In the Philippines, the idle land tax is known as the “Special Education Fund Tax on Idle Lands”. It is imposed by the Local Government Units (LGUs) on undeveloped or underutilized land. It is also called the “Special Education Fund Levy on Idle Lands” under Republic Act No. 7160, also known as the Local Government Code of 1991.
The idle land tax is a local tax determined by the LGUs, but it is subject to certain limitations and guidelines set by the Department of Finance. The tax rate may not exceed 5% of the assessed value of the land per annum.
The revenue generated from the tax is allocated for the Special Education Fund (SEF) of the LGU, which is used to support education initiatives, such as the construction of school buildings, procurement of equipment and supplies, and payment of teachers’ salaries.
The LGUs define the criteria for what constitutes “idle” land in their respective ordinances. In general, the LGUs consider land to be idle if it is not used for two years or more or if it is not utilized for its highest and best use.
It is important to note that the idle land tax is distinct from the real property tax, also known as “amilyar,” derived from the Spanish word “amillaramiento.”
It’s a national tax imposed on all real property, whether idle or not. The idle land tax is a specific tax imposed only on idle lands and is intended to encourage landowners to utilize their properties to benefit the community.
Table of Contents
Purpose of idle land tax in the Philippines
The purpose of the idle land tax in the Philippines is to encourage landowners to develop or utilize their undeveloped or underutilized land. The tax is intended to address the issue of urban blight, where land remains vacant and shapeless amid urban development, while also generating revenue for local government units to support education initiatives.
By imposing a tax on idle land, LGUs seek to motivate landowners to put their land to productive use, such as developing it for residential, commercial, or industrial purposes. The tax creates a financial disincentive for landowners to leave their land idle and encourages them to use their properties best.
Additionally, the revenue generated from the tax is allocated to the Special Education Fund of the LGU. The SEF is a fund that supports education initiatives, such as constructing school buildings, purchasing equipment and supplies, and paying teachers’ salaries. By contributing to the SEF, landowners subject to the idle land tax also contribute to developing education in their community.
The idle land tax in the Philippines aims to promote the productive use of land, discourage urban blight, and generate revenue to support education initiatives at the local level.
How idle land tax works in the Philippines
Definition of idle land
Each LGU has its definition of what constitutes “idle” land. In general, the land is considered idle if it is not used for two years or more or is not utilized for its highest and best use. The LGU assesses the property to determine whether it is subject to the idle land tax.
Assessment of tax
If the LGU determines an idle property, it will assess the idle land tax. The tax rate may not exceed 5% of the estimated value of the land per annum, as set by the Department of Finance. The revenue generated from the tax is allocated to the Special Education Fund of the LGU.
Notification to landowner
Once the idle land tax has been assessed, the LGU will notify the landowner of the tax liability. The landowner has the right to contest the assessment or seek a reassessment of the property.
Payment of tax
The landowner is required to pay the idle land tax to the LGU. Failure to pay the tax may result in penalties and interest charges.
Utilization of revenue
The revenue generated from the idle land tax is allocated to the SEF of the LGU, which is used to support education initiatives such as constructing school buildings, purchasing equipment and supplies, and paying teachers’ salaries.
Criteria for land to be considered idle in the Philippines
Lack of development
A land may be considered idle if it is not developed, meaning it has no improvements such as buildings, roads, or any other infrastructure that would signify it is being used.
Underutilized
A land may be considered idle if it is not used to its highest and best use, meaning it is not generating the maximum potential income or benefits it could. For example, a residential lot used as a storage facility may be underutilized.
Non-payment of taxes
A land may be considered idle if the owner is not paying property taxes or has unpaid taxes for a certain period. This indicates that the landowner is not using the land for income-generating activities.
Non-use for some time
Land may be considered idle if not used for two years or more. This indicates that the landowner has no immediate plans to develop or utilize the land.
Not contributing to the community.
A land may be considered idle if it does not contribute to its development or growth. For example, an undeveloped lot in a commercial district may be considered idle if it does not contribute to the local economy.
Calculation of idle land tax in the Philippines
The idle land tax in the Philippines is a local tax imposed by the Local Government Units on undeveloped or underutilized land. The calculation of the idle land tax is based on the assessed value of the land and the tax rate set by the LGU. Here are the steps on how to calculate the idle land tax in the Philippines:
Assess the land value
The LGU assesses the value of the land to determine its market or assessed value. This is done by evaluating the property’s location, size, and other factors.
Determine the applicable tax rate
The LGU sets the tax rate for the idle land tax, which may not exceed 5% of the assessed value of the land per annum, as set by the Department of Finance.
Calculate the tax amount.
To calculate the idle land tax, multiply the assessed value of the land by the tax rate set by the LGU. For example, if the estimated value of the land is P1,000,000 and the tax rate is 2%, the idle land tax would be P20,000 (1,000,000 x 0.02).
Payment of tax
The landowner is required to pay the idle land tax to the LGU. Failure to pay the tax may result in penalties and interest charges.
Implementation of idle land tax in the Philippines
The performance of idle land tax in the Philippines is done by the Local Government Units (LGUs), specifically, the city or municipality where the land is located. Here are the general steps on how the implementation of the idle land tax is done:
Identification of idle lands
The LGU surveys or assesses the lands within its jurisdiction to identify idle lands. The criteria for idle lands vary depending on the ordinance of the LGU, but commonly include undeveloped, underutilized, non-payment of taxes, and non-use for some time.
