BAGUIO, Philippines – The Supreme Court (SC) en banc announced on Wednesday, April 10, that local government units (LGUs) will get new and bigger Internal Revenue Allotment (IRA) shares starting in 2022 only.

The SC en banc affirmed its ruling from July 2018 that reinterpreted the “just share” of LGUs, so that the IRA will now be sourced from all national taxes and not just national internal revenue taxes.

It means LGUs would now be able to get a cut from franchise fees and customs duties which the government did not share with them before, University of the East law professor Lyssa Grace Pagano told Rappler in an earlier interview.

But it will not have a prospective application, and will not start right away.

“The Supreme Court clarified that the adjusted amounts of the IRAs of the LGUs is deemed effective only after the finality of the ruling of the Court. Hence, the adjusted amounts will be given to the LGUs starting with the 2022 budget cycle,” said SC Spokesman Brian Keith Hosaka in a news conference on Wednesday.

Hosaka said that the SC will give way to government to compute the new IRA.

“I believe there’s a 3-year period for which the government will have to compute and probably collect all these national taxes, so starting 2019, you have 3 years, the LGUs will start receiving the adjusted amount by 2022,” Hosaka said.

The SC denied the appeal of the government to reverse the reinterpretation of a local government’s “just share.” The budget department under then-secretary Benjamin Diokno expressed concerns that increasing IRA would lead to an “unmanageable fiscal deficit.” 

Under the Local Government Code, the LGUs are supposed to get 40% of national wealth. In the old interpretation of what constitutes “just share,” the 40% comes only from Bureau of Internal Revenue (BIR) collections.

In the 2018 General Appropriations Act, the LGUs got P522.7 billion under the IRA.

Senator Ralph Recto, who has been pushing for a bigger IRA, said that if customs duties were included, the IRA in 2018 would have been P644 billion.

An appeal was also filed asking the Court to give to the LGUs their rightful share under the new interpretation starting from 1992. The en banc also denied that appeal.

“The Court, in ruling such, reiterated the ‘operative fact’ doctrine,” said Hosaka.

The operative fact doctrine means that, according to one Supreme Court ruling, though a law was declared unconstitutional, “the effects of the unconstitutional law, prior to its declaration of nullity, may be left undisturbed as a matter of equity and fair play.” – Rappler.com