Republic of the Whilippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILLNO, 4697

Introduced by HONORABLE LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

The Internal Revenue Allotment (IRA), in the enactment of the Local
Government Code (LGC) of 1991, was designed to be an integral part of local
governance and local government; Providing local governments with resources to
fund the implementation of their respective programs and projects is considered an
important aspect of strengthening local autonomy.

From being a mere legislative grant, we find in Section 6, Article X of the
1987 Constitution a provision on the IRA: “Local government units shall have a just
share, as determined by law, in the national taxes which shall be automatically
released to them.”

The above-cited provision indicates that the IRA is both a matter of principle
and policy; it is a major component of local government and governance, and even
of national governance. Moreover, the IRA should be undersrtood with the entirety of
Article X on local government, which represents an expansion of local autonomy
provided earlier under the 1973 Constitution.

The Supreme Court in Ganzon v. Court of Appeals explained local autonomy
as follows:

“As the Constitution itself declares, local autonomy — means a
more responsive and accountable local government structure instituted
through a system of decentralization. The Constitution. . . . liberate[s] the
local governments from the imperialism of Manila. Autonomy, however, is
not meant to end the relation of partnership and interdependence


between the central administration and local government units, or
otherwise, to usher in a regime of federalism.”

Indeed, the underlying principles of Article X are local autonomy, including
both fiscal autonomy and administrative autonomy, and decentralization

However, the IRA or share of LGUs has remained at forty percent (40%) of
the national taxes for over twenty years. Limited funding for the operational costs
devolved to the LGUs proved to be a formidable challenge to the notion of devolution
and self-reliance. As a result, programs that should serve the people have not been
properly funded

Achieving local autonomy by increasing the IRA prepares the way to
achieving President Duterte’s vision of decentralization by federalism. There is not a
more appropriate time than now to revisit ‘just share” as worded in the Constitution
and redetermine the standard for compliance with this mandate to attain the
progressive vision of the IRA of making each unit self-sustaining. Revisiting the
LGU's just share in the national taxes is being faithful to the constitutionally
enshrined principles of decentralization and local administrative and fiscal autonomy
that are the very foundations of the LGC.

This measure aims to increase the current share of the LGUs in national taxes
and modify the current formulation of the IRA so that it will include all types of
national taxes. These modifications seek to truly empower and challenge the LGUs
to use the additional allocation in providing better services, creating more
development projects and implementing different programs to further the interests of
their constituents. Indeed, the autonomy and development of local governments is a
most important aspect of regional and national development.

In particular, this bill seeks to amend sections 284 and 286 of the LGC of
1991 to include the following features:

a. Increase the current IRA of LGUs from 40% to 60%;
b. Include all forms of national taxes in the IRA computation; and
c. Provide an automatic retention provision of the IRA.

In view of the foregoing, the approval of this bill is earnestly sought.

-s
LUIS RAYMUND *LRAY” F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO._469°7_

Introduced by HONORABLE LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

AN ACT INTENSIFYING LOCAL GOVERNMENT PARTICIPATION IN NATIONAL.
DEVELOPMENT BY INCREASING THE INTERNAL REVENUE ALLOTMENT OF
LOCAL GOVERNMENT UNITS FROM 40% TO 60% OF ALL NATIONAL TAXES
COLLECTED BY THE BUREAU OF INTERNAL REVENUE AND OTHER
GOVERNMENT AGENCIES AND AUTHORIZING THE LGUS TO
AUTOMATICALLY RETENTAIN THEIR IRA , AMENDING THE SECTION 284 AND.
286 OF THE LOCAL GOVERNMENT CODE OF 1991

Be it enacted by the Senate and the House of Representatives of the
Republic of the Philippines in Congress assembled:

SECTION 1. Section 284 of Republic Act No. 7160 is hereby amended to
read as follows

“Section 284.- Allotment of Internal Revenue Taxes- Local Government Units shall
have a share of 60% in the national internal revenue taxes based in 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, fifty percent (50%):
b. On the second year, fifty-five percent (55%)
c. On the third year and thereafter, sixty percent (60%)"

Provided, That in the event that the national government incurs an unmanageable
public sector deficit, the President of the Philippines is hereby authorized, upon the
recommendation of Secretary of Finance, Secretary of Interior and Local
Government and Secretary of Budget and Management, and subject to consultation
with the presiding officers’ of both Houses of Congress and the Presidents of the


"liga", to make the necessary adjustments in the shares of local government units in
the proceeds of national taxes but in no case shall the allotment be less than 40
percent (40%) of the collection of national internal revenue taxes of the third fiscal
year preceding the current fiscal year. [Provided, further, That in the first year of the
effectivity of this Code, the local government units shall, in addition to the forty
percent (40%) internal revenue allotment which shall include the cost of devolved
functions for essential public services, be entitled to receive the amount equivalent to
the cost of devolved personal services.)

National Taxes, in this act, pertains to all kinds of national taxes including, but
not limited to, taxes, tariffs, dues and fees collected by the Bureau of Internal
Revenue, Bureau of Customs, Philippine Ports Authority, Department of
Environment and Natural Resources, Department of Foreign Affairs, Department of
Transportation, Department of Trade and Industry and such other government
agencies deputized by the Bureau of Internal Revenue to Collect National Taxes.

SECTION 2. Section 286 of the Republic Act 7160 is likewise amended to
read as follows:

“Section 286 Automatic Retention of Shares - (a) The share of each local
government unit shall be AUTOMATICALLY released and RETAINED by it, without
need of any further action, directly to provincial, city, municipal or barangay, as the
case may be, on a quarterly basis within five (5) days after the end of each quarter,
and which shall not be subject to any lien or holdback that may be imposed by the
National Government for whatever purpose.

SEC. 3. All laws, issuances, rules and regulations inconsistent with the
provisions this Act is hereby amended, repealed or modified accordingly.

SEC. 4, This Act shall take effect fifteen (15) days after its publication in at
least two (2) newspapers of national circulation