Notification of landowners
Once the idle lands have been identified, the LGU notifies the landowners through a written notice. The notice usually informs the landowners of the idle land tax and the penalties for non-payment.
Assessment of the land value
The LGU assesses the value of idle land based on its location, size, and other factors to determine the market or estimated value.
Calculation of idle land tax
Based on the assessed value of the land, the LGU calculates the idle land tax by multiplying it with the tax rate set by the LGU.
Payment of idle land tax
The landowner must pay the idle land tax within a specified period, usually on or before the end of the year. The payment can be made in full or in installments.
Penalties and interest
Failure to pay the idle land tax may result in penalties and interest charges, as provided in the ordinance of the LGU.
It is important to note that the implementation of idle land tax may vary depending on the ordinance of the LGU. The revenue generated from the idle land tax is allocated to the Special Education Fund of the LGU, which is used to support education initiatives in the locality.
Pros and cons of idle land tax in the Philippines
Idle land tax in the Philippines is a policy measure encouraging landowners to utilize their lands for productive purposes. Like any other policy, there are pros and cons to implementing the idle land tax in the Philippines. Here are some of the pros and cons:
Pros
Encourages land utilization: The idle land tax encourages landowners to utilize their lands for productive purposes, such as agriculture or building residential or commercial properties. This can lead to the creation of jobs and the development of communities.
- Generates revenue: The idle land tax generates revenue for the LGU, which can be used to fund education initiatives and other development programs in the locality.
- Increases property value: Utilizing idle lands can increase the property’s value, leading to higher market values and the potential for higher rental or sale prices.
- Promotes social justice: The idle land tax promotes social justice by discouraging land hoarding and promoting equitable distribution of land resources.
Cons
Disincentivizes land investment: Some landowners may see the idle land tax as an added cost, discouraging them from investing in their lands.
- Maybe a burden for small landowners: The idle land tax may be a burden for small landowners who do not have the resources to develop their lands.
- Inaccurate assessment: The land value assessment may be inaccurate, resulting in a higher tax rate for the landowner.
- May lead to land grabbing: The idle land tax may lead to land grabbing, where the LGU takes over the land and uses it for other purposes, such as public infrastructure.
The idle land tax is a policy measure that aims to promote the productive use of lands and generate revenue for the LGU. While it has advantages, the LGU needs to ensure that it is implemented fairly and does not disproportionately affect small landowners.
Examples of idle land tax in practice in the Philippines
The Idle Land Tax or the “Adopt-A-Lot” program, has been implemented in different local government units in the Philippines.
Quezon City
The Quezon City government implemented an Idle Land Tax in 2017, which imposes a penalty tax on properties that are undeveloped, unutilized or unoccupied. The tax rate is 5% of the assessed value of the land. The program also provides incentives to property owners who will develop their idle lands, such as a reduction in the tax rate or a tax credit.
Pasig City
The Pasig City government implemented the Adopt-A-Lot program in 2019, which offers tax incentives to property owners who will develop their idle lands. Under the program, property owners can avail of a tax credit worth 100% of the idle land tax if they develop their lands within five years. The program also provides technical assistance and access to financing to help property owners develop their lands.
Cebu City
The Cebu City government implemented an Idle Land Tax in 2019, which imposes a penalty tax of 2% of the land’s assessed value for undeveloped or underutilized lands for more than a year. The tax rate increases to 4% if the land remains idle after three years. The program also provides incentives to property owners who will develop their idle lands, such as a tax credit of up to 10% of the assessed value of the land.
Baguio City
The Baguio City government implemented an Idle Land Tax in 2020, which imposes a penalty tax of 2% of the land’s assessed value for idle lands for more than a year. The tax rate increases to 5% if the land remains idle after three years. The program also provides incentives to property owners who will develop their idle lands, such as a reduction in the tax rate or a tax credit.
These programs encourage property owners to develop their idle lands and generate revenue for the LGU. The success of these programs will depend on the effective implementation and enforcement by the LGU.
A. The Comprehensive Agrarian Reform Program (CARP) in the Philippines
B. The Local Government Code of 1991 in the Philippines
C. The proposed idle land tax bill in the Philippines
Conclusion
The idle land tax in the Philippines has the potential to have significant future implications for landowners, the government, and the community as a whole.
Increased land utilization
Implementing the idle land tax may encourage landowners to develop their land, increasing land utilization. This could lead to the creation of jobs and the development of communities, contributing to economic growth.
Improved land distribution
The idle land tax could contribute to a more equitable distribution of land resources, promoting social justice.
Higher revenue for LGUs
The idle land tax could generate higher revenue for LGUs, which could be used to fund development programs, education initiatives, and other public services.
Improved land valuation
The implementation of the idle land tax could lead to a more accurate valuation of lands, resulting in fairer tax rates for property owners.
Increased scrutiny of land use
The idle land tax could lead to increased land use and ownership scrutiny, promoting transparency and accountability.
Potential for conflict
Implementing the idle land tax could lead to conflicts between the LGU and landowners who may see the tax as an added cost to their investments.
Overall, implementing the idle land tax in the Philippines has the potential to have significant implications for landowners, the government, and the community. The success of this policy will depend on effective implementation, fair assessment, and proper enforcement.
