P283-B increase in local gov’t funds possible without Cha-Cha – Recto

Aika Rey

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P283-B increase in local gov’t funds possible without Cha-Cha – Recto
Raising the internal revenue allotment of local governments can be done through ordinary legislation, says Senate President Pro-Tempore Ralph Recto

MANILA, Philippines – There is no need to revise the Constitution if the government’s intention is to raise local government’s internal revenue allotment (IRA), Senate President Pro-Tempore Ralph Recto said. That could be done through ordinary legislation.

Measures like these abound in Senate and at the House, we can fast track the approval. Instead of arguing over Charter Change, let’s unite first over IRA change. On that issue, there shouldn’t be any debate,” Recto said in a statement over the weekend. 

He noted that local government units (LGU) stand to lose some P121.5 billion in 2018 due to the “long standing faulty interpretation” of the Local Government Code. 

Under Republic Act 7160 or the Local Government Code of 1991, LGUs are granted a 40% share from the national government’s internal revenue collection.

Recto said that the current set-up takes the 40% share from the Bureau of Internal Revenue (BIR) collections but does not include excise tax and value-added tax (VAT) collections from the Bureau of Customs (BOC).

“This is wrong because VAT and excise taxes are classified as internal revenue, and the BOC is a mere collecting agent of the BIR, so in computing the share of LGUs in determining their IRA, BOC’s VAT and excise tax collections must be factored in,” he said.

“And because revenues from the BOC is not included in the computation of the IRA, LGUs will only receive P522.7 billion instead of P644 billion in 2018,” Recto added.

Recto pushes for a 50% IRA share for LGUs and urged Congress to pass the measure soon. He said that if IRA funds are computed at 50% share, including VAT and excise collections from the BOC, total IRA would have been P804.9 – or P282.2 billion higher than the current fund.

He added that if the LGUs’ share can be increased to 60%, the better. (READ: What’s the share of gov’t offices in the 2018 P3.8-T national budget?)

Recto has filed at least 3 “equal IRA share” bills which contain reform provisions, such as basing the IRA on revenues collected two years prior and allowing remittance of share or revenues from activities such as mining to host LGUs.

“It is unfair for LGUs to wait for three years before they can get their dividends. It is also not right that their share from the exploitation of natural resources in their own places will have to detour to Manila first,” the senator said.

LGUs receive 40% of the national government’s IRA every year, computed based on collections 3 years earlier. The amount equivalent to that 40% is divided between LGUs this way: 23% for provinces, 23% for cities, 34% for municipalities, and 20% for barangays.

The 2018 IRA will be divided among 81 provinces, 144 cities, 1,489 municipalities, and 42,000 barangays. – Rappler.com

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Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.