Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. _124?

Introduced by HONORABLE LUIS RAYMUND 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 RA ‘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 understood with the entirety of
Article X on local government, which represents an expansion of local autonomy
provided earlier under the 1 973 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
predetermine 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 LGLIs 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 mast 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% to60%
b. Include all forms of national taxes in the IRA computation, and
¢. Provide an automatic retention provision of the IRA,

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

4
LUIS, MOND F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

1247
HOUSE BILL NO. ee

Introduced by HONORABLE LUIS RAYMUND 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 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 266 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 Cadet 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 af the third fiscal year
preceding the current fiscal year. [Provided, further, that in the first year of the
effectivity of this Cade 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 is 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.

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provisions this Act is hereby amended, repealed or modified accordingly.

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

Apptoved.