Real estate is one of the most heavily taxed assets in the Philippines. From acquisition to ownership and sale, property owners carry numerous layers of fiscal obligations — real property tax (RPT), capital gains tax, documentary stamp taxes, transfer taxes, VAT, and other charges. At times, there are proposals to make that burden even heavier. One such effort was the GROWTH Bill, which proposed raising taxes on property-related transactions — though that bill has since been withdrawn. The example set by Pasig City under Mayor Vico Sotto suggests there is another way.

The Pasig Example: More Revenue Without Raising Tax Rates

In his recent State of the City Address, Mayor Vico Sotto shared that Pasig City achieved an 84.7% ratio of locally sourced revenue to total operating income, putting it among the top cities in the country in terms of financial self-sufficiency. What makes this more notable is that Pasig has done this without raising local tax rates; in fact, they even lowered some fees (market stall rents, TODA franchises).

This performance aligns with recognition from the Department of Finance’s Bureau of Local Government Finance (BLGF) for Pasig’s outstanding financial management and resource mobilization. Pasig’s Revenue Code retains typical real property tax rates — 1.5% for residential, 2% for commercial/industrial/special properties — without recent increases under Sotto’s administration. The city opted instead for reforms in collection, assessment, compliance, and efficient spending.

Real Estate Is Heavily Taxed & the GROWTH Bill

Real estate already comes with multiple tax layers. For example:

• When you sell a property, you face a capital gains tax of 6% on gross selling price or fair market value (whichever is higher).
• There are documentary stamp taxes and transfer taxes involved.
• Ownership brings annual real property tax, assessments, and other local charges.
• Rental income is taxed; commercial property may incur VAT or other business-related charges.

With this as the backdrop, the GROWTH Bill (Government Revenues Optimization through Wealth Tax Harmonization) was proposed by the Department of Finance to raise certain tax rates related to property transactions. Specifically, it would have increased capital gains tax, donor’s tax, and estate tax rates from 6% to 10% over the period of 2025 to 2030.  

However, in April 2025 the DOF formally withdrew the proposal. The reasons cited included stronger-than-expected government revenue collections, robust fiscal performance, and concern about the burden the increases would place on middle-income families and property transactions.  

This withdrawal is significant: it shows that even when national proposals aim to raise revenue by increasing tax burdens on property, there is political, economic, and social feedback that can stop these from passing. It validates the idea that revenue growth doesn’t always require higher rates — sometimes what matters more is timing, context, and implementing governance reforms.

Legal Framework: RA 7160 and Local Government Powers

Under Republic Act No. 7160 (Local Government Code of 1991), local government units (LGUs) have the authority to:

• Create their own sources of revenue through taxes, fees, and charges. (Section 129)
• Ensure such taxes, fees, and charges are equitable, uniform, and not unjust, excessive, or oppressive. (Section 130)
• Enact any tax or fee via a proper local ordinance with required public hearings. (Section 132)

Additionally, the Real Property Valuation and Assessment Reform Act (RPVARA, RA 12001) modernizes and harmonizes how property is valued and assessed across the country. While this law does not automatically increase tax rates, it may increase assessed values, which has the effect of raising actual tax bills even if rates remain unchanged.

What It Means for Real Estate Owners & Professionals

For owners, developers, and real estate practitioners, this situation reinforces a few insights. First, tax burden increases don’t always come from rate hikes — assessment revisions, valuation reforms, and stricter enforcement can lift what you owe. Thus, understanding how property value is determined, when assessments are updated, and what exemptions or reliefs are available becomes essential.

Second, good governance — transparency, efficiency, improved collection systems, minimizing leakage — can increase LGU revenues without heavier rates. This helps maintain investor confidence and housing affordability. Third, when proposals like the GROWTH Bill surface, stakeholders must engage in advocacy and policy discussions. Real estate taxation isn’t just about what the law allows, but about how the government chooses to balance revenue needs with social impact.

Tax Is a Social Contract that Requires Balance

The state holds powerful tools — the ability to levy taxes, to reclaim land via eminent domain, etc. Yet these powers come with responsibility. Taxation should be part of a social contract, where citizens accept contributions only if accompanied by fairness, service, transparency, and accountability.

Real estate in the Philippines is heavily taxed, but Pasig under Vico Sotto shows that growth, fiscal strength, and financial independence can also come from smarter governance — not just from raising the rates. The withdrawal of the GROWTH Bill demonstrates that even national tax policy must balance fiscal goals with socioeconomic realities.

As real estate professionals and citizens, being informed, involved, and vocal — especially when changes are proposed — matters. Because taxes are not just about law; they’re about trust.

Image Credit: Pasig City Gov PH