance the educational value of agro-tourism, are still to be developed.

Furthermore, the city is actively promoting the existing land tenure instrument called the “Upland Agroforestry Program” under DENR Administrative Order No. 2005-25, where lands under the public domain are distributed to provide occupants with land tenure security and a source of livelihood.

3 More about the Mining FactorThe vignette of Sipalay in the late 1990s is very much different from the Sipalay a decade after. At that time, Sipalay suffered from the collapse of a huge tailings pond of Maricalum Mining Corporation. Three barangays were covered with sediments of the tailings pond, making it look like a winter wonderland, and disguising the harsh reality. People suffered from respiratory illnesses as the wind carried ash-like sediment, making it difficult to breathe and eat. Since the pond damaged all the crops planted by the farmers and covered the soil with sediment, there was scarcity of food. The rivers were also covered by the sediment and made it unsafe for drinking and bathing. The adamant refusal

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of Maricalum Mining to compensate the communities resulted in a brewing hostility toward the company and threatened the peace and order situation. A nearby mining company, Philex Mining, was also identified as a threat to the health and safety of the people and to the environment. Thus the Office of the Presidential Adviser for the Peace Process intervened and initiated an Appropriate Dispute Resolution process with the community, the local government unit, DENR and Maricalum Mining. In the end, the city decided to bear the burden of rehabilitating the farmlands as Maricalum did not cooperate in cleaning up its act. It took years before the City was able to remove the siltation to make the lands productive again.

Indeed, mining claims and actual MPSAs cover 63 percent of the City’s area, making mining a virtual Damocles Sword hanging over the city. The most pressing issues at this time are the prospects of the re-operation of otherwise shut mines such as Maricalum and Philex, and/or the opening of new mines such as Colet/Copper Resources and Vulcan. Prospects for a brighter future surfaced during the Planning Study, when an interview with Philex officials indicated that there is a less than 50 percent chance that the currently moribund mines will resume operations in the next five years. Re-opening the mines will require billions in investments and a time horizon of at least five to seven or even 10 years. The context of this observation was basically the slump in metals prices that were characteristic up until less than a year ago.

Now, however, metals have dramatically increased in prices, so much so that the open pit mining of copper can be viable. The sudden and steep ascent of gold prices has given rise to speculations that gold mines might re-open. Colet Mining has already indicated it will pursue the operation of its “Hinobaan” copper mine, and it reckons they could be operational in four years.

The City’s attitude is that mining in Sipalay is welcome, but it must conform to stringent environmental safeguards that will ensure that the City’s people and its environment do not suffer the same damage, material or otherwise, that they suffered in the past. The City has just begun to rebound from the nightmare of adverse consequences of mining operations, something that other localities are just starting to suffer at present. Indeed, within the immediate future efforts will be focused toward establishing a sense of tourism in the City and then vigorously pushing it to take off. Once tourism is soaring high, it can be demonstrated—in no uncertain social, economic or financial terms—that it makes sense for the City to keep its “natural capital” intact, with or without mining.

Having said that, there are imminent issues that could explode into full-blown crises for the City. One of them is the impending operation of Colet/Copper Resources Mining in the Manlucahoc area. Particularly at risk, unless some mutually beneficial arrangement is arrived at, is the beautiful eco-tourism site and organic rice production valley of Dung-i. The Sitio sits right in the middle of the proposed tailings pond of the Colet/Copper Resources and nearby would be

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the planned open pit mine designated as DJ1 Pit. On the other hand, it has been proposed that the entire mine layout be designated as protected forest area or for production forest use.

Another potential issue is the apparent refusal of the Maricalum Mining firm to recognize the City’s right to regulate land use within its MPSA areas. There is, in fact, a trend among the mining firms to firmly assert the “prior rights” they have by virtue of their MPSA. However, the Local Government Code clearly mandates that land use regulation is the right of the LGU. Paragraph C of Section 20 of the Local Government Code stipulates that:

(c) The local government units shall …continue to prepare their respective comprehensive land use plans enacted through zoning ordinances which shall be the primary and dominant bases for the future use of land resources…

This apparent conflict of legal rights at the very least compels each party to dialogue with the others. In the specific case of Colet / Copper Resources, initial dialogues have commenced and the mining firm has declared that it is open to the “potential of multiple land uses within its MPSA areas.” It has also indicated that it wants the Colet/Copper Resources mine operation to be an example of sustainable mining in the region, if not in the country.

4 The State of Local Taxation in Sipalay

A. Facts and Figures

Sipalay has City Ordinance No. 2001-002 as its Real Property Tax Code, enacted on September 25, 2001, in which almost all of the provisions are similar to the provisions of the Local Government Code.

Under its Tax Code, agricultural lands have a fixed 40 percent assessment level. A rate of one percent is levied on the assessed property, with one percent additional tax levied for the Special Education Fund (SEF) and an additional tax, not to exceed five percent of the assessed value to be levied on idle lands, which shall accrue to the general fund of the city. A discount of 10 percent is given if real property taxes are paid on time, and 20 percent for advance payments. A two percent interest is imposed per month on unpaid taxes, in no case to exceed 36 months. Non-payment for three years makes the taxpayer delinquent, and the property can then be subject to a levy and auction sale by the city.

For most LGUs in the Philippines, the IRA is the biggest revenue source, followed by the real property tax. In more progressive and urbanized LGUs, cities in particular, the local business tax and real property tax assume the greater proportion. In the specific case of Sipalay, a big loss is the real property taxes

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unpaid by the mining companies. According to the Treasurer, Maricalum Mining has been delinquent in the payment of real property taxes and millions of pesos have yet to be collected from it. However, with rumors that Maricalum is interested in resuming mining operations in the area, both the Treasurer and the Mayor look forward to the payment of its back taxes.

Presentation of sources of and status of revenues and income for CY 2006 in Sipalay City

Table 9. Real Property Tax (RPT) Accomplishment RateAmount of RPT Collected 4,869,642.85

Amount of Projected RPT Collection 4,504,390.00

RPT Accomplishment Rate (A/B x 100%) 108.11%

Cost Collection Ratio

Cost to Collect Revenues 4,432,120.00

Total Revenues from Local Sources 10,443,572.00

Internal Financing RatioA/B x 100% 4.13%

Revenue Target Accomplishment Rate*

Actual amount of revenue collected 250, 668,302.00

Projected amount of revenue collected 217,821,650.00

Revenue Target Accomplishment Rate (A/B x 100%)

115.08%

* Local Governance Performance Management System of Sipalay City (Data Capture Form), CY 2006

A study on the Income and Expenditure of the City reveals that real property is the leading source of locally sourced tax revenues of the City, and that Sipalay currently has a deficit, where its expenditures exceed its income, to wit:

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Table 10. Statement of Income and Expenditures (as of 2004)9

I N C O M E : LOCAL SOURCES (TAX REVENUE)

TOTAL INCOME

Local Sources A. Tax Revenue

1. Real Property Tax2. Business Tax3. Other Taxes

B. Non-Tax Revenue 1. Regulatory Fees2. Service/User Charges3. Receipts from Economic Enterprise 4. Toll5. Fees/Other Receipts

Shares from National Tax CollectionsExtraordinary Receipts/AidsLoans & BorrowingsInter-Local Transfers

:

:

::::::::::

::::

205,634,000

6,398,830

4,256,3502,913,880

979,880362,590

2,142,480639,980230,120

1,253,7703,280

15,330

199,235,170000

E X P E N D I T U R E S

TOTAL EXPENDITURES

General Public ServicesEducation, Culture & Sports/ Manpower Devt Health, Nutrition & Population ControlLabor and EmploymentHousing and Community DevelopmentSocial Security /Social Services & WelfareEconomic ServicesDebt ServiceOther Purposes

:

:::::::::

211,533,410

49,233,9301,466,370

19,113,95000

4,008,70024,241,55014,911,31098,557,600

Excess (deficit) of Income over Expenditures : -5,899,410

Average real property tax assessed and collected in areas with CARPable lands, both private agricultural and commercial land

In Sipalay, agricultural land comprises a big part of the real property tax collection. There is no distinction made, however, on whether the land is CARPable or not. In 2007, the basic net collections from agricultural land was PhP 665,851.31, followed by taxes from residential lands in the amount of PhP 283,109.84 and with commercial lands in the amount of PhP 51,670.49.

9 http://www.blgf.gov.ph/pages/fiscalData.php.

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5 The Implementation of the Comprehensive Agrarian Reform Program (CARP):

Context and Perceptions

A. The MARO and its Key Accomplishments

The Municipal Agrarian Reform Office in Sipalay City has only two staff members, including the MARO himself. The MARO is also responsible for two other municipalities, which makes it all the more difficult for him. His office, including the airconditioning unit, was donated by the mayor. On the day of the interview, the lone staff member of the MARO was not present and it was difficult to obtain any data as his files were not in order. Further attempts to obtain specific data on the CARP implementation achievements and targets proved to be unsuccessful.

As stated in the interview with former Councilor Freddie L. Fernandez, the MARO office is always closed. It is as if it doesn’t function at all.

Based on the report of the MARO, in a period of 10 years (from 1997 to 2007), the office has distributed lands under RA 6657 (otherwise known as the Comprehensive Agrarian Reform Law, CARL) totaling 816.2046 hectares. It had a bigger accomplishment of land distribution under EO 407, where a total of 3,240.2741 hectares were distributed. Under PD 27, 763.7777 hectares were distributed to the farmers.

The MARO also reports that it has identified idle and unproductive lands that are the retained areas of landowners under CARP, covering a total of 258.3963 hectares.

B. State of CARP Implementation: Realities Faced by the Farmer Beneficiaries

Of the total land area devoted to rice production, only 44 percent is currently irrigated. This accounts for the low productivity of the agricultural lands. There are already six existing irrigation systems, and a program to improve irrigation facilities is being implemented through the National Irrigation Administration (NIA). Through this program, the Sipalay River will be tapped as the main source of water to irrigate an additional 300 to 400 hectares or 35 percent of the irrigated rice land. Various credit institutions such as the Land Bank of the Philippines (Sipalay Branch), NGOs, the City Government, the Provincial and the National Government and the Sipalay Multi-Purpose Cooperative provide the necessary assistance to farmers’ cooperatives and small/medium enterprises and commercial establishments. However, credit is still largely sought by the majority of the population from informal lenders charging high interest rates.

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This is due to the relative ease of securing loans from them, since there are no documents required and none of the bureaucratic delays that are often encountered when applying for formal credit.

Hence, it is interesting to note that there exist different systems of financing mechanisms that enable farmers to avail of cash when the need arises, but these also pave the way for them to be heavily in debt and to run the risk of losing their land:

1. Prenda or Mortgage – Land is used as security in exchange for a specific amount of money. The original title of the land is handed over to the creditor and the farmer/landowner can only claim the title upon payment of the principal amount loaned plus the interest incurred over a specific period of time. If the time for payment of the loan has lapsed, the property is foreclosed and title is transferred to the creditor. The farmer/landowner, however, depending on negotiations, may continue to use the land and enjoy its produce when the mortgage is in place.

2. “Prenda-Bakal” (Mortgage Sale) – Similar to a mortgage but here, the farmer/landowner can opt to sell the property instead at a negotiable price, which is usually higher than the amount loaned. The creditor will then give an additional sum of money to the farmer/landowner for the purchase of the land.

3. Arriendo – Unlike a mortgage, the farmer/landower obtains money as loan under this system, and in return, allows the creditor to use the land and enjoy its produce as payment for the amount loaned, usually for a span of three years.

4. Alili – The farmer/landowner loans his expected harvest at a price lower than its real value in exchange for a sum of money. To illustrate: For a P2,500 loan, the farmer agrees to pay the creditor with sacks of rice at a price of P250 per sack. When harvest time comes, he then delivers 100 sacks of rice as payment, but the market value of the harvested rice is P470 per sack.

5. Percentage system – The farmer seeks a financier who will give him/her money for necessary expenses in tilling the land, i.e fertilizers, seeds, etc. When harvest time comes, the financier will receive 10 percent of the total produce.

When asked about the state of implementation of CARP in Sipalay, all the respondents agree that the farmers are in an unfavorable situation. The benefits that CARP has provided in giving farmers a sense of dignity and respect from finally owning land and having the option to mortgage it when in a financial crisis diminish because of lack of support services. Interviews with the Treasurer, Assessor, City Agriculturist and Councilors reveal that the problem

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with CARP does not involve land distribution but rather the lack of support services. Once the land has been distributed to the farmers, they do not have the capacity to till it and make it productive. Or in cases of emergency, such as a family member falling ill, the farmers are forced to sell or use the land or its expected harvest as collateral. Of course, there are also the occasional drunkards or gamblers who will sell or mortgage their land to finance their vices, or families not wanting to be embarrassed during town fiestas who use their land and/or its produce to acquire loans to spend on entertaining guests. It seems therefore that the national government has failed to recognize that the farmer, once given land, does not have the means to make the land productive. Without such support services, land distribution thus becomes futile.

C. Absence of Support Groups on Agrarian Reform

It does not help that there is no group that works toward making agrarian reform a venue through which farmers may assert their right to own land and make it productive. The only non-governmental organizations (NGOs) working in Sipalay at present are the Quidan Kaisahan (QK) and Paginupdanay Inc.(PI). QK is a development NGO working on local governance and education. It has gained recognition for its education program on child laborers. PI, on the other hand, is implementing microfinance in the community. When asked why they are not into direct agrarian services, the staff all answered that it is difficult given that there is really no such thing as agrarian reform in Sipalay—not while the Montillas continue to be the area’s local chief executives.

Previously, Binhi, an NGO, provided agricultural training and support for farmers in Sipalay. However, it is common knowledge that the Mayor was not happy that the opposition councilors were always seen in the Binhi office. She was displeased with the organization and started making it “difficult” to implement its programs in the community. Binhi ultimately had to leave the city and implement its programs in nearby municipalities.

D. Sipalay as the Hacienda of the Montillas?

Here is a brief profile of the sample key local political actors of Sipalay City—namely the mayor; a staunch supporter on the council with his newly elected wife; and two known opposition figures in Sipalay.

The Mayor of Sipalay, Soledad C. Montilla:

Mayor Soledad C. Montilla hails from an old ruling clan. For as long as people can remember, it has been members of the Montilla family that have always held the position of mayor of Sipalay, even before it became a city. Thus, whoever is the Mayor is well connected with local and national businessmen, elites and political parties, having been part of the ruling clan in Sipalay for a long, long time.

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One opposition councilor quipped: “(t)he town of Sipalay is one big hacienda of the Montillas.” And indeed, the biggest landowners in the entire city of Sipalay are the Montillas and they have been the mayors of Sipalay as long as one can remember – from its being a municipality until it became a city.10

Yet, when interviewed for the case study, the Mayor immediately lamented that she and her family are victims of CARP. She declared that she now has only 20 hectares of sugarland left. Their 22 hectares of land were covered under compulsory acquisition and 52 hectares were subject to Voluntary Offer to Sell. Her brothers and sisters had 700 hectares of land covered by CARP. Yet, she says all is well in Sipalay when it comes to CARP, as there is no agrarian related violence or any unrest among the farmers.

The Montillas own a construction company that is the same company that builds roads and constructs buildings for the Sipalay local government. This is the reason why some of the people of Sipalay are not happy that the priority of the mayor is to build a new municipal building and roads as well as ports. It is one of the priority projects of the mayor to build an eco-friendly port in the famous Campomanes Bay. Interviews with local residents give an impression that the mayor and her family are using their power to further improve their business interests.

