Finding the Hidden Wealth

1 March 2011

Education is one of the most important determinants of an individual’s chances in life. Education levels the playing field between the rich and the poor, and allows progress to be equally shared.

Some LGUs, however, have found a hidden wealth and started mining this potential gold mine for education. They call it the Special Education Fund (SEF).

But providing quality education has its costs. Money is needed to put up adequate school buildings and classrooms, to pay enough teachers, and buy quality books. And for many local government units (LGUs), there are simply not enough funds to spend on education.Education is one of the most important determinants of an individual’s chances in life. Education levels the playing field between the rich and the poor, and allows progress to be equally shared.

What is the Special Education Fund (SEF)?

The SEF was established to serve as an additional funding source to ensure the delivery of quality public education services throughout the country.

Republic Act No. 7160 or the Philippine Local Government Code of 1991 – which devolved the delivery of social services including education to local governments – specifically mandates the Local School Boards (LSB) to manage and administer revenues collected for the SEF.

The SEF is especially earmarked for use in local public education expenditures and placed under the budgetary authority of the local school board.

How is the SEF funded?

It is funded by the SEF tax which is an additional 1% levy on real property tax. It is enforced and collected by provincial and city governments as well as component municipalities comprising Metro Manila.

Being a levy on real property, the SEF has a permanent tax base and, as such, is assured of a constant funding source. However, the huge potential of SEF as a major funding source for local education has not been realized due to the poor enforcement and collection of the SEF tax.

The proceeds from the 1% SEF tax collected are to be equally shared (50:50) between the provincial and the municipal school boards.

What can be done to increase SEF collection?

Since the SEF is a levy on real property tax, higher property tax collection simply means higher SEF allocation. Here are some tips on how LGUs can improve the collection of property tax – or any tax for that matter – in order to increase their capacity to deliver quality education and other social services to the people.

  • Learn
    LGUs should engage tax experts in focus group discussions to heighten their level of awareness on the in’s and out’s of the SEF tax, particularly on how it is enforced, collected and utilized.By doing such consultations, local officials can realistically set SEF collection targets, effectively draft tax ordinances that will improve revenue generation, and successfully develop work programs for revenue allocation.


    Local treasury officials can also learn from the experiences of LGUs which significantly improved tax compliance by simply sending out tax bill reminders to taxpayers and deploying tax collectors on house-to-house tax collection duties.

  • Communicate
    LGUs should conduct information campaigns on how local taxes are improving the quality of their children’s education. Local officials could also highlight the positive impacts of its tax program such as the delivery of community projects and welfare benefits which are funded by tax revenues.Knowing that the money they pay the government is being spent well will inspire community taxpayers to be responsible taxpayers.
  • Strategize
    Creativity can go a long way in improving tax collection. For example, LGUs may offer rewards to encourage early tax payments, or accept tax payments in kind – sacks of rice or poultry stocks – in order to raise as much resources as possible.A small “Thank you” letter can also go a long way in letting the taxpayers know that their contributions are appreciated.
  • Enforce
    Property valuations should be performed on a regular basis.For real properties whose taxes have not been paid, LGUs could use legal remedies such as the authorized sale of such properties through a public auction. Once they see their properties advertised for sale, delinquent taxpayers are likely to settle their obligations before their properties are auctioned.
Did you know that…
on the average, most local governments are able to collect only about half of the SEF potential tax revenues? This is attributed to the following factors:
• Incomplete and inaccurate records of real property and property owners in the locality;
• Market values of properties are not regularly updated to reflect prevailing market values;
• Poor tax compliance and weak tax enforcement; and
• Lack of understanding of programs directly supported by the tax payments.

By efficiently collecting property taxes, LGUs begin to realize their hidden wealth – a potential gold mine that can increase their capacity to deliver quality education to the Filipino youth.

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