SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
Second Regular Session )
SENATE
s.B.No. 1788

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE THE SHARE OF LOCAL GOVERNMENT UNITS IN INTERNAL
REVENUE TAXES.

EXPLANATORY NOTE

Since the passage of the Republic Act 7160, otherwise known as the Local
Government Code, LGUs have complained that they do not receive their just share of
national internal revenue tax collection or the Internal Revenue Allotment (IRA).

‘A key complaint lies in the non-inclusion of the tax revenue generated from the
imposition of the value-added tax (VAT) on the goods imported into the country. The
national government argues that Section 284 only provides that the LGUs receive their
share from the collection of national intemal revenue taxes not taxes imposed on import
goods or import taxes.

However, the imported goods are already considered within the border after the
import taxes have been levied making any other taxes levied in addition as part of
national intemal revenue tax collection. It is therefore necessary to clarify this in
legislation that the collections from the imposition of the VAT on imported goods are part
of national internal revenue and consequently, part of the IRA.

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

Bm

SONNY ANGARA



SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session )

SENATE
$.B.No. 1788

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE THE SHARE OF LOCAL GOVERNMENT UNITS IN INTERNAL
REVENUE TAXES

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

SECTION 1. Section 284 of Republic Act No. 7160, otherwise known as the
Local Government Code of 1991, hereinafter referred to as the “Code”, is hereby

amended to read as follows:

“SEC. 284. Allotment of Internal Revenue Taxes. — Local government units
shall have a share in the national internal revenue taxes INCLUSIVE OF
VALUE ADDED TAX AND EXCISE TAXES ON IMPORTED GOODS based
on 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, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the national goverment 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



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Congress and the presidents of the “liga”, to make the necessary adjustments
in the internal revenue allotment of local government units but in no case shall
the allotment be less than thirty percent (30%) 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 thirty percent (30%) 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.”

SEC. 2. Repealing Clause. - All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Act are hereby
repealed or modified accordingly.

SEC. 3. Separability Clause. - If, for any reason or reasons, any part of
provision of this Act shall be held unconstitutional or invalid, other parts or provisions

hereof which not affected thereby shall continue to be in full force and effect.

SEC. 4. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,