There have also been numerous stories about how the mayor harasses businessmen and local residents when the Montillas do not get their way. In hush-hush tones, residents state that there are numerous anomalies in the implementation of CARP, the most recent controversy being the naming of city employees as CARP beneficiaries in lieu of farmers or farmworkers. It does not help that the MARO and most of its resources are sourced from the city government. This is why, as one respondent from the NGO sector commented, agrarian reform is unknown in Sipalay When asked about the possibility of implementing the ILT in Sipalay, Mayor Montilla expresses her support and is even keen to have the pilot implementation in Sipalay, since she argues that if ILT is to be implemented then she really has no choice but to submit.

Councilor Myrna Fernandez is a neophyte councilor who won the recent local elections, only because her husband, Freddie L. Fernandez, was a three-term serving councilor who could no longer run for office.. The couple, who were also interviewed, have no landholdings except for the land in the city on which their house was built.

10 The present mayor is Soledad C. Montilla, mother of the former mayor, Oscar C. Montilla Jr. The latter also served three terms as Local Chief Executive and holds the distinction of being the last Municipal Mayor and the First City Mayor of Sipalay. It must be noted that Mayor Soledad Montilla was the mayor prior to the assumption of office of Oscar C. Montilla, Jr.

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Former Councilor Freddie Fernandez can be categorized as being upwardly mobile middle class, having completed his university degree, and developed connections with the wealthy and powerful, as well as in the local government bureaucracy during the three terms he has served. He is known as the right hand councilor of the Mayor. In fact during the interview, an athlete who won in the ASEAN Olympics for the Disabled approached him to seek help. As a result she was able to call immediately upon the mayor and visit the local radio station for an interview. The Councilor then instructed his wife to secure the athlete’s CV, so that the City Council could issue a board resolution recognizing her achievements, and that she could be given a cash prize.

With regard to the possibility of ILT implementation, the husband and wife councilors stated that they would not resist as long as a public hearing/consultation was conducted first. Also, it should be determined whether the idle land is exempt because the owner/farmer is too poor to develop it or because the land itself cannot be made productive (e.g., it is stony, depleted).

Councilors Edmundo Garinganao Jr and Zaldy “Doc” Galvan

Councilor Garinganao is a former Brgy. Chairperson who now heads the Committee on Ways and Means and on Good Governance. He has 5.5 hectares of land covered by an Emancipation Patent and has half a hectare of idle land. He bought this land from farmers who needed money and mortgaged their land. Eventually, the farmers agreed to the foreclosure of the property but Councilor Garninganao said that gave an additional amount so as to pay a fair price for the land.

Councilor Garinganao is well educated and has developed connections with people in government but as he himself admits, he does not have the strong, well established connections of the Montillas. He had a buy-and-sell business that funded his bid to run for mayor against the son of the present mayor. When he lost, he suffered more losses as the mayor attempted to make things difficult for him. He therefore decided to establish his business in Bacolod City. He came back and ran for councilor last election.

Zaldy “Doc” Galvan, meanwhile, purchased seven hectares of land two years ago, some parts of which are idle, former coconut and rice lands in Maricalum that were not planted by the farmer/owner because he lacked the money to do so. The farmer had to sell his land so that he could have money to feed his family.

Doc Galvan practices his medical profession, and has a sari-sari store as source of business. A three-term Councilor, he has good local political connections. This is the reason why he is known as the number one opposition councilor, and why the previous mayor made things difficult for him. At present, however, the current Mayor actively seeks the opposition councilors out, asking for

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their comments, suggestions and help. Thus, a more collaborative working relationship exists between them and the mayor.

The two councilors are supportive of ILT implementation, but given the political reality of Sipalay being governed by the Montillas as their own little hacienda, they are not very optimistic that it will really benefit farmers and agrarian reform.

6 Views on the Feasibility of Idle Land Tax Collection to Support CARP Implementation:

A. How Should Idle Land Tax be Operationalized?

The LGU of Sipalay is determined in its tax collection efforts. The Office of the Assessor has the latest technology on surveying, GIS equipment, and with the ongoing World Bank assisted program on computerization, they will be able to map out Sipalay, even its remotest areas, for an improved and highly accurate tax mapping. Hence, technology and skills wise, the LGU can implement the idle land tax. In fact, it is already provided for in the City’s Tax Code, but has not been implemented by the Assessor as he has difficulty in operationalizing the definition of “idle lands.” To illustrate: under the Local Government Code, idle land is below 50 trees planted in a hectare. He then asks, what if when his staff goes there, there are less than 50 trees, but when they come back there are already 52? Could he still impose an idle land tax? Interestingly enough, it is only the Assessor who, among all the stakeholders interviewed, is aware of the legal definition of idle land tax.

B. Initiatives of the Treasurer in Real Property Tax Collection

The Office of the Treasurer has implemented a house-to-house tax campaign in which his staff visits and conducts an information drive on real property tax. It strictly follows the provisions of the Tax Code and has implemented a system of “shaming” taxpayers by posting their names in public places and visiting each barangay twice a month to follow up on tax payments. As a result of this, the amount of tax collected has increased. The Office of the Assessor has even assessed real property taxes on public lands, in particular, of the beneficiaries of the Integrated Social Foresty Program of the DENR, despite the latter’s objections, on the theory of “beneficial use.” Several CARP lands have also been auctioned off by the Treasurer for non-payment of real property taxes.

Given the million pesos arrears of Maricalum Mining on taxes, the Treasurer has instituted a collection case for the payment thereof in court. Maricalum has filed an Ombudsman suit against the Treasurer.

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The people are satisfied with the tax collection of the LGU, albeit with a few snide remarks and innuendos that those who are close to the LGU officers are given more lenient treatment. Of course, it is noted that the 10 percent and 20 percent tax incentives are mostly availed of by the rich landowners. The taxes become less of a burden for them because of this. For those who are already hard up – the farmer beneficiaries of CARP — penalties imposed by the Treasurer and the real threat of losing their land further makes them more “pigado” (wretched). Also, when the land involved is still to be subdivided among family members, it becomes another case where the payment of the real estate taxes becomes problematic, as there is difficulty in securing the services of a surveyor (these must be hired in Bacolod City) and paying for these services. So, the family members end up not waiting for one another to pay their share until the taxes become bigger with accumulated penalty interest.

C. Acceptability of the Proposed Idle Land Tax Implementation

When asked about the feasibility of the idle land tax, there was a general sense of openness to the idea of implementing it, provided that the taxpayers would be consulted and informed prior to implementation. All the stakeholders interviewed also agreed that the revenues from the idle land tax should be used for land distribution under the agrarian reform program, provided however that this time, the flaws of CARP – specifically the non-provision of adequate support services to the farmers, in terms of knowledge, technology and financing or credit facilities as well as the marketing of their products—would be addressed. Should the revenue collected from the tax be more than enough to cover other services, then there was a general agreement that the tax should also go to health facilities (given that Sipalay does not have a fully operational hospital and most barangays do not have adequate health centers and facilities), education, and farm-to-market roads.

The stakeholders all agree that the assessment and collection of idle land tax is best handled by the current set up of the Assessor and the Treasurer, as they are doing their jobs well and have the necessary equipment, skills and staff. Several respondents have noted that it will be difficult for the MARO to be placed under the LGU and perform such functions, as the LGUs already have their own dynamics. Coming from a national agency, the MARO, even if devolved, will not be able to function well. The MARO himself is not happy with the idea of devolution, even if at present, his office and other logistical requirements are being provided for by the Mayor. The MARO, however, pointed out that the devolution of the agrarian reform program to the LGU will require a big budget, and this will not be acceptable to the LGU as it is IRA-dependent.

The main benefit identified in the implementation of the idle land tax was that it would “force” those who have land to render it productive. After all, if land is productive, then it should be more than enough to pay for the taxes and provide

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for the needs of the family. The only concern is if the land is already barren and cannot be made productive. There should be a distinction on this, as it is unfair to impose the tax on a farmer already suffering from such losses. The only major hindrance identified in the implementation of the idle land tax is the adamant refusal of landowners to pay if they are not properly informed, consulted and briefed on the matter.

7 Idle Land Tax in the Context of an LGU-led Agrarian Reform Program: A Feasible Alternative?

During the conduct of the interviews for the case studies, the Assessor came up with a novel option that is worthy of serious consideration. He proposes that agrarian reform be led and managed as a program of the local government unit, and that idle land tax on agricultural land be a component of such. Hence, the LGU will collect the tax and then distribute lands under CARP, and if necessary, will purchase lands for further distribution. Then the LGU will conduct a program that will provide training, seeds and farming implements to farmers, credit facilities and other support services to ensure a productive harvest. The LGU will also be in charge of marketing the produce of the farmers, getting rid of the middle man and offering the products at competitive prices. The City can easily be a regular customer since instead of buying sacks of rice from the NIA as part of its rice program for the CAFGUs, the city will purchase the rice from the farmers under this program.

8 Summary and Conclusion The true the state of agrarian reform in Sipalay is this: It is a non-issue to everyone concerned. From the landowners to the farmers themselves, there is already a sense of resignation and a lack of faith that agrarian reform is still possible and can be made effective in Sipalay. Instead, everyone is of the observation that the economic conditions of the farmers are becoming more wretched. As a result, the land that was intended to provide them with a sense of dignity and pride is easily lost or mortgaged. The farmers are unable to keep the land that should be the source of their livelihood and of security for their family and the generations to come.

Hence, while there is a general sense of openness to the program continuing, despite the flaws of CARP implementation, when funding ends in June 2008, the people in Sipalay are not so optimistic about the future and promise of agrarian reform, given its history and present conditions.

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Thus, while conceptually, idle land tax as an option is feasible and acceptable to all as long as the taxpayers are well informed and consulted, there are more basic and underlying questions and issues in Sipalay that need to be addressed before idle land tax is implemented. If it is indeed implemented, it is hoped that proceeds can still be used for purposes other than land distribution, to cover the urgent and basic needs of the community that are not being addressed by the City, particularly in the areas of health and education. The serious poverty incidence in Sipalay is a more pressing concern in need of attention. The people are satisfied that the offices of the Assessor and Treasurer can do the job well, as they have done so in the past with regard to real property tax assessment and collection.

Yet the concern is not really simply about assessment and the collection, but rather the more fundamental issue of what the LGU and government will do to ensure that the implementation of the idle land tax as a measure to support the agrarian reform program of the country will actually benefit the already “pigado” impoverished farmers and their families.

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References

Annual Investment Plan of Sipalay for CYs 2003-2008

Executive-Legislative Agenda of Sipalay, 2004-2007

List of Proposed Development Investment Programs/Projects of Sipalay for the Next Ten (10) Years

Local Governance Performance Management System, CY 2006

Based on interviews conducted from January 31 to February 5, 2008 with Mayor Montilla, City Agricultural Officer Raymund Villanueva, City Assessor Glenn, the City Planning Officer, City Treasurer Renato Manilla, Councilor Myrna Fernandez and former Councilor Freddie L. Fernandez, Councilors Edmundo Garinganao Jr and Zaldy “Doc” Galvan, DENR Community and Environment Officer (CENRO) Feligracio Pantaleon and Lands Investigator Severino Llamas Jr., Municipal Agrarian Reform Officer Thomas Ronvero, Brgy. Chairperson Francisca Cordova and Kagawad Jacinto Vecinal of Brgy. 4 Cordova, landowners Edmond Ligan and Lucinda Cabilin, Max Dibuyan, the Instructional Manager of Quidan Kaisahan Development Institute (QK), Pastor Boy Estoya, Program Officer of QK, Rodina Ortiaga, Program Officer of QK, Gina Estellita, Program Officer of Pag Inupdanay, Inc (PI), Gloria Sendon, Program Officer of QK and other residents of Sipalay.

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MINDANAOSURIGAO CITY

IMPLEMENTING THE IDLE LAND TAX TOSUPPPORT AGRICULTURE Stakeholder Views from Surigao City1

1 Area Profile

1.1 Surigao City: A City within the Agroforestry and Mineral Center in Mindanao

Surigao City is the provincial capital of Surigao Del Norte and is located at the coast of the province, a mosaic of islands that lies at the rim of the Asian continental shelf. It is perched at the northeastern tip of Mindanao, a southern island in the Philippines, and faces that abysmal canyon known as the Philippine Deep. The historic Strait bounds it on the North, and the East is bound by the Pacific Ocean, the South by the provinces of Agusan Del Norte and Surigao Del Sur, in the West.2

The mainland and clustered islands of Surigao City have irregular or hilly topography with flat lands near the coast. They have an average elevation level of 19 meters, or 65.5 ft. above sea level.

Surigao City comprises 54 barangays. Of these, five are urban, eight are suburban, 19 are rural mainland barangays, and 22 are island barangays. These five urban barangays- Taft, Washington, San Juan, Canlanipa and Luna- comprise the city proper. As of 2000, the urban areas are the most populated, although

1 Timoteo Pupa, La Liga Policy Institute Coordinator, Mindanao, and Leelanee Lanuza-Reyes, Senior Researcher for the Idle Land Tax Research Project.

2 Surigao City-Gateway to Mindanao, available from http://www.surigao-city.de.

Source: http://www.surigao-city.de/ Figure 1. Map of Surigao

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these have the least land area and number of barangays. The least populated, while having the most number of barangays, are the island barangays3. In 2007, poverty incidence in the city decreased but remained high at 40 percent. From 1997 to 2007, the average poverty incidence was 37.4 percent.4 The highest incidence was recorded in 2001 at 44 percent, followed by 43 percent in 2004-2005.

Surigao City belongs to the agroforestry and mineral center in Mindanao. Fifty-seven percent (57%) of its land area are alienable and disposable lands, while 43 percent are forest lands. Of these, 98.7 percent are for production and only 1.3 percent remains protected.5

3 From review of NSO-Surigao City figures.4 Source: Minimum Basic Needs (MBN) Survey, City Health Department, Surigao.5 Figures from DENR-Surigao City.

Figure 3. Source: City Agriculture Office, Surigao

Source: Minimum Basic Needs Survey, City Health Department, Surigao City

Figure 2. Poverty Incidence (1997-2007)45%

44%

43%

42%

41%

40%

39%

38%

37%

36%

1997 1998 1999 2000 2001

Year

2002 2003 2004 2005 2006 2007

Percent Distribution of Land Area Per Crop

CoconutRootcropsRiceCorn75%

22%

2%

1%

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As of 2005, a big portion (63.8 percent) of Surigao City’s land area is composed of agricultural lands (15,655 hectares of 24,534 hectares)6. The bulk of the agricultural lands (75 percent) is devoted coconut farming followed by rice (22 percent), root crops (2 percent) and corn (1 percent).7

Majority (75 percent) of the rice lands are irrigated, while the remaining 25 percent are rainfed.8 The lack of rainfall in 2006 slightly affected the average yield of palay per hectare.9

The most important agricultural products of Surigao City apart from rice are abaca, copra and corn, banana, vegetables,

root crops, mango, coconut, swine, chicken, cattle, goat, duck, and turkey. Fruit production and processing (banana, pineapple, mango, kaong, and citronella oil), coconut processing, and vegetable production and processing (squash, ginger, and coffee) are among the major industries in Surigao City.10

The city’s 25, 948 square kilometers of marine fishing grounds offer the potential of large scale fishing, in addition to the 24,000 hectares of inland fishing grounds, which are sources of its fresh and processed prawn exports. The inland fishing grounds also produce 10,000 metric tons of tilapia, mudfish and carp annually. In 2007, fish and marine products yielded higher production compared to previous years-a total of 13.186 metric tons of marine products, while inland production yielded 134.15 metric tons.11

1.2 Where Mining Overshadows Agriculture

Despite the city’s agricultural potential, the mining industry predominates. Surigao City continues to rely on income from mining minerals like gold, silver, iron, chromite, nickel, manganese and copper. Table 2 shows the average production and values of the mineral products of the city. Nickel mines have the biggest contribution in terms of bulk and value. They propel the economic growth of the city.

