The Finance secretary’s willingness to compromise on some taxes, including a reduction in the 12% value-added tax (VAT), is fiscally cautious but potentially meaningful. His caveat is that any lost revenue must be replaced by alternatives to fund the national budget.

The central issue is not whether some taxes can be removed, but how the government will make up the revenue loss. That is why the President should reconsider his recent call for Congress to suspend Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act (RPVARA).

Discussion of the law, enacted in 2024, has focused largely on whether property taxes will rise. That concern is understandable. For many families, a home is not an investment asset but a necessity, and any additional tax on ownership can be a burden.

RPVARA allows the government to update property values closer to market prices. That has understandably created anxiety, especially because market values have already risen to extraordinary levels in highly urbanized areas. Higher prices can mean higher taxes.

At the Legislative-Executive Development Advisory Council meeting on Aug. 6, Malacañang proposed suspending RPVARA’s implementation to avoid adding costs for businesses and property owners already facing a difficult economy, to protect investments from an abrupt shock, and to give local government units more time to develop the valuation expertise, data systems and procedures needed to apply the law consistently nationwide.

In short, the Palace wants Congress to defer the law until local government units are ready to implement it. That is a fair request. But it does not answer the harder question of whether deferral is the right solution to the problem the law is designed to address.

The law seeks to fix a valuation system that has been broken for decades. Schedules of market values have gone unrevised for many years. Similar properties, even when they benefit from the same roads, schools and drainage systems, continue to carry different assessments. That kind of inconsistency matters because property taxation is only as fair as the valuation behind it, and uneven assessments can distort both local revenues and public confidence in the system.

RPVARA is meant to correct that by anchoring valuation to actual market value, aligning it with Philippine Valuation Standards and building a Real Property Information System. In this way, the government will know what property in the country is actually worth.

Getting the valuation right does not automatically mean higher taxes. Tax bills still depend on assessment levels, tax rates and local government unit decisions. The law also caps at 6% the tax hike in the first year of effectivity of the new approved schedule of market values.

Admittedly, many local government units may not yet have trained assessors, updated records or the systems needed to apply a market-based schedule fairly. Unpreparedness is a reason to phase implementation, but not to suspend the law altogether. Congress should give the measure a chance to work, while ensuring the transition is orderly enough to avoid the very administrative confusion opponents worry about.

The broader argument is that the government should not continue relying heavily on taxes imposed on work, salaries, professional income and entrepreneurship. More of the burden should gradually shift toward accumulated wealth, land appreciation, corporate profits and activities that impose social costs.

Not everyone who earns income owns land or property. For that reason, the system may be more equitable if the burden shifts more toward wealth than work. RPVARA should be seen as a good alternative to higher income or consumption taxes, or as a way to replace revenue that may be lost from any tax relief for consumers.

Salaried workers, professionals and small entrepreneurs are taxed heavily because they are easy to tax. Consumption can also be taxed through VAT. But every peso a worker earns reflects effort, risk and initiative. Every peso spent is more likely to be driven by necessity than luxury.

Land is different. It is fixed in place and, in most cases, does not lose value. Much of that value is not created by the owner. A vacant lot becomes valuable because the government builds a road beside it. A neighborhood becomes prime real estate because taxpayers financed the drainage, schools, police stations and hospitals around it.

More than a century ago, American economist and journalist Henry George argued that land occupies a unique place in taxation because much of its value is created by society rather than by the owner alone. He argued that governments should tax the increase in land value created by population growth, public infrastructure and community activity.

The International Monetary Fund has been rediscovering the same principle in its work on property taxation in developing economies. It has noted that property taxes in emerging Asia and sub-Saharan Africa raised about 0.1% of GDP in 2021, compared with about 1.4% in OECD economies.

That suggests there is substantial room for countries such as the Philippines to expand property tax collection through better valuation and administration. Public investment helps create private wealth by raising asset values, and property taxation is one way for society to recover part of that value.

RPVARA is the country’s first real step toward closing that gap, and suspending it could be counterproductive. It is a suitable alternative to higher taxes on income and consumption. But phased implementation and some revisions should be considered.

A retired couple may live in a house now worth P20 million because the city grew around them, while their pension remains modest. Small businesses operating on thin margins could also struggle with reassessment. Renters, who own nothing, could still feel the effect if landlords pass on higher property taxes through higher rent. A fair system must account for all of that, which is why transition measures should be built into implementation rather than left for later.

The law should be adjusted, but not suspended. Canada and Australia allow eligible pensioners to defer property tax until sale or estate settlement. Singapore taxes owner-occupied homes more lightly than investment properties. South African municipalities offer rebates to pensioners and indigent households.

If Congress suspends RPVARA, it allows an already-delayed correction to slip further into the future. It would be better to amend the law to phase implementation, give local government units more time to prepare, and protect vulnerable households, renters and small business owners.

The Philippines should gradually rely less on taxing productive labor and more on real property, on activities that impose real costs on society, and on the global top-up tax now being designed for undertaxed multinational profits.

Corporate and personal income taxes and VAT can remain, but perhaps at reduced rates. The direction of reform should be clear: less tax on work, moderate tax on consumption, better taxation of accumulated wealth, higher taxes on social harm and the highest taxes on luxury. RPVARA is key to that direction.

Marvin Tort is a former managing editor of BusinessWorld and a former chairman of the Philippine Press Council.

matort@yahoo.com