What are the new sources of local governments’ IRA share?

MANILA, Philippines – Local government units (LGUs) will get bigger Internal Revenue Allotment (IRA) starting 2022, pursuant to a Supreme Court (SC) ruling that redefined the “just share” of LGUs in national income to be derived from a wider base.

The SC upheld its July 2018 ruling that amended 3 provisions in the Local Government Code that used to define the “just share” of an LGU as being sourced from “national internal revenue taxes.” The phrase “internal revenue taxes” is now deleted from the provisions and replaced with “national taxes.”

It means that, starting 2022, the IRA share of LGUs – which remains at 40% – will be computed based on a wider range of sources, and therefore bigger than its current share based on the internal revenue collection alone. 

“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,” SC Spokesman Brian Keith Hosaka explained on Thursday, April 11. 

The SC denied the appeal of the winning petitioners to make the decision retroactive, saying the operative fact doctrine applies. It means that there should be no effect to the past once a law is declared unconstitutional. The petitioners, applying the new interpretation, wanted to charge the government all arrears that it was not given since 1992. 


What are the additional sources of IRA share for local governments?

The Supreme Court ruling says “collections of national taxes for inclusion in the base of the just share the Local Government Units shall include, but shall not be limited to, the following”:

Other declarations

The SC declared as valid the laws that say 25% of franchise taxes collected the Manila Jockey Club and Philippine Racing Club shall be distributed as follows: 5% to the national government, 5% to the host municipality or city, 7% to the Philippine Charity Sweepstakes Office, and 6% to the Anti-Tuberculosis Society, and 2% to the White Cross.

Except for the expansion to include all national taxes, the past setup of the IRA remains the same.

The SC also ordered the Department of Finance, Department of Budget and Management, Bureau of Internal Revenue, Bureau of Customs, and the National Treasury “to include all collections of national taxes in the computation of the base of the just share of the Local Government Units.” – Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.