6 This is the officially recognized land area of the city. In 2002, the DENR issued a new certification that the total land area of Surigao City stands at 26,117 hectares, based on the GIS findings. This figure, however, is not yet recognized by NSO-Manila.

7 Data from City Agriculture Office of Surigao.8 Ibid.9 Hon. Alfonso S. Casurra, State of the City Address, 2007, available from http://www.surigaocity.gov.ph/

index.php?option=com_content&task=view&id=97&Itemid=31#agriculture 10 Available from http://www.surigao-city.de.11 Hon. Alfonso S. Casurra, ibid.

Table 1. Area Coverage Per Crop Crops Coverage (in hectares)

Rice 3,499.4

Corn 215

Coconut 11,565

Root crops 376.35

Total 15,655.75

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Table 2. Average Production and Value of Surigao City’s Minerals (2001-2006)

Mineral Average Production in Metric Tons

Average Value in US $

Beneficiated Nickel Silicate Ore 316,171,700.67 132,053,806.24

Lateritic Ore 137,187,339.67 27,696,471.15

Scrap Iron 2,700.00 108,800.96

Limonitic Ore 35,976,592.25 3,733,306.115

Chrome Ore 14,284,209.85 26,119,517.32

Iron Fines 34,046,847.00 68,044,639.00

Saprolitic Ore 1,090,450 1,550,000.00

Source: Bureau of Customs, Surigao City

In 2006, the city government was hoping for an “economic takeoff” with the anticipated reopening of the Nonoc Nickel Project.12 There was a deadlock, however, in the negotiations and as such, the project did not take off. Still, the LGU is optimistic that the project will eventually push through, considering the worldwide demand for nickel and investors’ expressions of desire to operate the project as soon as possible. Meanwhile, the mining industry continued to flourish, as evidenced by the five million metric tons of mineral ores exported to China and Japan, with a combined value of US$121 million–a 49 percent increase from the year 2004. Combined, the total contribution of minerals is highly significant compared to the values of production of agriculture. As presented in Table 3, the difference between the contributions of ores alone and agriculture is considerable.

Table 3. Value of Production of Ores Against Agricultural Products

Sector Value of Production(in million pesos)

Rice, Corn and Cassava 385.42

Fisheries Production 404.123

Mineral export Nickel silicate ore, Lateritic ore, Chrome ore, Limonic ore, and Saprolitic ore

5206.311

Sources: Surigao City Agriculture Office, BFAR, Bureau of Customs-Surigao City, 2005-2006

From interviews with key informants, one reason cited why the city’s agricultural performance is not maximized is the perception that the city, or the province itself, is declared as a mineral land. Because of this misinformation, agribusiness investors are not encouraged to invest in the area.

12 Hon. Alfonso Casurra, State of the City Address, 2007.

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2 Local Government Finance and Priorities

2.1 Strong Reliance on IRA

The city government claims that the “launching pad” of their economic ascent starts with their streamlined transactions for securing business permits, which provided good results in the local revenue collection. The number of businesses securing and/or renewing business permits increased dramatically, encouraged by the reduced processing time (average of two hours and 30 minutes per transaction, further reduced to one hour and 42 minutes in 2007). Still, the IRA dominates the share in the local government revenue, increasing and increasing over time. The average IRA contribution to the city’s income from 2001 to 2006 is 72.3 percent (see Table 4). In 2007, the IRA accounted for 84 percent of Surigao City’s total tax revenue.13

Table 4. Ratio of Income from Local Sources, RPT and IRA to Total Income

Year Total Income Total Local Sources

% of the Total Income

Real Property Tax

% of the Total Income IRA % of the

Total Income

2001 231,233,574 53,563,450 23 11,140,268 4.8 174,407,028 75.4

2002 266,975,854 69,529,870 26.0 16,678,068 6.2 197,370,983 73.9

2003 303,053,767 72,306,861 23.9 15,502,453 5.1 200,861,786 66.3

2004 286,201,227 73,802,609 25.8 17,285,662 6.0 207,344,988 72.4

2005 300,000,900 no data 19,436,300 6.5 213,146,000 71.0

2006 351,041,520 no data 18,795,510 5.4 263,024,170 74.9

Total 1,738,506,841 269,202,790 98.7 98,838,262 34 1,256,154,955 434

Average 289751140.2 67300697.57 24.7 16473043.58 5.7 209359159.2 72.3

Sources: BLGF Statements of Income and Expenditures, 2001-2004, COA Annual Financial Reports, 2005 and 2006

2.2 Local Property Tax Administration

To increase the city’s income and real property tax collection, the LGU drafted the Comprehensive Revenue Code. The Assessor’s Office updated its tax maps and conducted information and education brigades that reached far-flung barangays14. The barangay LGUs, however, are not supportive of the tax collection efforts, being used to the ample IRA shares from the national government, or afraid of the risk of losing the support of residents, some of whom might have to pay higher taxes if implemented.

13 Jesus Llanto, “Less IRA Forcing Mindanao Cities to Cut Down on Services, Workers,” The Mount Balatucan Monitor (March 15, 2008), Mindanao Online Reporting Project, available from http://balatucan.wordpress.com/2008/03/01/less-ira-forcing-mindanao-cities-to-cut-down-on-services-workers.

14 Cunegunda Dina B. Anitan, Winning the War on Corruption Through Transparency, Reform and Exemplary Leadership, 2003.

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On the average, real property tax accounts for almost six percent (5.7 percent) of the local revenue. Despite the city government’s efforts, its performance is still erratic, registering a significant increase only in 2002 (see Table 5).

Table 5. Real Property Tax Performance (2001-2006)

Year Real Property Tax Increase/Decrease % Increase/ Decrease

2001 11,140,268

2002 16,678,068 5537800.48 49.7

2003 15,502,453 -1175615.46 -7.0

2004 17,285,662 1783208.98 11.5

2005 19,436,300 2150638 12.4

2006 18795510 -640790 -3.3

Computed from COA and BLGF data

The implementation of CARP partly affected the real property tax collection, as pointed out by the City Assessor. The landowners, upon turnover of their property for distribution, stopped paying taxes. The entire land transfer process, from turnover for distribution, review of documents, bank validation if compensable, sometimes takes years until the final turnover to the ARBs. The property taxes remain unpaid all the while. 2.3 Local Development Plans and Priorities

Government Efforts Vis-à-vis the Need for Agricultural Support Services

Land Acquisition and Distribution under CARP is 97 percent complete. About 2,473 hectares were distributed, and 216 hectares remain. Of the city’s 54 barangays, 36 are Agrarian Reform Communities (ARCs) while 18 are non-ARCs. The ARCs receive support services from the Department of Agrarian Reform (DAR), but more has to be given. For instance, the funding requirement for ARC 1 amounts to PhP 246,573,301.61. The DAR and other line agencies are only able to shell out Php114,359,100.34, or 46 percent of the requirement. This is an improvement compared to island ARCs, which need a total of PhP 163,963,500.00. These have, so far, received solar lighting amounting to PhP 6,814,335.10, accounting for four percent of the requirement. Meanwhile, the ARC III in the mainland is still lobbying for funding. The Agrarian Reform Beneficiaries (ARBs) acknowledge the support coming from the government, particularly in the form of farm to market roads, potable water supply and solar lighting, but they confided that they still need other services such as lending, technology enhancement, and provision of opportunities for agribusiness. Moreover, the Sison-Surigao Irrigation System funded by DAR for NIA implementation is not yet fully operational. The project started in 2002. An informant from the NGO sector shared that most of the support services come

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in the form of infrastructure. Only a small percentage goes to livelihood and marketing assistance. Almost all of the stakeholders interviewed saw the need for CARP extension.

The City Agriculture was able to acquire funding from the national government amounting to PhP 5.9 million. Bags of certified and hybrid rice and corn seeds, assorted vegetable seeds and seedlings were distributed to farmer beneficiaries15. This, totaled with the abovementioned funding disbursed, accounts for 44 percent of the requirement of the ARCs.

To provide opportunities to the farmers to earn more “rather than depend on traditional agricultural products such as rice, corn, and copra,”16 the city government is now trying to focus on producing jatropha and castor oil. Surigao City has taken the lead in pursuing the search for alternative fuel. It has also identified areas in which cassava production can be concentrated. A better agricultural outlook is anticipated with these developments and a funding grant of PhP 1.5 million of from the Government of Japan for the establishment of a demonstration center for high value crops. Top Priorities

The reopening of the Nonoc Nickel Mining Project remains to be the city’s top development priority, especially the search for investors who are willing to agree with the terms set by the LGU. Most of the projects lined up for the year 2007 and beyond involve:

(1) infrastructure• operationalization of the sanitary landfill, which is compliant with the

law on solid waste management;• operation of the public cemetery; • dredging of the heavily silted area of the Surigao River, to prevent flooding

and complement the coastal embankment efforts in some areas;• inclusion of street widening in the Comprehensive Drainage Program;• implementation of the first phase of the Boulevard Development

Program;• construction of new school buildings and the repair of those that are no

longer suitable for classes;• rehabilitation of the central public market; • completion of the City PNP Station;

(2) social services• increasing the number of Philhealth Medicare Para sa Masa beneficiaries;• achieving a 95-percent level of fully immunized children in the DOH-

Expanded Program of Immunization;

15 Mayor Casurra, State of the City Address, 2007.16 Ibid.

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• establishment of the Botika sa Barangay in all barangays of the city, in partnership with the DOH;

• expansion of partnership with the Couples for Christ-Gawad Kalinga Housing Program and Habitat for Humanity to other barangays in the city and search for more lands to respond to the city’s housing backlog;

(3) tourism• extending assistance to newly opened hotels through linkaging with other

businesses to enahce their capacities to provide services at par with international standards or at least standards acceptable to major urban cities;

• developing the Maharlika Training Center and Beach Resort into becoming one of the major tourist destinations in the city through privatization;

(4) peace and order - continuous provision for the needs of the local police; and

(5) information technology - full computerization of all government systems.

No other provision for agriculture was indicated in the mayor’s State of the City Address, except that the LGU is strongly lobbying for the refiling of the bill for the conversion of about 600 hectares of timberland to become alienable and disposal to qualified residents. Based on the city government’s expenditures for the period 2001 to 2004, economic services, part of which is agriculture-based, only accounts for an average of 16 percent of the city’s total expenditures. It ranks next to expenditures on other purposes, which accounts for an average of 35 percent of the total expenses, and general public services, made up of spending for public administration and on peace and order, accounting for 32 percent of the total expenditures, on the average.

Table 6. Surigao City Expenditures

Year Total Expenditures

General Public Services

Social Services Economic Services

Debt Servicing Other Purposes

2001 228,034,372 75,666,924 29,726,842 38,894,526 5,878,841 77,867,240

2002 209,027,711 73,088,945 25,877,194 39,347,668 5,878,841 64,835,063

2003 278,696,310 79,470,265 28,838,569 39,636,114 36,599,951 94,151,411

2004 275,233,769 93,305,256 31,635,728 38,669,463 5,878,841 105,744,480

Total 990,992,161 321,531,390 116,078,332 156,547,771 54,236,474 342,598,193

Ave. Exp. 247748040 80382847 29019583 39136943 13559118 85649548

Ave. % Dist. 100 32 12 16 5 35

Source: Computed from BLGF SIE data

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2.4 Tenuous Linkages

In addition to the efforts mentioned above, attempts have been made by government agencies to assist the agriculture sector, particularly the farmers, in trying agribusiness. The Department of Trade and Industry, for instance, organized a land owner conference to explore the establishment of a coco oil mill or refinery. The agency’s assistance, however, is limited to recommending interested farmers to commercial banks for loan assistance. Even if the farmers are interested, they claimed that the sizes of their landholdings are not enough to serve as collateral. A modern coconut oil mill has remained a dream.Another sad experience is the Humay Coco Cooperative failed venture at contract farming. The cooperative was advised by a company agent to plant peanuts, but was not given clear directions on the required volume such that by harvest time, the company did not buy their produce. In 1990, the same happened to some peasant women being assisted by an NGO, who was asked to plant cassava for San Miguel Corporation. By harvest time, the buyer from the corporation was nowhere in sight.

3 Implementing the Idle Land Tax to Support Agriculture

3.1 The Political Environment

A Progressive Mayor

Recognizing the city’s dependence on the IRA, the mayor, a former Administrative Manager of a multinational corporation and three-time Councilor, devised a revenue generation strategy, part of which is the Comprehensive Revenue Code that features taxation for idle lands (discussed fully in the following section). The local chief executive was first faced with the obstacle of passing this legislation given that majority of the Sanggunian Members belong to the opposition and only two are his allies. He was able to pass the Comprehensive Revenue Code within the target date, however.

Another barrier prior to the implementation of the revenue generation strategy is the presence of staff and officers who unlike the mayor are not used to fast-paced and results-oriented work. Strong resistance and internal conflicts were anticipated, compounded by the threat of losing support from constituents who would have to pay higher taxes when the Comprehensive Revenue Code took effect. To overcome these barriers, the mayor took the following actions:

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• demanding good performance from the staff and officers, determined by accomplishing targets, and gauged by performance evaluation;

• developing in them the proper attitude of public servants who have customer satisfaction as their guiding principle;

• establishing good relations among the fiscal managers;• ensuring efficiency in the delivery of services by having timely and quality

services that optimize use of limited LGU resources;• ensuring decrease in the irregularities in collections and the delivery of

services; • establishing good rapport with the Sangguniang Panglungsod by dealing

with its members in a professional manner and by making sure that the engagement with the legislative unit of the city would not go down to the personal level; and

• launching of an information and education campaign to inform the public of their new tax liabilities based on the Local Tax Code.17

The mayor went as far as terminating the services of the personnel whose performance did not improve over time, despite prior advice and clear instructions. The local chief executive’s good leadership is not only locally recognized: He has received the Most Outstanding City Mayor of the Philippines award for 2006. Under his leadership, the city has received numerous awards as well. Surigao City has been the country’s Most Competitive City for two consecutive years. It has been adjudged as one of the Most Business-friendly City, and has maintained the status of a Child-friendly City and one of the Cleanest Cities in the Philippines. Lastly, it has been identified as one of the Peaceful Cities in the World and one of the most livable cities in Asia.18

A Cautious Sanggunian

Anitan (2003) cited that the mayor, in trying to pass the Comprehensive Revenue Code, initially treaded on “unfriendly ground.” The Sanggunian conceded but with the condition that the code be implemented on a gradual basis, by phase. As such, the Socialized Housing Tax went first. The Sanggunian perceives that their people do not have enough income to pay for additional taxes.

Laid Back Barangay LGUs and the Culture of Dependency

As mentioned earlier, despite the local government unit’s efforts at raising income from internal sources and the intensive information campaign targetted at barangays, it cannot generate enough support from the barangay officials. A local researcher observed that the anticipated huge internal revenue allotment, even though delayed, lulls them into complacency.

17 Cunegunda Dina B. Anitan, Winning the War on Corruption through Transparency, Reform and Exemplary Leadership, International Bank for Reconstruction and Development/The World Bank, 2003.

