MANILA, Philippines – Budget Secretary Benjamin Diokno said the Department of Budget and Management (DBM) will appeal the recent Supreme Court (SC) ruling on the “just share” of local governments from national taxes.

In a media briefing on Wednesday, July 25, Diokno said it would cost the government P160 billion in 2019 to give local government units (LGUs) their “rightful” share of taxes.

“The fiscal impact of the SC decision on the IRA (internal revenue allotment) computation for 2019 alone is around P160 billion. The DBM, in coordination with the Office of the Solicitor General, will file for a motion for reconsideration within 15 days from the receipt of the decision,” the budget chief said.

“We expect that the Supreme Court en banc will take its time to meticulously thresh out the issues and reconsider its decision,” he added.

In a July 4 ruling, the SC decided on a 6-year-old petition filed by then representative and now Batangas Governor Hermilando Mandanas. The petition states that a total of P500 billion from all national taxes – not just national internal revenue taxes – was not released to local governments from 1992 to 2012.

But the SC ruling is prospective in application, meaning the national government will only give LGUs their “just” share of taxes once the decision is deemed final and executory. The LGUs will not be reimbursed for their share from previous years.

With the SC ruling, Mandanas then urged the national government to adjust the proposed 2019 national budget. But Diokno said they can still file an appeal on the decision.

The budget chief also said that President Rodrigo Duterte on Monday, July 23, already submitted the P3.757-trillion proposed 2019 national budget to Congress.

Under the proposed 2019 national budget, the IRA amounts to P575.52 billion. This can increase to as much as P732 billion should the SC decide the ruling must be implemented in 2019.

But application of the ruling next year, Diokno said, “would compromise projects,” particularly social services and the Build, Build, Build infrastructure program.

“There’s a possibility that certain line items in the budget, such as the Conditional Cash Transfer, that we can just give to them. The LGUs were supposed to do these, but the national government took over,” Diokno said.

“Nevertheless, the DBM will faithfully comply with the SC’s decision once it has become final and executory,” he added.

LGU fiscal autonomy

Under Republic Act No. 7160 or the Local Government Code of 1991, LGUs are granted a 40% share from the national government revenue collections.

The IRA for the current year is computed based on the collection of the national government 3 years earlier. This means the 2019 IRA is based on revenues collected in 2016.

Senate President Pro-Tempore Ralph Recto, who wants bigger cuts for LGUs, said raising their share of the IRA could be done through ordinary legislation, without charter change. Recto is pushing for a 50% IRA share for LGUs.

He 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 the remittance of share or revenues from activities such as mining to host LGUs.

But some experts said the suggested revenue sharing under the draft charter is “better.” Under the proposed federal setup, the LGUs would be remitting only 20% of their revenues to the national government.

Diokno said the proposed 2019 national budget does not reflect possible changes which could result from the shift to federalism, affirming Malacañang’s earlier pronouncement that charter change “will not affect the budget.”

“Whether it’s parliamentary or unitary, the budget system would remain the same. Of course, I cannot decide on the basis of ‘what if’ [for the 2019 budget]. We need to ratify it first and that will happen in 2019. Regardless, [federalism] won’t affect the budget,” Diokno said in a mix of English and Filipino. – Rappler.com