SC: Local gov’t shares should come from all national taxes

The “just share” of local government units (LGUs), also known as Internal Revenue Allotment (IRA), will now be sourced from all national taxes and not just from national internal revenue taxes collected by the Bureau of Internal Revenue (BIR) following the Supreme Court’s ruling.

Voting 10-3 during its weekly full-court session on Tuesday, July 10, the high court partially granted former Batangas 2nd District Representative and now provincial Governor Hermilando Mandanas’ petition filed in January 2012. The petition questioned the process of allocating IRA funds for LGUs.

Mandanas claimed in his 23-page petition that unreleased IRA due from provinces, cities, municipalities, and barangays had reached P500 billion from 1992 to 2012.

“Compliance by the National Government with the Constitution and existing laws will enable the LGUs to efficiently and expediently serve the Filipino people, and hasten the delivery of much needed and long delayed basic services,” Mandanas’ petition read.

Mandanas argued that Section 284 on Allotment of Internal Revenue Taxes of Republic Act (RA) No. 7160 (Local Government Code) defines “just share” regarding the IRA.

The said section states: “Sec. 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year, as follows:

a) On the first year of the effectivity of this Code, 30 percent;
b) On the second year, 35 percent;
c) On the third year and thereafter, 40 percent.”

Mandanas said, “It is clear that the legally mandated revenue base to compute the IRA should include the entire national internal revenue taxes collected annually.”

According to him, the national internal revenue taxes are specifically enumerated in Sec. 21 of RA 8424 (National Internal Revenue Code):

“Sec. 21. Sources of Revenue. – The following taxes, fees, and charges are deemed to be national internal revenue taxes:

a. Income taxes;
b. Estate and donor’s taxes;
c. Value-added tax;
d. Other percentage taxes;
e. Excise taxes;
f. Documentary stamp taxes; and
g. Such other taxes as are hereafter may be imposed and collected by the BIR (Bureau of Internal Revenue).”

He also stated that the Bureau of Customs (BOC) collects national internal revenue taxes such as value-added tax, excise taxes, and documentary stamp taxes on imported goods as an agent of the BIR, as provided for in Sec. 12 of the National Internal Revenue Code.

“However, the BIR has not been including the collections of the BOC of the national internal revenue taxes in the legally mandated revenue base to compute the IRA for the LGUs since 1992 up to 2012,” his petition stated. “And when included in accordance with the Philippine Constitution and other applicable laws, then the LGUs should receive P498.85 billion or very close to P500 billion.”

Mandanas also urged the high court to order the immediate release of IRAs to LGUs, saying that the national government, in the persons of the respondents, should “automatically release the Internal Revenue Allotments (IRA) or the just shares of the Local Government Units (LGUs) in the national taxes as determined by law.”

In his petition, he stated that that the automatic release of the IRA to the LGUs is “clearly provided for in Sec. 6 of Art. X of the Constitution” which states: “Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.”

Mandanas filed the petition along with eight local officials, with the lead counsel in the case being former Senate president Aquilino Pimentel Jr., author of the Local Government Code.

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