18 Mayor Casurra’s State of the City Address, March 15, 2007.

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3.2 An Existing Instrument

The city already has a policy for the idle land tax. This forms part of Surigao City’s Comprehensive Revenue Code, found in Section 2, Article K. It adopts the provisions of the Local Government Code, except that it sets the taxation rate at one percent of the assessed value of the property. The collection and accrual of proceeds is likewise the same as that in the LGC- that it will be collected at the same time and in the same manner as the basic real property tax and the proceeds shall accrue to the city’s general funds (Section 2K.04). Part of the government’s information campaign for efficient and transparent transactions is the posting of the real property tax collection process in the LGU website, shown in Table 7.

Table 7. Procedures in Processing of New, Transfer and Revision of Real Property (Computerized)1. Property owners (customers) enter the City Assessor’s Office. 2. The assigned Officer of the Day evaluates the documents/requirements needed for processing. 3. The Appraisal and Assessment Division prepares Field Appraisal and Assessment Sheet (FAAS). 4. Tax Mapping Division staff plots real property in tax map, assigns new Property Index Number

(PIN) and enters property details in the tax map control roll. 5. Computer Section assign Tax Declaration numbers and processes Computerized Tax Declaration. 6. The Assistant City Assessor reviews the validity of documents/requirements and countersigns

FAAS/Computerized Tax Declaration. 7. The City Assessor approves the Tax Declaration. 8. The Records Division releases the owner’s copy of the Tax Declaration.

Requirements for New, Transfer and Revision of Real Property 1. Land Declared for the First Time

• Written or verbal request of interested party • MSA, FLA, MLA or any evidence of claim • A and D Certificate if the Land is not titled • Certification from CEO, Zoning Officer • Photo copy of the Title if it is Registered Land • Approved Plan/Subdivision Plan

2. Reclassification or Change of Actual Use of Land • Request by Declarant • Certification from Zoning Officer - (land Use) • Certification from DAR/City Agriculturist • Inspection by LAOO for Actual Use of the Land

3. Transfer of Ownership • Request • Deed of Conveyance Duly Registered by the Register of Deeds • Photo copy of Title if Titled Land • Certificate of Authorized Registration (CAR) from the BIR• Certificate of Tax Payments or O/R • Transfer Tax Fee O/R • Subdivision Plan/Sketch Plan

4. New Buildings • Sworn Statement • Certificate of Occupancy • Actual inspection by LAOO and Tax mapper • Inspection Fee (Official Receipt)

5. Machinery • Sworn Statement • Official Receipt

Source: http://www.surigaocity.gov.ph/index.php?option=com_content&task=view&id=224&Itemid=31, City Government of Surigao, Philippines, 2007

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For the identification of idle lands, the Assessor, as is under the LGC, is authorized to make and keep an updated record of the idle lands located with in his area of jurisdiction (Section 2K.05). But, as in most cases in the country, idle lands in Surigao City have yet to be identified.

3.3 A Generally Open Constituent

There is generally low awareness of the idle land tax among the stakeholders, especially at the barangay level, even among barangay officials. When informed about the specific features of the idle land tax, most of the informants are generally open. The Agrarian Reform and Development Officer confided that they are willing to share their expertise in identifying idle lands, in coordination with the Registry of Deeds. A former barangay official and the Community Environment and Natural Resources Officer (CENRO) said that the idle land tax will spur the development of rural areas and prevent land speculation. Concerns, however where shared on the cost of administration and the forced idling of lands, as in the case of farmers who, in the CENRO’s opinion, are only capable of maintaining a hectare of land without government support. When asked about this form of taxation, the farmers shared their fear of losing their land in case their properties become deliquent. A representative from the NGO shared another barrier to idle land tax implementation –that is, possible resistance from the landowners who think that they can do whatever they wish with their lands as long as they pay the basic real property taxes. In line with this, the NGO representative saw the need to enhance the Local Government Unit’s capacity to collect the idle land tax. All the informants agreed to the channeling of the idle land tax proceeds to agriculture.

4 Summary and ConclusionAlthough results of the revenue generation strategy of Surigao City’s local government have yet to be felt with the continued dominance of the IRA, the LGU’s efforts should not be undermined. It has the right vision of strengthening its income from internal sources. It has to devote more attention, however, to its agriculture sector, which has a big potential for growth but relatively low level of support. The idle land tax for agriculture, especially since it has been received well by the stakeholders, could be a start. On the other hand, special considerations have to be given to those lands idled by circumstance, as in the cases of small landowners-tillers who are badly in need of support.

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References

Anitan, Cunigunda Dina B. 2003. Winning the War on Corruption Through Transparency, Reform and Exemplary Leadership. International Bank for Reconstruction and development/The World Bank.

Bureau of Customs. Production and Average Values of Surigao City’s Minerals. Surigao City

Bureau of Fisheries and Aquatic Resources. Values of Production of Agricultural Products. Surigao City

Bureau of Local Government Finance. Statements of Income and Expenditures (2001-2004). Department of Finance.

Casurra, Alfonso S. 2007. “Sustaining the Momentum of Prosperity, Competitiveness and Excellence in Local Governance,” Surigao City Government online. http://www.surigaocity.gov.ph. Available from http://www.surigaocity.gov.ph/index.php?option=com_content&task=view&id=97&Itemid=31#agriculture; Internet

City Agriculture Office. Area Coverage per Crop. Surigao City.

City Health Department. 2007. Poverty Incidence by Year. Surigao City. City Government of Surigao. 2007. Surigao City Government Online. http://www.surigaocity.gov.ph.

Commission on Audit. 2005. Annual Financial Report.

Commission on Audit. 2006. Annual Financial Report.

Department of Environment and Natural Resources. Land Use. Surigao City.

Llanto, Jesus. “Less IRA Forcing Mindanao Cities to Cut Down on Services, Workers,” The Mount Balatucan Monitor-Mindanao Online Reporting Project, http://balatucan.wordpress.com. Available from http://balatucan.wordpress.com/2008/03/01/less-ira-forcing-mindanao-cities-to-cut-down-on-services-workers/

National Statistics Office. 2000. Population Figures. Surigao City.

Storch, Jorg. “Surigao City-Gateway to Mindanao,” Surigao City online. Available from http://www.surigao-city.de/; Internet

191

List of Key Informants

Local Government and Line Agencies

Bayana, Jose Expiditus B., Member, Sangguniang Panglungsod and Chairman, Committee on Good Governance

Botero, Manuelita R., Brgy. Captain, Brgy. Mat-i, Surigao City

Curreos, Uriel, E.S., Planning Officer III, City Planning and Development Office

Dagdag, Wendelita L., Brgy. Secretary, Brgy. Mat-i, Surigao City

Dasilao, Ulpiano D., Community Environment and Natural Resources Officer, Surigao City

De Guzman, Elizaneth, City Agrarian Reform Officer, Surigao City

Ortujan, Ruberto E., Chief, Assessor Department

Otacan, Alejandro S., Assistant Regional Director for Operation, DAR-CARAGA

Sebucao, Jose T., OIC Provincial Agrarian Reform Officer II (PARO II), DAR

Suarez, Evangelisto, Former Barangay Kagawad, Mat-i, Surigao City

Farmers Sector

Ansit, Marcelito, Chairman, Humay Coco Cooperative

Borja, Susana, Member, San Roque Farmers Irrigators Multi-purpose Cooperative (SARFIMUCO)

Bungabong, Merlindito J.Corminal, FelixbertoElumba, Isias, City Agriculture Officer, Surigao City

Equibar, Lucricia, Vice-Chairperson, SARFIMUCO

Jovita, EduardoLaicularat, Loreto, Member, SARFIMUCO

Moreno, Maria, Member, SARFIMUCO

Zerda, Purita

Non-Government Organizations

Napalan, Arceli, Executive Director, Rural Enterprise Assistance Center (REACH) Foundation

Penados, Esmeralda, Administrative Assistant, Surigao Economic Development Foundation

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MINDANAODAVAO CITY

EXPLORING THE POSSIBILITY OF AN IDLE LAND TAX1

Davao City Case Study

1 Davao City: The Land of Promise

1.1 An Abundant City with Rich Multi-Culture Character

Davao City is a melting pot of diverse cultures. It is composed of migrant settlers from Luzon and the Visayas and Moro and Indigenous Peoples. Its population of 1,147,116 peoples is predominantly Catholic. Christian churches and chapels dot the city’s landscape along with temples, mosques, and other places of worship.2 Its multi-cultural character is reflected in the easy integration of various ethnic and Moro tribes with migrant settlers who do business and work with each other. The city is in fact the first to institute a deputy mayor system where all ethnic and Moro groups have their own deputy mayors to represent their aspirations and vision for development in local government. Davao City is divided into three congressional districts and 11 administrative districts (see Figure 2).

The city is the largest in the world, with a land area of 244,000 hectares representing eight percent of the whole Region XI. It is located in the Southeastern part of Mindanao, strategically making it the regional trade center of Southern Mindanao, the international trade center to the South Pacific and the Southern gateway to the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Triangle (BIMP-EAGA). The city’s mountain range nurses the country’s highest peak – Mt. Apo, located at the boundaries of North Cotabato, Davao del Sur, and Davao City. Mt. Apo serves as the city’s recharge point for its water source.

1 Nikki Philline dela Rosa, La Liga Fellow and Program Officer, Peacebuilding, Information, and Education Services, Alternate Forum for Research in Mindanao (AFRIM), Inc.

2 http://www.davaocity.gov.ph/about/culture.htm, accessed 24 February 2008.

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Being located outside the typhoon belt, the city enjoys a mild tropical climate. It is rich in both metallic and non-metallic mineral resources, has vast fertile lands making it suitable for agriculture, and abundant potable water both from surface and underground sources. Davao City is primarily an agricultural area with 187,465 hectares or 76.83 percent of its total land area used for such purpose. Large, contiguous lowlands are found in the eastern part of the city, particularly in Pacquibato district. Other substantial areas are found in the southeastern part in the districts of Bunawan, Buhangin, Agdao, Poblacion, Talomo, and Toril. The districts of Toril, Tugbok, Calinan, Baguio, Marilog, and portions of Talomo, Buhangin, and Bunawan are agricultural lands. Soil type is highly adaptable to agriculture; majority of the city’s soil is of silty clay loam quality.

Data from the Land Evaluation Party (LEP) of the Department of Environment and Natural Resources (DENR) XI identified 147,548 hectares as Forest and Timberland and 96,813 hectares as Alienable and Disposable (A&D) lands, both classifications representing 12 percent of the total land area of the city, respectively; 5,475 hectares are unclassified lands.

Figure 1. Davao City Land Use

Source: Socio-economic Indicators, 2007. Office of the City Planning and Development Coordinator. Davao City

1.2 Agriculture: Lifeblood of the City

DAR and agencies under the LGU define productive use of land as the maximum utilization of the land to generate optimum production. Soil quality and the provision of support services to farmers are key elements to achieve optimal productivity. Respondents believe that farmers and landowners are rational beings: there is no reason for being unproductive if there are skills and technology, capital and market linkage.

AgriculturalForest (Rehabilitation/ Agro Forestry)ConservationBuilt-up/Settlement Area

5.48%

6.36%

11.32%

76.83%

194

Figure 2. Map of Davao City

195

Other than it being a bustling metropolis, Davao City still has agriculture as its lifeblood. This has been so historically. Since the 1900’s the city has been one of the major producers of agricultural exports such as abaca, copra, and lumber. To date, it is the major producer of agricultural commodities such as coconuts, rice, corn, vegetables, fruit trees, bananas, pineapple, citrus, rambutan, pomelo, and beverage crops such as coffee and cacao. Davao City is a major producer of banana, with an annual production of 191,749 metric tons. Overall, Region XI, which Davao City is a part of, is the country’s principal producer of banana, with main markets in Japan and the Middle East. But, as indicated in Table 1, more than banana, the city is also a major producer of coconuts, even more than banana, with an annual production of 220,817 metric tons.

Table 1. Agricultural Production (major products)

Commodity Production (2006)In metric tons

A. Cereals

Palay 27,129

Corn 18,774

B. Fruit Crops

Banana 191,749

Durian 19,358

Pineapple 17,994

Mango 10,109

Papaya 4,346

C. Industrial and Commercial Crops

Coconut 220,817

Coffee 8,288

Source: Bureau of Agricultural Statistics XI, as cited in Socio-economic Indicators, 2007. Office of the City Planning and Development Coordinator. Davao City

According to the City Planning Office, Davao City is also a priority area for the government’s Key Livestock Development Program. The city has earmarked portions of the districts of Marilog, Baguio, Tugbok, Toril, and Calinan to be utilized for the program. Areas with low soil quality and a slope of 25 to 40 percent, considered non-productive lands unsuitable for cultivation, will be developed for grazing/pasture purposes. As of 2006, the city has been home to businesses engaged in commercial poultry and swine/hog production.

196

Table 2. Inventory of Livestock ProductionType No. of Heads (2006)

Swine 234,830

Cattle 42,653

Goat 55,488

Carabao 50,236

Ducks 65,997

Poultry 3,009,562

Source: Bureau of Agricultural Statistics XI, as cited in Socio-economic Indicators, 2007. Office of the City Planning and Development Coordinator. Davao City

Davao Gulf is the city’s major fishing ground, where fishes like skipjack, yellow fin tuna, nig-eyed scad, slipmouth, herring, anchovy and other marine products such as, sea cucumbers, seaweeds and ornamental shells could be found. Fishponds are likewise present in Davao City, particularly in the districts of Bunawan, Toril, and Tugbok culturing bangus, tilapia and prawns.

Table 3. Fish Production

Type Production (2006)In metric tons

Municipal - Inland/marine 1,270

Commercial – Deep Sea 6,127

Aquaculture – Fishponds 1,453

Source: Bureau of Agricultural Statistics XI, as cited in Socio-economic Indicators, 2007. Office of the City Planning and Development Coordinator. Davao City

True to this character, the city’s agricultural development and agro-industrialization plan is to focus away from raw material, extractive-based agricultural activities and promote food processing and agri-based manufacturing. This creates new markets and ensures development would be accrued to the people who produce such agricultural commodities by developing downstream industries. The Comprehensive Development Plan of the city identifies the districts of Pacquibato, Marilog, Calinan, Baguio, and Tugbok with around 16,936.26 hectares allotted for agricultural development. Its land use plan also stresses the protection of the city’s productive agricultural lands and promotes expansion of agricultural areas in the city’s grassland areas where the soil is productive.

Corollary to this, agrarian reform is considered by the city as an important component to developing an internal market for both agricultural and industrial products, as well as the sector’s niche in the international market. Thus, for the city, it is imperative, according to its development plan, that lands identified as production lands, where most CARP lands are located, are efficiently utilized for agricultural production as well as food production to guarantee food security of Davao City constituents.

197

There is, however, a conflict in land classification of the city by the Department of Agriculture – national and the local zoning division of the Office of the City Planning and Development. There are some areas, e.g., Marilog and Baguio Districts, classified by the Strategic Agriculture and Fisheries Development Zone (SAFDZ) as agricultural areas, while under the Terrain Analysis of the city, they are classified as non-tillage and recharge zones. The City Planning and Development Office is committed to protect the watershed and overall ecological health of the City. As such, it will not give permits to plantations to utilize recharge zones and conservation areas—all areas classified as non-tillage.

The City Agriculturist’s Office (CAO) will finish this year (2008) its own map of agricultural land uses of Davao City to determine what crops are planted to the area and recommended crops to be planted according to soil type and quality to ensure maximum productivity.

Maps and land use plans are vital tools to make certain any development programs and projects implemented in the city are appropriate and sustainable. The issue on conflicting maps and databases of various agencies implementing development programs poses a problem to its overall output and impact. Harmonization of programs and tools is therefore an important undertaking of the City’s administrators and policymakers. Problems arising from conflicting data can easily be mitigated if harmonization of records and tools is enacted. This issue is especially vivid in the experience of CARP implementation outlined in the succeeding sections of this paper.

1.3 Pattern of Land Use and Crop Conversion

Even with the thrust to develop the city’s agriculture sector, a trend in land use and crop conversion is experienced. This premise is substantiated by a study conducted by the Southern Mindanao Agriculture and Resources Research and Development Consortium (SMARRDEC) in 2006 on land conversion and crop change in Region XI. The study looked into patterns of land use and crop conversion in Davao City, Davao del Sur, Norte, Oriental, and Compostela Valley. Overall, lands intended for agricultural use have generally declined through the years, with grasslands, forest areas, and agricultural lands converted to non-agricultural uses.

In Region XI, for the period 1992 to 2003, the average annual conversion was 534 hectares. Davao City has an average of 158 hectares per year, where conversions are found in Talomo, Toril, Poblacion, Buhangin, and Bunawan districts – areas classified as agricultural lands.

There is a general decline in lands planted to rice and corn, with a rate of 1.5 percent and 2.8 percent, respectively, posing negative impact on the food security of the Region. Change in cropping pattern in Davao City is from coconut, vegetables, corn, and coffee to banana production. Crop conversion impacts

198

traditional crops of the Region such as rice and corn and coconuts. Coconut farmers have remained poor because of limited support services provided by the State. There is no genuine coconut industrialization plan being implemented to boost the sector’s productivity. Existing trees are old, there is less yield, and therefore income from coconut production is not sufficient to meet the basic needs of the family. Coconut areas remain to be feudal. There is not much change in tenurial arrangements and the overall quality of life of coconut farmers even with agrarian reform. Researches by the Alternate Forum for Research in Mindanao (AFRIM) have documented the dismal state of coconut farmers in Mindanao.

As Table 1 shows, Davao City is a major producer of coconuts, but this is now being replaced by banana production with trends in crop conversion. The SMARRDEC study has indicated that conversion to banana production is a common pattern in Region XI, the country’s largest supplier of Cavendish banana for export. The reason for land use and crop conversion is mainly to increase household income. There is a high demand for premium banana in the international market, and communities are enticed to convert to banana production with the promise of substantial increase in income compared to planting rice, corn, or coconuts. The study shows that income from banana is as high as PhP 400,000.00 per hectare in four months, while rice only yields an income of PhP 30,000.00 per cropping. Such shining promise blinds people to the negative impact of mono-cropping and inorganic fertilizers to public health and the environment, not to mention the problem of being tied to huge debts by growers to corporations they entered into agri-business venture agreements (AVA) with. This has been a pattern with ARBs who went into various AVAs with banana corporations, as studies by the AFRIM and other research organizations have shown. ARBs, although earning more from banana production, are tied to onerous contracts with corporations, negatively impacting their access and control to their lands. Now, even if they hold the title to their land, they do not have the decision-making power over it.

This indicates the urgent need of ARBs for support services by the State, both for ARC and non-ARC areas. With other options and opportunities for beneficiaries that will not sacrifice access and control over their lands, and with the strict implementation of a land use policy for the Region, land use and crop conversion would be assuaged and food security and sustainable development would have a chance at being achievable.

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1.4 Big Landholdings have yet to be Distributed under Agrarian Reform

Data from the Provincial Agrarian Reform Office (PARO) as of December 2007 indicates there are still 3,784 hectares of CARP lands that remain undistributed. This is about 17 percent of the working scope of 21,964 hectares, with accomplishment of 18,280 hectares. Data indicates accumulated accomplishment since PD 27 in 1972 into RA 6657 or the Comprehensive Agrarian Reform Law (CARL) enacted in 1988.

Table 3 shows that a large portion of undistributed lands (3,245 hectares) are under Compulsory Acquisition (CA) mostly in rice, corn, and coconut lands and commercial farms of banana and pineapple. Lands under CA are big landholdings owned by prominent and influential families who hold not just multi-million business investments in plantations but also political positions in government. The column “others” in Table 3 includes agricultural crops other than those indicated. This category also contains huge portions of lands yet to be distributed, prominently under CA mode of acquisition.

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Tabl

e 4

. D

avao

Cit

y La

nd D

istr

ibut

ion

Acc

ompl

ishm

ent

by L

and

Type

/Mod

e of

Acq

uisi

tion

by

Cro

p, in

Hec

tare

s,C

umul

ativ

e as

of

Dec

embe

r 2

00

7

Land

Type

and

Mod

e of

Ac

quis

ition

Scop

e (S

)Ac

com

p (A

)Ri

ce a

nd C

orn

Coco

nut

Defe

rred

Com

mer

cial

Far

ms

Othe

rsBa

nana

Pine

appl

eRu

bber

Caca

oOr

char

dSu

b-To

tal

SA

SA

SA

SA

SA

SA

SA

SA

SA

Gran

d To

tal

21,9

6418

,280

5,94

65,

382

8,73

67,

260

519

399

441

270

104

104

308

304

512

512

2,32

51,

859

4,95

73,

781

Priv

ate

Agri

Land

s18

,065

14,3

813,

480

2,91

68,

342

6,86

651

939

944

127

010

410

430

830

451

251

22,

325

1,85

93,

918

2,74

0

Oper

atio

n La

nd Tr

ansf

er1,

318

1,31

11,

318

1,31

1-

-

Govt

Fin

anci

ng In

sti

1,12

01,

089

138

134

610

593

--

372

362

Volu

ntar

y Offe

r to

Sell

3,01

82,

939

372

357

1,63

71,

590

6565

1212

7777

932

915

Com

puls

ory A

cqui

sitio

n5,

956

2,71

186

532

72,

885

1,50

112

99

181

1031

3126

726

32

279

132

51,

415

558

Volu

ntar

y Lan

d Tr

ansf

er6,

653

6,33

178

778

73,

210

3,18

232

532

526

026

073

7341

4149

849

81,

457

1,45

71,

199

905

Non-

Priv

ate

Agri

Land

s3,

899

3,89

92,

466

2,46

639

439

4-

--

--

--

--

--

-1,

039

1,04

1

Settl

emen

ts (N

RDP)

6262

6262

-

Land

ed E

stat

es-

--

--

Govt

-Own

ed L

ands

/KKK

3,83

73,

837

2,40

42,

404

394

394

--

1,03

91,

041

Sou

rce:

Pro

vinc

ial A

grar

ian

Ref

orm

Offi

ce, D

avao

Cit

y.

201

In terms of funding, the PARO sources funds from General Appropriations (Fund 101), Agrarian Reform Fund (Fund 158), Foreign Funds (Fund 102), and Capital Outlay. The DAR 2007 budget for Davao City amounted to PhP 34,746,292.18 for Personnel Services (PS), Maintenance Operating Expenses (MOOE) and Capital Outlay. About PhP 22,425,412.18 was allocated for the PS, PhP 9,320,880.00 for MOOE and PhP 3,000,000.00 for Capital Outlay. MOOE expenditures include all maintenance and other operating expenses in the implementation of the major programs such as:

1. Land Acquisition and Distribution2. Land Use and Management Development3. Non-Land Transfer Program4. Agrarian Legal Services5. Adjudication of Agrarian Reform Cases6. Program Beneficiaries Development7. Social Marketing Campaign8. Human Resource Development

A large portion of the PARO’s budget (67 percent) for 2007 was allotted for Personnel Services representing salaries, wages, and benefits of staff. Only 24 percent was spent for MOOE and a meager nine percent for capital outlay, which would include infrastructures such as farm-to-market roads for some Agrarian Reform Communities (ARCs).

Figure 3. Fund allocation by category

Source: 2007 Annual Report. Provincial Agrarian Reform Office, Davao City.

MOOE allocation from different fund sources as shown in Figure 4 shows 90 percent of the Agrarian Reform Fund (Fund 158) was earmarked for MOOE-related expenses in the implementation of major programs on distribution and support services provision to agrarian reform beneficiaries. Nine percent of the funds come from foreign funding (Fund 102), and just one percent was from the General Appropriations Fund (Fund 101), which earmarks a big chunk of its fund allocation for PS. The figure shows there is a need to increase funds specifically for land distribution and support services provision to farmer beneficiaries under MOOE, which is essentially the meat and substance of the agrarian

PSMOOECap. Outlay

67%9%

24%

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reform program. As it is, there is a significant gap between PS and MOOE with the latter lagging behind in allocation. Furthermore, Table 4 shows that only about 16 percent of the total MOOE budget is allocated for land acquisition and development, including “other land tenure improvement” services.

Figure 4. Comparative Analysis of MOOE Allocations from Different Fund Sources

Source: 2007 Annual Report. Provincial Agrarian Reform Office, Davao City

Table 4. DAR-PARO 2007 Budget for LAD and other LTI services, Davao City

Classification Hectare No. of FBs BudgetPhP Total

A. LADNew Lands 638 2,061 1,183,426.00

B. Other LTI services

Redoc. of collective CLOA 250 656 147,600.00

Redoc. of Distributed Not Yet Paid (DNYP) 110 1,200 118,800.00

Uninstalled FBs 59 105 5,575.00

Leasehold 118 656 69,667.00

Sub-Total 341,642.00

Total LAD 1,525,068.00

Source: Operations and Administration Office, DAR-PARO, Davao City

The PARO sets the annual land distribution targets of the MARO. Budget allocation to the MAROs largely depends on their LTI targets. The MAROs, since they are the frontliners of DAR in implementation and are already very familiar with their areas of responsibility, would rather that they set their targets in coordination with the PARO instead of the other way around. This is one area where some functions could already be decentralized to the MARO.

Fund 158Fund 102Fund 10190%

1%

9%

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2 Prevailing Views on Agrarian Reform

2.1 Agrarian Reform: Where is it now and what is its future?

With the Comprehensive Agrarian Reform Program (CARP) set to end in June 2008, perceptions regarding its accomplishment for the last 10 years and its (perceived) impact on the rural poor are varied. The PARO still believe that agrarian reform remains to be the cornerstone of achieving social justice for the rural poor because it is only through such programs that small farmers are able to own the land they till. NGOs agree with this fundamental principle, but not without criticisms related to CARP implementation over the last 10 years, which have been riddled with loopholes favoring landowners more than the rural poor. DAR’s accomplishment has yet to translate to improved farm income and socio-economic well-being of beneficiaries. The Local Government Unit (LGU) identified the following issues that resulted in the slow implementation of agrarian reform in Davao City:• Not enough support system for ARBs;• Limited financial capability of government to purchase CARPable lands;• Resistance of landowners; • Applications for land conversion; and• Land valuation problems.

The LGU believes, and in fact this is reflected in the Davao City Comprehensive Development Plan for 1996 to 2021, that emphasis must be placed in developing ARCs towards increasing farm productivity and household income. Intervention must focus on land tenure improvement, livelihood and economic activities, infrastructure development, institutional development, and environmental protection and conservation. In its development plan, strategies were identified by the LGU related to speeding up implementation of agrarian reform in Davao City and improving the quality of life of agrarian reform beneficiaries:• Pursue and speed-up resolution of agrarian cases; lobby with concerned

agencies for granting of decentralized authority to make decisions on problematic cases;

• Implement/ update the ARC development;• Develop other sources of CARP financing for land tenure improvement and

support services delivery;• Improve inter-agency relations between LAD and CARP implementing

agencies; and• Subject all foreclosed agricultural lands to compulsory acquisition by

government through the Land Bank of the Philippines and distributed to landless farmers and farm workers under land reform.

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On the issue of CARP extension beyond June 2008, most respondents agree to an extension of 3, 5, or 10 years, but with the institution of changes to the program. The PARO believes ensuring agricultural productivity and therefore improving the quality of life of beneficiaries entails removing some of the provisions of CARP, specifically Administrative Order (AO) No. 8 (1995) or the “Transferability of Lands Awarded to Agrarian Reform Beneficiaries Pursuant to P. D. No. 27 as Amended by Executive Order No. 228 and Republic Act 6657,” which allows farmer beneficiaries to sell their lands after 10 years from the time this was awarded to them. AO No. 8, according to the PARO, deters farmers from ensuring productivity of their lands since they have a choice of selling it and in principle, ARBs have a social contract to government to make the lands given them productive. Experience shows that some ARBs have already been given “earnest” money from buyers to sell to them after 10 years, or that some have sold them to “moneyed” landowners, who now “oppress” farmer beneficiaries in adjacent lots. Illegal transfer of titles is prevalent as pointed by one of the key informants. For the MAROs, this is a very frustrating situation especially for lands that were fraught with difficulties in distribution. Having these lands sold back to landowners by beneficiaries, they say, waters-down the principle of redistributive justice. The farmer has, again, become landless. For them, any transfer of lands by the ARBs should only be through hereditary succession.

Respondents from DAR (PARO and MARO) and NGOs engaged in agrarian reform and rural development is against devolution of DAR functions to the LGU, as this would “cripple” programs since its budget would depend on allocation from the local government. What is essential if extension is going to be approved is compulsory acquisition of remaining lands for distribution and the serious provision of support services to beneficiaries, not just in ARCs.

The AFRIM, a research and advocacy institution, has specific recommendations related to CARP extension. Such will only be acceptable if RA 6657 would be amended with the inclusion of the following3: • CARP funds should be provided by Congress through automatic

appropriation of at least 1.6 percent of the annual national budget;• Support services currently being provided only in Agrarian Reform

Communities should be made available to all farmers; • Existing balance under LAD after June 2008 should be under the Compulsory

Acquisition mode;• Valuation of commercial farms including standing crops should be based on

land assessors valuation; and,• Awarded land should not be sold or conveyed even after 10 years; change of

ownership should only be through hereditary succession.

3 Proposed amendments are already included in Cong. Hontiveros’/AKBAYAN’s bill.

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Farmer-networks also have the following recommendations:• Condonation of interest of farmer-beneficiaries’ amortization;• In cases where support services delivery involves NGOS, local organizations

should be tapped but their track record should not be sacrificed;• Selection of farmer beneficiaries, both men and women, should be based on

social justice, not on whether a farmer wants or does not want the land;• Farmers should be assisted in forging agribusiness venture agreements, and

the process and contract be made transparent to ensure fairness to both parties;

• Roles of various agencies involved in the pre, actual and post distribution stages should be re-clarified; and,

• BARC, as part of the implementation agency, should be given funding and members to be provided with honorarium.

There are several criticisms and loopholes on implementation pointed out by CSOs engaged in agrarian reform and rural development (ARRD): • unreported reversals; • land use conversion allowed;• onerous leaseback arrangements;• stock distribution option, which does not actually transfer land ownership

rights;• overpricing of lands;• alleged padding of accomplishment reports by DAR;• fake land titles;• haphazard distribution of public lands; and• voluntary land transfer–beneficiaries are dummies, e.g., relatives or tenants

were bribed or coerced. The issue of social justice needs to be emphasized– land must be for the landless tiller. From experience, beneficiary selection is reportedly done haphazardly just to reach accomplishment targets; personnel list beneficiaries who are not landless tillers, or some DAR personnel apparently help landowners evade agrarian reform through various tactics such as VLT or conversions, to name a few. ARBs and people’s organizations (POs) or cooperatives who have a high sense of stakeholdership are those who have struggled collectively to own the land they till. These beneficiaries and POs or cooperatives oftentimes succeed even with minimal support from the State, because their goal and vision for development is clear and everyone contributes to achieve such vision.

Urgent agrarian reform and rural development (ARRD) issues, as pointed out by key informants, remain to be agricultural productivity and the severe limitations in the provision of support services by agencies implementing

206

agrarian reform. Even after 10 years of implementation, increases in household incomes and improvement in the quality of life of beneficiaries remain to be seen. Farmer beneficiaries are still faced with issues on market linkage, lack of infrastructure such as farm-to-market roads, and pre and post-harvest facilities, as well as access to skills development and agricultural technology trainings and information on credit sources and markets. These challenges, as one NGO sees it, is a reflection of the State’s failure of its redistributive justice objective vis a vis agrarian reform program.That extension must therefore be focused on compulsory acquisition and serious provision of support services. Land distribution will not result in improvement in the quality of life of farmers if it is not tied with appropriate and relevant support services.

In Davao City, where expansion of plantations, mostly Cavendish banana for export, is promoted and agri-business venture arrangements are entered into by ARBs, the advocacy is agricultural productivity without sacrificing access and control over the land and food security of ARBs. CARP extension needs to look into second-generation problems of the program and target strategies to answer these.

Furthermore, most of the MAROs interviewed said that although the creation of ARCs, which then DAR Secretary Garillao instituted to consolidate ARBs and provision of support services, has good intentions, it has resulted in inequitable provision of support services to beneficiaries, leaving out those from non-ARC areas. As an example of this, Official Development Assistance programs are only implemented in ARCs, and support services such as skills training and infrastructure are poured into ARCs, thereby creating vast inequality in development and access to services among ARBs. Extension would need to look into providing beneficiaries from non-ARCs much needed support services, as well. 2.2 Agencies Need to Harmonize Efforts

In Davao City, the PARO interacts with the LGU and line agencies in the implementation of agrarian reform through the Provincial CARP Implementing Team (PCIT). The coordinating body has regular quarterly meetings. The Land Management Service of the Department of Environment and Natural Resources (DENR), City Agriculturist Office (CAO) of the Department of Agriculture, Department of Trade and Industry, Register of Deeds, and the Department of Public Works and Highways are members of the coordinating body. PCIT meetings discuss implementation of agrarian reform and the issues and concerns that need to be coordinated with line agencies; the line agencies report about or provide updates specific to ARB-related assistance their office has provided, e.g., CAO-DA dispersal project to ARCs and non-ARC areas.

207

The Provincial Agrarian Reform Officer personally sits on the coordinating body in his capacity as the executive officer of the lead implementing agency - DAR. The Provincial Agrarian Reform Committee (PARCOMM), which meets monthly, also sits in during the PCIT meetings. The PARCOMM reports resolutions and agreements to the Provincial Agrarian Reform Council (PARC).

It was only recently, more specifically just this January (2008), that the City Assessor’s and the City Treasurer’s offices sought the audience of the Land Bank of the Philippines, the PARO, and the concerned MAROs related to delinquent accounts of former landowners whose lands have been distributed to beneficiaries. The assessor’s office cannot transfer ownership of the land to the farmer beneficiaries because of this problem. Worse, there was in fact a case in Baguio district where a property that was already issued a CLOA was opened for public bidding by the Assessor’s office because of non-payment of real property taxes, they said did not have information that the property was under CARP. The ARBs only knew of the case when the highest bidder went to the area and informed the “occupants.” The situation clearly points to inadequate inter-agency coordination, the need to improve collaboration among implementing agencies and to the importance of harmonizing records of all agencies that relate to agrarian reform in all its forms, from land classification to tax declarations. All line agencies agree that better information exchange must be promoted to ensure uniformity in baseline data and databases. The PCIT is already a good avenue for this.

The importance of complementation and collaboration of line agencies to help farmers and the need for national government agencies to have political will in empowering devolved agencies to institute programs and mechanisms that would safeguard the welfare of small farmers in the locality is underlined by all respondents.

3 Revenue Collection and Idle Land Tax Implementation

3.1 Status of Davao City Revenue Collection

The role of local governments in economic development and provision of public services has increasingly been recognized by policymakers over the years.4 The enactment of the Local Government Code in 1991 concretized such recognition as it accorded local governments autonomy thereby enabling them to attain “their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals.”5 The Code allows local

4 Paderanga, Cayetano, Jr. Real Property Taxation in the Philippines: Issues and Research Directions. http://dirp4.pids.gov.ph/ris/sp/pidssp8401.pdf, accessed 6 March 2008.

5 Section 2. Declaration of Policy. Local Government Code of 1991.

208

government units (LGUs) to generate its own sources of revenue other than from national allocations. Implementation of taxes, special levies, and fees is one such tool to create sources of revenue for the city, municipality or province.

Real property tax is the second most important revenue source of LGUs.6 It is therefore important to administer–i.e., assessment and collection–this fund more efficiently. Estimate and Actual Overall Revenue Collection (see Tables 5 and 6) of Davao City, however, show collection efficiency of real property tax from 2000 to 2006 has been consistently below 100 percent, except for 2002 when the LGU implemented a tax amnesty program. Collection efficiency for that year was at 103.8 percent. Real Property Tax is imposed on all real properties including lands, buildings, machinery, and other improvements related to the property. The Treasurer’s office identified the 1997 Asian financial crises and the resulting economic slump as one of the reasons for the inability of big businesses and individuals to pay real property taxes. In fact, 2000 data shows only 59 percent collection efficiency of Real Property Tax and 2004 and 2005 at 68 percent. Collection of fines and penalties, on the one hand, has been better. The rate of payment of Real Property Taxes for the period 2005 and 2006 was at 325.5 percent and 233.2 percent, respectively. The Treasurer’s Office acknowledged the enforcement of policies related to collection such as public auction of properties as one of the factors that pushed payment of fines and penalties of those with delinquent accounts.

Big businesses, whose income is declining or has closed down due to various reasons, foremost of which is economic shock, are usually unable or have difficulty settling real property taxes. Small landowners, such as those who use the land for agriculture, have been diligent in paying property taxes, from experience of the Real Property Tax Division of the Office of the City Treasurer. Sanctions for delinquent payments include a penalty of two percent per month but not more than 78 percent or three years of delinquency. By such period, the amount of penalty would equal that of the assessed value of the property. The property would then be foreclosed and opened for public auction. Incentives for diligent tax payers include 20 percent discount for prompt and full payment, while 10 percent discount is given for prompt and quarterly payments. The Treasurer’s Office acknowledges that incentives such as discounts and tax amnesty such as in 2002 encourage payment of real property taxes.

In 2006, the tax rate was revised from 1.125 percent to 1.25 percent, which was the prevailing rate since 1991. It was only after 15 years of Real Property Tax implementation that the change was enacted. In fact, since 1993, no revisions were made on the schedule of fees being used by the Assessor’s Office to assess value of properties. This means the declared real property value is way below the existing market value of the lot/property. A revision of the real property

6 Paderanga, Cayetano, Jr. Real Property Taxation in the Philippines: Issues and Research Directions. http://dirp4.pids.gov.ph/ris/sp/pidssp8401.pdf, accessed 6 March 2008.

209

schedule of fees via a General Revision could have increased revenue targets and revenue generated by the City.

The Local Government Code indicates General Revision must be done by the Assessor’s Office every three years. It was only this year that the request of the Assessor’s Office to conduct a General Revision has been approved by the City Council, effective in 2009. Previous requests over the years have been denied by the Council due to “economic difficulties.” The Office of the City Administrator said the revision of the tax rate from 1.125 percent to 1.25 percent in 2006 was in fact an answer to the wide discrepancy of the declared real property value viz. market value. The City is losing what could be the actual real property revenue if it is based on the current market value. That is why if asked if people are able to pay property taxes and if they find the rate affordable, the Treasurer’s and the Assessor’s office would say, yes indeed because computation is based on 1993 market values of properties.

Even so, collection efficiency of Real Property Tax has only been “satisfactory,” with rate below 100 percent or below the projected collection. For Davao City, aside from Internal Revenue Allotment (IRA) from the national government, its main source of revenue is from tax revenues from real property, property transfer, business taxes, other taxes such as from sand and gravel, community tax, and amusement tax and fines and penalties. This contributes about two-thirds or 75 percent of the city’s total income from local sources. The remaining 25 percent is sourced from General Income Accounts. These are income derived from government services such as permits and licenses, service income, business enterprise and other business income such as from subsidy from special accounts, i.e., EVAT, PAGCOR, and miscellaneous income.

Taxes from property transfer and from “other taxes,” other than from fines and penalties, substantially contributed to the total tax revenue of the city for the period 2000-2006. Taxes from real property and business fluctuate in performance, again, perhaps because these two categories are more vulnerable to economic shocks.

We could deduce that Davao City is economically developed in terms of income generation. Its total income from local sources and from IRA are in billion pesos and has shown consistent increase over the six-year period investigated by the research.

The succeeding tables (Tables 5 and 6) give details on the foregoing summary. Figures indicate net income after deducting discounts and 30 percent barangay share. Table 7 figures show gross income from collection, before said deductions. Data with net figures are from the Treasury Operation Review Unit while data with gross figures are from the Real Property Tax Division. Table 7, albeit showing gross income, is illustrated to show percentage of contribution of taxes from agriculture to the total income from local sources. Data from which

210

Tables 5 and 6 were culled does not show breakdown of real property tax into residential, agricultural, commercial, industrial, mineral, timber, etc.

Table 5. Estimated and Actual Overall Revenue Collection, 2000-2001*

Sources 2000, PhP

Collection Efficiency

(CE)

2001, PhP

Collection Efficiency

(CE)

I. TAX REVENUE 85.05% 104.05%

1 Real Property Tax

Estimated 155,000,000 115,000,000

Actual 91,121,072.87 99,761,059.04

2 Property Transfer

Estimated 20,000,000 20,000,000

Actual 21,815,436.86 21,510,976.12

3 Business Taxes and Licenses

Estimated 238,400,000 235,200,000

Actual 242,405,974.19 256,631,419.67

4 Other Taxes (wharfage, community tax, amusement, etc.)

Estimated 91,000,000 40,500,000

Actual 71,127,267.74 45,040,519.31

5 Fines and Penalties

Estimated 8,100,000 6,800,000

Actual 9,397,586.17 11,478,555.64

6 Sub-TOTAL (1+2+3+4+5)

Estimated 512,500,000 417,500,00

Actual 435,867,337.83 434,422,529.78

7 II. OPERATING AND MISCELLANEOUS REVENUE 68.38% 84.95%

Estimated 133,370,000 97,900,000

Actual 91,198,253.65 83,169,497.46

8 Receipts from cemetery, market, slaughterhouse, public utilities 104.91% 104.76%

Estimated 42,500,000 42,500,000

Actual 44,587,246.61 44,522,982.36

211

Sources 2000, PhP

Collection Efficiency

(CE)

2001, PhP

Collection Efficiency

(CE)

9 III. CAPITAL REVENUE

Estimated

Actual 585,000

10 TOTAL INCOME FROM LOCAL SOURCES (6+7+8+9) 83.13% 100.76%

Estimated 688,370,000 557,900,000

Actual 572,237,838.09 562,115,009.60

11 IV. INTERNAL REVENUE ALLOTMENT

Estimated 1,086,000,000 1,260,000,000

Actual 1,293,248,609 1,212,735,313

TOTAL INCOME (10+11) 105.14% 97.63%

Estimated 1,774,370,000 1,817,900,000

Actual 1,865,486,447.09 1,774,850,322.60

Source: Treasury Operation Review Division. City Treasurer’s Office, Davao City*Follows old government accounting system format; 2002 onwards uses the new government accounting system format

212

Tabl

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. E

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and

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000

120,

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172,

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102,

196,

141.

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6,08

3.74

115,

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691.

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325,

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325,

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597,

100,

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312,

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6732

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426,

300,

000

465,

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000

587,

000,

000

587,

000,

000

876,

116,

400

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al47

3,79

0,57

4.08

499,

551,

371.

3853

4,58

8,82

9.66

602,

567,

435.

2587

3,25

1,61

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GEN

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778,

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8.52

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480,

201,

417

1,62

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335,

584,

383

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626,

799,

382

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2.53

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1,89

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587,

326

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4,99

0,96

82,

250,

231,

417

2,73

2,69

4,53

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971,

431,

595.

132,

067,

640,

185.

982,

104,

778,

878.

332,

259,

639,

707.

622,

744,

493,

145.

82

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9,34

8,87

6.70

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214

As indicated in Table 7, agricultural lands only contribute a minimal amount, less than 5 percent from 2003 to 2006 to total real property tax collection of the city, and consequently, to its total sources of income. The percentage increased to 17 percent in 2007, still low compared to contribution from commercial properties, which contribute about 50 percent to total real property tax collection, as indicated by data from the Real Property Tax Division of the City Treasurer’s Office.

Davao City has vast agricultural lands—in fact these make up more than 75 percent of its total land area and yet in terms of taxation, the sector only contributes less than five percent to the total real property tax collection of the City. The answer might lie in the actual use of the land. The Assessor’s Office assesses according to actual use of the land, regardless of where it is located and whoever uses it. Whether the zoning indicates agricultural land when actual use is residential, it shall be assessed as residential land, with the corresponding assessment level. As the LGC on real property taxation goes, there are different assessment levels assigned to categories under real property, which are as follows: • Commercial, including industrial 50 percent• Agricultural 40 percent• Residential 20 percent (changed from 10% in 1992 backwards)

The formula for computing assessed value of the property (land), which is the basis for computing the real property tax is:

Assessed Value = Market Value* x Assessment Level*Market Value = area x unit value

The assessed value is then multiplied by .025 to get the amount due the tax payer—.025 is 1.5 percent basic tax and 1 percent special education fund7.

Data on real property tax collection for agricultural and commercial lands from the Treasurer’s and the Assessor’s office are not disaggregated to show contribution to local government income of CARP lands. They do not classify their data with special emphasis on CARP lands. Similarly, the Provincial Agrarian Reform Office also does not have data on real property tax payments of ARBs; after CLOA issuance it is the responsibility of the beneficiary to secure a tax declaration from the Assessor’s office and pay the corresponding real property tax, along with the responsibility of paying a monthly amortization with the Land Bank of the Philippines.

7 RA 5447, this is an additional levy on real property for special education fund.

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3.2 Idle Land Tax and Implementation, or lack thereof

The 14th City Council of Davao City signed the ordinance approving the 2005 revenue code of the city of Davao, as amended. Article 2 of Ordinance No. 158-05, s. 2005 specifies the provision for the implementation of tax on idle lands. The definition of idle lands by the City is the same as that in the Local Government Code, to wit:

a. agricultural lands, more than one hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall likewise not be considered idle lands.

b. Lands, other than agricultural, located in the city, more than 1,000 square meters in area, one-half of which remain unutilized or unimproved by the owner of the property or person having legal interest therein.

c. Regardless of land area, this shall also apply to residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax. Provided, however, that individual lots of such subdivisions, the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or operator.

Exemption is allowed for landowners who are physically or legally prevented from improving, utilizing, or cultivating the land by reason of force majuere, civil disturbance, natural calamity, legal dispute, or any justifiable cause or circumstance. The annual tax rate for idle lands is 25 percent of one percent of the assessed value of the property. The levy should be paid in addition to the basic real property tax. Proceeds of such levy shall be accrued to the General Fund of the City. The rate, as provided for in the Ordinance, however, is much lower compared to what is provided for the LGC8 allowing an annual tax on idle lands at the rate not exceeding five percent of the assessed value of the property. The Chamber of Real Estate and Builders Association (CREBA), seeing the potential of such revenue to help the country avert financial crises and mitigate land speculations, has submitted a proposal to the national government to increase the rate from five percent to a graduated 20 percent to 50 percent subject to reasonable exemptions. CREBA has submitted a position paper to this end to national legislative bodies seeking to amend provisions related to special levy on idle

8 As indicated in Sec. 236 of the Local Government Code (236).

216

land tax as stipulated in RA 7160 otherwise known as the Local Government Code of 1991.

In 2004, the Davao Chamber of Commerce, Inc. and the Davao Board of Realtors Foundation, Inc. for its part has submitted a position paper to then Vice Mayor Luis Bonguyan in support of CREBA’s proposal. Ordinance No. 158-05 was signed in 2005.

According to 1994 data from the Comprehensive Development Plan of Davao City for 1996-2021, there are 9,118 hectares of vacant urban lands, or 68 percent of its total urban area. There is no available data as to the proposed land uses and location of these vacant lands. The Zoning Division of the City Planning and Development Office has targeted to update their data, including on idle lands, this year (2008). No update was done after 1994.

Also, there is no available data on idle agricultural lands. The general perception of respondents is that there are virtually no idle agricultural lands in Davao City, except for forest/timberlands, recharge zones or conservation areas, because of the rapid expansion of banana plantations. The trend of expansion is towards highland areas, which yield sweeter varieties and have gained popularity in the international market. The concept of idle lands seems to be alien to most of the MAROs interviewed. They said most of the lands they covered for distribution is productive and actively being tilled by farmers or farmworkers. Davao City, they say, has productive agricultural lands. Idle lands, or what the MAROs define as not being tilled, are mostly found in forest, timberlands or areas with high elevation (having a more than 20 percent slope). When referred to the Land Management System and the Land Evaluation Party of DENR XI and of the City Environment and Natural Resources (CENRO), no mapping of idle lands in A&D lands had been done. Their general perception is that, even without mapping, there are no idle lands in Davao City. Lands have either been occupied for residential, commercial uses or for plantation expansion in agricultural areas.

In the number of years that City Agriculturist’s Office (CAO) personnel has been doing fieldwork, they said that on ocular basis alone, the following areas still have about 30 percent lands that are idle (note: this has not been formally identified and mapped by the City Planning/zoning or the City Assessor’s Office): • Tugbok District - Matina Biao - Tacunan - Talandang - New Valencia• Calinan - Lampianao - Dalagdag - Dumingga - Inayangan - Megkawayan - Saloy

• Marilog District - Malamba - Bantol - Salaysay - Suawan - Tamugan• Buhangin District - Callawa• Baguio District - Tambobong• Pacquibato District - Fatima

217

Some of the problems identified by CAO that may have caused farmer’s or landowner’s inability to develop their lands are water supply/irrigation, soil property, market linkage, and price stability, to mention a few.

At present, there is no mechanism by which to corroborate this since there is no map that identifies idle agricultural lands. However, there is an opportunity to correct the problem of the lack of information on areas that have idle lands, which need to be taxed. CAO is currently finishing its map on land use in Davao City, identifying what crops are planted and the suitable crop according to soil type and quality. The map will be of help in identifying idle agricultural lands since the map would, as a secondary output, determine areas that have not been planted to any agricultural crops. Such information would be of use to the City Assessor’s Office as they prepare, as well, to conduct the General Revision of their assessment roll. CAO’s map would flag areas that they need to inspect to further determine information related to identifying it as idle land. The map would also be a tool to check if there are still lands that should be under CARP and were not included in DAR targets. This further validates DAR accomplishment report.

Idle or underutilized areas in the central business districts such as in C.M. Recto and San Pedro Sts. have been leased out to the informal sector as Ukay-Ukay (used clothes from Japan, Korea, the US, etc.) shops and as parking lots of banks and other business establishments in the area. Landowners lease their lots to ukay-ukay and food establishments rather than develop these themselves, or sell them. Real property tax and/or idle land tax rates of the City do not seem to push them to maximize the potential of their lands, even with it being located in the central business district of the city. There seems to be no incentive or disincentive for them to do so.

The disincentive posed by an additional levy for idle lands seem to not have made a dent. Implementation of the Ordinance on Idle Land Tax has not been done since this was signed in 2005. Mapping and identification of idle lands by the Assessor’s Office has not been enacted. Although an entry on special levy on idle lands is included in the report of real property tax collection by the City Treasurer’s Office, there is zero collection on record since 2003. The lack of identification and mapping of idle lands by the City Assessor’s Office was cited in an earlier study by Roberto Alabado III published in 2005 entitled “Managing vacant lands within central business districts: Implications of implementing idle land taxation,” saying the Assessor’s Office is not equipped to implement the Ordinance. To quote, “the lack of proper investigation, monitoring, and evaluation of the declared values by the Assessor’s Office has led landowners to undervalue their declared market prices. Imposing the idle land taxation will take a considerable amount of time and resources considering that the database of the Assessor’s Office has to be updated and evaluated first.” It concluded that a thorough study needs to be done to ensure a fairer land market and to provide

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policy makers and planners with a better perspective in using idle land tax as a tool to improve urban economy.

Respondents from the Assessor’s and the Treasurer’s Office perceive the implementation of an idle land tax as not being feasible in terms of generating additional revenue to induce development in the city, or funding land tenure improvement in particular. The low tax rate of 25 percent of one percent of the assessed value of the land is one factor cited by the offices as a reason for their perception. Revenue generated will be insignificant and the Assessor’s Office would rather concentrate its efforts in updating its assessment roll to generate higher revenues for the city. As a case in point, idle land tax for a property assessed at PhP 1,000,000.00 using the existing rate would only generate PhP 2,500.00 per annum. This is especially compounded by the fact that the Schedule of Fees being used by the Assessor’s Office is 1993 values and is yet to be updated and revised in 2009, after more than 15 years. The assessed value of the land is therefore much lower than the current market value and idle land tax will likewise be insignificant. According to respondents, unless the Ordinance is revised to increase the tax rate to the maximum allowable in the LGC of five percent, and clearer provisions in identifying idle lands in terms of, for example, number of years before the land is declared idle, allow for lesser exemptions rather than vague statements of “force majuere, civil disturbance, natural calamity, legal dispute, or any justifiable cause or circumstance,” then it will not be an effective tool in generating additional revenue to push the city’s economic development forward.

3.3 Davao City’s Political Economy Interlocking directorates

In 1989, AFRIM conducted a study on major corporations operating in Mindanao,9 which provided insights into the economic structure of corporations, of ownership and control, and the contribution of these corporations to both the local and the national economy. The study yielded a comprehensive directorate of Mindanao corporations that interlocks them with each other, implying a monopoly of only a handful of “cliques” lead by Ayala-Soriano-Zobel followed by the Yuchengco clique. These cliques are further entrenched into other firms and directorates operating in Mindanao, forming some sort of a “mega-clique” that controls agriculture and the business sector, including the financial sector. Analysis indicates that such characteristics would result in the decisive control of only a few individuals/groups of the Mindanao economy and of the whole country.

9 Mindanao Incorporated: Performance of Major Corporations Operating in Mindanao. AFRIM, Inc. 1989.

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A similar story surfaced in the study of the same organization on the banana export industry of Mindanao.10 Floirendo, Alcantara, Dizon, J.V. Ayala, Soriano, and Ayala-Aboitiz have major interests in the banana export industry of the country. These too have interlocking directorates, team up with international corporations, and have monopolistic control over the banana industry of Mindanao.

As these families and the corporations they operate have control over the economic sphere of Mindanao, they would consequently have a significant influence in the political sphere of the region – at the local level, this influence may be seen in how ordinances, and perhaps flagship programs of local government, are crafted and implemented.

But with political will, community interest over business interest can prevail. In 2007, Davao City Mayor Rodrigo Duterte signed the ordinance banning aerial spraying in banana plantations amidst hard lobbying against it by banana corporations represented by the Philippine Banana Growers and Exporters Association. The Mayor stood by his decision, with the recommendation of the City Council, because, he said, “his prime concern was the health of his constituents.”11 Bukidnon is the only other province that has banned aerial spraying in plantations. It hosts vast pineapple and banana plantations, foremost of which is Del Monte Philippines.

The foregoing context will be used to look into the experience of Davao City in the implementation of its ordinance on Idle Land Tax. Was the content and implementation influenced by the interests and socio-economic background of the City Councilors who passed this to law? What were the factors that contributed implementation or non-implementation?

Implementation is another story all together Ordinance No. 158-05, s. 2005 was signed in 2005 by the 14th City Council. Article 2 of the “Ordinance Approving the 2005 Revenue Code of the City of Davao, as amended” outlines tax on idle lands. This specifies the levy to be imposed, coverage, exemption, listing of idle lands by the assessor, and collection and accrual of proceeds. The ordinance is very much similar to that in the Local Government Code (LGC), but with specification on the rate of the levy to be imposed. Whereas the LGC indicates that the levy can be up to a maximum of five percent of the assessed value of the property, the Davao City ordinance indicates that the rate will be 25 percent of one percent of the assessed value of the property – a significantly lower rate than what is allowable under the LGC.

10 De Leon, Teresita and Gemma Escobido. The Banana Export Industry and Agrarian Reform. AFRIM, Inc. 2004. 11 Acac, Rizalene and Jeffrey M. Tupas. DESPITE APPEAL FROM AGRICULTURE CHIEF, Davao’s Duterte signs ban

on aerial spraying of bananas. http://newsinfo.inquirer.net/breakingnews/regions/view_article.php?article_id=48792, accessed 3 June 2008.

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Moreover, 1993 is the base year of the market value in which the computation of the assessed value of the property is based. The City Assessors’ Office has requested for a general revision, but this has been “denied” by the City Council because of “economic reasons.” With economic difficulty, people need not be burdened by higher property taxes. Under the LGC, a general revision shall be done every 3 years from implementation of the revenue code of the city. It was only early this year that the request was approved, effective 2009.

Annual reports of property tax collection from the Office of the Treasurer indicate an entry on special levy under which the idle land taxation is classified. This column has been in the annual property tax collection since 2003, even before the idle land tax ordinance was signed in 2005. But even with the ordinance, there is still zero collection.

It would seem that the City Council just complied with the provisions of the LGC. The said ordinance was never implemented since this was signed into law in 2005. For the implementing offices, the assessors and the treasurers, the rate is insignificant because it is too low and therefore the revenue that would be generated would also be low. Given the limited human resource of these offices, it is perceived as cost-ineffective to implement the ordinance—they say they would rather focus on collection of property taxes and conduct the general revision to ensure better collection of property taxes. For those with idle lands, the ordinance is not a deterrent because the rate is too low. Even with strict implementation, they can still easily maintain their lands as idle.

Although most of the officials interviewed recognize the importance of keeping lands productive and therefore of imposing tax on idle lands, this seems to be all just talk. If we look at implementation, it is a different story all together. There is zero implementation and it looks as though those in the offices that are mandated to implement the ordinance do not want to implement it. They do not see its importance since, again, it is too low and would entail mapping and drawing up of an additional roll – additional human and financial resources they do not know where to source from. Some of them would be affected by this ordinance. They have properties that are not productive. One staff from the assessor’s office said she could not make the land productive because there is no farm-to-market road to speak of. She said she can easily file for exemption because she has fruit trees planted in her property and she can cite the peace and order situation as a factor. Still, it shows that the ordinance is not a deterrent to unproductive agricultural lands.

Moreover, there is no oversight body that monitors implementation of this special levy on idle lands. So essentially, the ordinance remains on paper.

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With political will, good things can be enacted

If we look at the family background of the city councilors who passed the ordinance, some of them have business interests such as schools, media (print and radio), resorts, and agriculture. Most are professionals and a handful are progressives. Most of their families hail from Davao City but have interests outside it as well. They hold properties in the City, mostly sprawling residential areas; some also own agricultural lands elsewhere. The mayor, in his declaration of assets and liabilities, has residential properties in the city and is an incorporator of Honda Cars in General Santos City. The Vice Mayor has properties that are other than residential such as a beach resort and other unclassified lands within Davao City and in Davao provinces.

We cannot attain a solid link between non-implementation and the protection of the interests of the local government officials and the local elite, including their business interests. Perhaps there is a link because the crafting of the ordinance is too soft to make a difference in the revenue collection of the city. It is essentially a win-win scenario: it complied with the LGC while not “hurting” land owners who hold lands idle for various reasons—it could be land speculation or perhaps because the property is under litigation. Perhaps, too, the monitoring of implementation is not that essential for local officials who have other “more important” things to focus on–things that would enable them to win in the next elections.

What is clear, however, is that with political will, as illustrated by the ordinance banning aerial spraying, there is a positive sign that the city of Davao can enact laws that would generate additional funds for the city to pump-prime its agriculture sector, to improve social services, or to achieve other objectives that would have a social development trajectory. The mayor of the city shows strong leadership and political will. Albeit his alleged human rights violations have dubbed him as “the punisher,” he has gained the loyal support of the majority of Davao City’s populace. He was elected Mayor for three consecutive terms from 1989 until the present. Quite possibly, with such leadership character, if the ordinance is revised to its optimum or a land use tax is implemented showing a gradation of levies on various usages of land and it is lobbied to the mayor with the support of the progressives from the City Council, it can be enacted.

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4 Stakeholder’s Perspectives on Taxation of Idle Lands

4.1 Only Good in Theory? Alabado’s study (2005) cites to the opportunity posed by support from the private sector, such as the Davao Chamber of Commerce and the Davao Board of Realtors Foundation, for the enactment of an additional levy for idle lands. Other stakeholders are not as encouraging in their perceptions toward the implementation of an additional levy. Respondents of the research agree to the rationale of such policy – that such is a revenue-raising measure and a development instrument. However, most of them say it is only good in theory but not in practice, particularly because unlike in developed countries, real estate in the Philippines is not that brisk. When implementing an idle land tax, there is an assumption of a brisk land market and that land taxation is based on permitted use rather than current use. Neither assumption is present in Davao City, where land market is not brisk and taxation is based on actual use of land rather than its zoning classification according to the best use of the land. The rate of an additional levy for idle lands is too low to deter landowners from not developing their lands. Idle lands become easy to maintain as opposed to the premise that taxing idle lands would make being unproductive more expensive for landowners, therefore pushing them to invest in their lands or sell it.

Government agencies interviewed perceive idle land tax as an additional burden to landowners, especially small farmers who at the outset lack capital to develop their lands. It is expected that this would have adverse reactions from landowners when implemented. If the implementation of such policy has an objective of funding land tenure improvement or land distribution, then perhaps, according to the respondents, the aim might be misplaced. Some pose emotional arguments to the question of the appropriateness of earmarking revenue from idle land tax to land tenure improvement. Some question the accomplishment of the agrarian reform program of government, on why the people, through taxation, would shoulder the problem of funding source for CARP extension or the devolution needs of the MARO. Even the PARO stated that revenue from such a levy should be accrued to agricultural productivity, placing the funds, therefore, in the hands of the City Agriculturist’s Office to free it from having to depend too much on budget allocation from the local government and enable it to implement local agricultural development.

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Box 1. Strategies recommended by Alabado (2005) for the effective implementation of the idle land taxation as a tool in managing the vacant lands of the CBD.

1. The capability of the City Assessor’s Office in updating its maps and its valuation schemes must be upgraded. An inventory of idle lands of the city must be developed through constant monitoring of the lot parcels. This can be done by undertaking periodic aerial surveys and actual ground level validation. This will help facilitate the development of strategies to properly utilize the various vacant lands not only in the Central Business District but in Davao City as a whole.

2. Further studies are needed to determine the tax rates for the idle land tax. The current maximum of five percent of the assessed value may be too low to discourage land speculation while the proposed 50 percent rate of the assessed value may force landowners to erect structures which do not maximize its potentials. New tax schemes must likewise be explored such as the lowering of tax rates on the improvements of the lot while increasing the tax rate of the land. This will encourage owners to develop their lots without being burdened by additional taxes.

3. Idle land taxation must be used in congruence with other incentive and disincentive schemes to persuade the landowners to develop their idle assets. This should include all land uses like those zoned for industrial, agriculture and residential areas. Different rates and exemptions can be devised to enable the city to properly manage its spatial strategy. For example, to induce development in the city center, development costs or disincentives to develop new commercial areas in the fringes of the downtown area can be institutionalized. Increases in the rates of idle land taxation based on the period the land remains vacant can likewise be included in the local land policy.

4. The local government units can explore entering into short to medium-term lease contracts with land owners to allow the LGU to optimize the use of the land albeit temporarily. Alternative uses for the idle assets of both the government and private landowners include urban gardens, mini-parks, parking spaces, temporary basketball courts and activity/recreational centers.

5. A public-private partnership is essential to effectively manage the Central Business Districts. A downtown management council can be organized composed of both the public and private sectors to conceptualize strategies to make the land market more efficient and the utilization of land assets more rational.

In terms of whose office would implement it, respondents say it is still the Assessor’s and the Treasurer’s Office and not the MARO. The latter is understaffed and already has a workload too heavy contend with for the collection of idle land taxes. From interviews, they are committed to help in the identification of and collection for idle areas in their municipality as support, but not as the lead agency to implement the Ordinance, even given the possibility that the revenue would be earmarked for their office. They say taxation is the main function of the Assessor’s and the Treasurer’s offices.

But, as already pointed out by the study on managing vacant lands within central business districts, the Assessor’s office does not have the technical capability to implement the Ordinance (see Box 1). Skills upgrading is necessary, along with

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updating of maps and valuation schemes. As it is, regular ocular inspection of properties to update the assessment roll of real properties is not being done because of limitations in human and financial resources; what more with the additional task of mapping and identifying idle lands?

The question is, can the local government absorb such an additional task? The Ordinance has already been signed into policy and the implementing offices have no choice but to comply. Details on budgets and skills of implementers need to be looked into by the administration and warrant further studies in terms of cost efficiency vis-à-vis expected revenue that would be generated from such levy. As it is, the rate is too low (25 percent of one percent of the assessed value of the land) to generate significant income for the city. Revisions may need to be recommended by the Assessor and the Treasurer, with necessary endorsement from the Administration, to the City Council to amend the Ordinance. Results of the study would also surface strategies that are better suited to the conditions in the locality, such as instituting an incentive and disincentive mechanism (see Box 1) or exploration of partnerships with the private sector.

4.2 Not a Deterrent, Revisions may be Necessary

NGOs and landowners, including implementing agencies in the local government, interviewed perceive the Ordinance for an additional levy to be imposed on idle lands not to be a deterrent to unproductive lands and speculations. Such would especially hurt small farmers who are already burdened by lack of capital and access to services. An argument for social justice would presuppose that the Ordinance should exclude them and instead target big landowners who have access to capital and markets and thus have the capacity to make their lands productive. Small landowners interviewed said the Ordinance would further push their comrades who are unable to make their lands productive further into poverty with the additional levy. DAR and DA, according to them, are partly to blame for why some farmers have left portions of their lands unattended and unproductive. What they need is an injection of capital and support services from the State to help them ensure that their lands are productive.

On the one hand, landowners who have holdings of more than five hectares perceive the additional levy to be helpful, as they put a premium on agricultural productivity. They believe that without just and probable cause, there is no reason for a landowner to leave his/her lands idle. Such taxation would be beneficial as this would generate employment for the community where the idle land is. For absentee landowners, they would be forced to hire workers to till the land.

If there is no other alternative to generating revenues to induce development, such policy needs to be further studied, according to NGOs interviewed. Perhaps a graduated system could be imposed wherein idle lands of more than five

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hectares would first be targeted while the agrarian reform program speeds-up distribution of remaining targets through a compulsory acquisition mode. The program must first fulfill the requisites of LTI in the form of providing necessary support services to beneficiaries. Only after some breathing time, when ARBs have applied the technologies and have accessed capital and markets, would idle lands be identified and mapped in CARP areas and imposition of additional levies for unproductive idle lands be enacted.

This form of taxation, whether on idle lands or on real property, in order to be a development tool needs to be combined with support services and incentives -- for farmers and investors alike. Incentives may be in the form of tax holidays or reducing taxes on land improvements while increasing land tax (see Box 1) via a General Revision of assessment values. Again, appropriate incentives and disincentive mechanisms need to be determined through studies by implementing agencies and packaged as a recommendation to policy-making bodies at the local level and incorporated into the city’s development plan. The taxation scheme needs to be in consonance with the development plan of the city, particularly for agricultural, industrial and the business sectors, which are major revenue-generating sectors of cities. Income from the sectors through taxation would then be channeled back to them in the form of appropriate support services and programs by the local government. Such a symbiotic relationship would encourage taxpayers to comply with the city’s tax policies.

4.3 Alternatives to Stimulate Agrarian Reform and Rural Development

One alternative cited by respondents is the compulsory earmarking of the pork barrel of congressmen and senators for land tenure improvement and pump-priming agricultural and rural development. This is the easiest alternative, they say, without burdening small landowners, who are barely able to pay property taxes and amortizations, with additional land taxes. This would especially be acceptable since pork barrel funds are a major source of corruption and irrational spending that does not have social development value but rather is a means of maintaining “loyalties” of constituencies and of cronies.

Respondents from local government did not veer away from implementing a land policy in the form of taxes. An alternative they presented is to provide incentives for farmers and investors, the latter in the form of tax holidays and moratorium to enable them to recoup their investment. No additional land tax for farmers but rather sales taxes are to be imposed. One idea is to establish a central trading post for all agricultural produce of the city. This will be the only place for trading, and receipts would be issued from the sale of produce from the farmer to the buyer. This helps in the implementation of the sales tax of the city. This would eventually eliminate middlemen and traders and would help in price control, says the CAO. The proceeds of the revenue that would be generated

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would then be funneled back in the form of support services and subsidies for farmers. An incentive would be doubling the production value if the farmer reached the target volume for the specific produce. This would be given not in the form of monetary incentives but through the provision of farming inputs.

For NGOs, what is important for government programs in support of farmers is the objective of achieving sustainable livelihoods. This relates to having a holistic perspective in the menu of services that would be provided to farmers, providing due consideration for food security and sovereignty, environmental care, and sustainable and equitable development. How sustainable and equitable development is to be achieved is a subject of debate viz. a substantial portion of the income generated by products and raw materials from Mindanao are accrued to the National Government and return to the regions as IRA. Mindanao receives only about a third of the national budget.

Advocacy for One Mindanao or Federalism is not to be discounted, but this movement lost momentum when politicians used the campaign for federalism as an option for staying in power. The hypothesis is that, with Federalism, Mindanao, in which seven out of the 10 poorest provinces are located, will be able to decide for itself its own road to development based on the aspirations of its peoples and how it would use its resources to accrue sustainable development for all. Of course, there are many assumptions to this hypothesis and therefore, this needs to be further studied in terms of applicability to the Philippine context, as its essence is clouded by power-hungry politicians clamoring for constitutional change.

Private sector partnerships are another alternative that is being looked into in fueling development in areas, both commercial and agricultural, where idle lands are located. Similar to what is proposed by Alabado (2005) for central business districts, the local government can forge partnerships with the private sector to boost productivity in idle lands.

5 Summary and Conclusion

5.1 Potential for Generating Income and Fund Land Distribution The potential for generating budget for land distribution from idle land taxation may be slim for Davao City considering the tax rate is very low –25 percent of one percent of the declared value of the land. Furthermore, the assessment values being used by the Assessor’s Office in assessing properties is the 1993 market value. This severely deprives the city of higher revenue given the wide discrepancy of values from 15 years ago and current land prices.

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Because the tax rate is too low, both for real property and the additional levy for idle lands, it does not provide a substantial contribution to increasing the income of the city. Given such, using the revenue from idle land tax to fund land distribution and still contributing to the budget of the city may be a long shot -- what more with no implementation of the idle land tax ordinance? The Ordinance does not seem to be highly acceptable to most of the key respondents of this research. They recognize the merit of this new land tax but, as they say, it is only good in theory but not in practice. Further studies need to be done to give flesh to appropriate provisions, e.g., clarify exemptions, assessment not on actual use but on permitted/required use, and crafting other mechanisms such as an incentives and disincentives scheme that would encourage taxpayers to comply. Forging partnerships with the private sector to pump prime productivity of idle lands is an alternative. This would be helpful to generate capital and revenues that would otherwise not be possible for capital-deprived landowners.

Another is a graduated scheme, which calls for the concerted efforts of local agencies and the DAR. Identification (and mapping) by appropriate office of large tracts of idle lands will be done while DAR speeds up distribution, especially on lands under CA. Big landholdings that are idle would be the first to be taxed while giving breathing space for small ARBs to develop their lands through an efficient support services provision by DAR and DA. Only after such time can idle lands in CARP areas be mapped and idle land taxation be imposed for unproductive lands.

Revisions to the Ordinance therefore needs to be done for this tax to achieve its goal of inducing development. Perhaps, since the premise is to use revenues generated from idle land tax for land distribution and agricultural productivity, DAR could play a role as the national body to oversee implementation of this new land taxation scheme. This is where it can interface efforts with the local government since local tax enforcers are the assessor’s and the treasurer’s office. An incentive scheme for local government units, e.g. additional budget from national government depending on the revenue collection from taxes, could also be crafted to encourage them to enforce such taxation. This could then be earmarked to fund programs that would fuel agricultural productivity in the locality.

On its human resource requirements, skills of implementing bodies under the local government needs to be upgraded to better implement this new land tax. As it is, the Assessor’s Office does not have the manpower and perhaps, better systems, to regularly investigate and update their existing Masterlist or assessment roll. Improving capacities within the Assessor’s Office is the first step towards better tax collection and higher revenues for the city.

Collection efficiency of real property tax has been, for the last five years, below the target compared to other taxes, which has a collection efficiency of more than 100 percent. The biggest contributor to the tax revenue of the city is

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business tax. According to the 2007 annual report by the local government, overall revenue collection of the city has been good over the last six years. Income of the city is used to fund priority programs on peace and security, environmental protection, promoting sound business climate, and providing basic social services to its constituents.

5.2 Capacity of Local Government to Absorb a Devolved DAR The city does not have specific programs that substantially interface with the agrarian reform program. DAR seems to implement its programs with little interaction with local line agencies. If devolution is being seen as a future direction of the agency, extension might also need to include a phase-out mechanism like interfacing program components with appropriate line agencies, e.g., DA-CAO for agricultural technology and support services, DOJ for legal cases, DTI for market linkage, etc. This would allow for a smoother transition of a devolved DAR.

The present structure of DAR is heavy on staffing, whereby a substantial portion of its budget goes to personnel services (PS) or to salaries and benefits of staff. What remains, about a third, is pegged for land distribution and other LTI services. Such a proportion would have implications on the quality of output of the agency given that it still has undistributed lands to attend to. Provision of support services has been of lesser priority and precisely because of this, the agency has been dependent on foreign-assisted projects (FAPs) to provide the much needed package of support services to ARBs. The problem with this scenario is that non-ARCs are left to fend for themselves, since FAPs only assist ARCs. Accessing FAPs is also difficult because of the inability of the agency to provide counterpart funds.

Budget problems will be one negative impact of devolution. Limitations in financial resources, unless people in the bureaucracy are creative in looking for additional funds, usually result in a “watered-down” program. The backlash would be against rural development, further driving rural folk into poverty.

5.3 What Can be Done?

Land taxes need to be combined with support programs that encourage compliance, and revenues from them must be channeled back to farmers and investors. This would create a climate in which social reform objectives can be achieved and development can happen. If the objective of this land tax would be for a specific purpose of funding land distribution, it might be misplaced, as respondents have expressed. If it is a social development tool, it needs to answer overall agrarian reform and rural development objectives—those that should still be anchored on the principle of social justice.

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Forging partnerships with the private sector is another feasible option for the local government, along with the DAR, to induce development of idle lands. The private sector can provide the capital, much like what corporations do when engaging in agribusiness venture arrangements with farmers. If done properly, meaning the rights and control of farmers to their lands and contracts are fair, is a win-win situation. Social preparation and capacity-building therefore, needs to be seriously looked into by all – government agencies and NGOs, to empower people to understand the “language” of contracts and to better bargain and negotiate with the business sector.

As respondents of this study imply, collaboration and harmonizing efforts are the key to achieving the country’s development objectives—those that are reflective of the aspirations of its peoples.

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References

Alabado, Roberto P. III. 2005. Managing Vacant Lands Within Central Business Districts. Implications of Implementing Idle Land Taxation. Banwa 2 (1): 63-85.

City Government of Davao. 2007 Annual Report.

______________________. Office of the City Planning and Development Coordinator. Davao City Comprehensive Development Plan Year 1996-2021.

______________________. City Assessors Office. Estimated and Actual Overall Collection, and Collection Efficiency. 2000-2006.

______________________. City Treasurer’s Office. Quarterly Report on Real Property Tax Collections. 2003, 2005-2007.

______________________. Office of the City Planning and Development Coordinator. Socio-Economic Indicators 2007.

______________________. Sangguniang Panlungsod. Ordinance No. 158-05, s. 2005. An Ordinance Approving the 2005 Revenue Code of the City of Davao, as Amended.

Department of Agrarian Reform. Provincial Agrarian Reform Office. 2007 Annual Report.

Local Government Code of 1991. RA 7160 and the Philippine Constitution.

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List of Respondents and Secondary Sources

Ernesto Tan, OIC, Provincial Agrarian Reform Officer, Department of Agrarian Reform XI

Elizabeth Caparo, MARO-Calinan district, DAR XI

Naome Inggao, MARO-Baguio district, DAR XI

Mr. Ermelito Taguding, MARO-Marilog district, DAR XI

Ms. Jocelyn Bachinicha, Sr. Agrarian Reform Technologist/Development Facilitator, MARO-Tugbok District, DAR XI

Lino Morilla, OIC, Land Evaluation Party Coordinator, and staff of the Land Management System in both CENRO and DENR XI, who asked that their names be withheld

Isagani Carillo, Tax Mapper III, City Assessor’s Office

Gisiela Yumang, Administrative Officer, City Assessor’s Office

Anastacio Jardin, Assistant City Treasurer- Administrator, City Treasurer’s Office

Conrado Lapido, Chief, Real Property Tax Division, City Treasurer’s Office

Teresita Reyes, Chief, Treasury Operation Review Unit, City Treasurer’s Office

Engr. Roy Anthony Carino, Agricultural Technologist, Agricultural Land Evaluation and Management, DA-CAO

Lorna Alderete, Senior Agriculturist, DA-CAO

Erwin Alparaque, Assistant City Administrator

Lope Barbadillo, ARB, small landowner

Teresita de Leon, Program Officer, Asset Reform, AFRIM

Elvira Quintela, Program Officer, Sustainable Livelihoods, AFRIM Inc.

Mark Amor, Exec. Director, Mindanao Farmworkers Development Center (via email)

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