Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Fifteenth Cong
First Regular Ses

House BILLNo, 2162

Introduced by: Honorable GEORGE P. ARNAIZ

EXPLANATORY NOTE

Republic Act No. 7160 otherwise known as the Local
Government Code of 1991 explicitly devolves gargantuan powers
and responsibilities to local government units in pursuance with the
decentralization policy enshrined in the Constitution. This law was
considered as the linchpin of the administration of President
Corazon C. Aquino. Many experts in local governance had shared
the view that for the decentralization policy to succeed, the
devolution of powers to local government units must be
accompanied by financial requirements from the national
government. This might be one of the reasons the framers of the
Local Government Code of 1991 not only enhanced the taxing
powers of local government units but also granted a forty percent
(40%) share from national internal revenue taxes.

It is worthy to emphasize however, that more than a decade
after the passage of this landmark legislation, many local
government units had been persistently clamoring for the reversion
of the devolved functions and responsibilities, specifically health
services, to the national government. Suffice it to say that the forty
percent (40%) share from national internal revenue taxes is not
sufficient enough to shoulder the cost of devolved functions and
responsibilities, particularly those local government units, which
belong to lower income classifications.

This bill therefore seeks to increase the share of local
government units in the national internal revenue taxes, including
the Value Added Tax (VAT being collected by the Bureau of Customs


from forty percent (40%) to fifty percent (50%) for a 50-50 sharing
scheme.

The approval of this important piece of legislation will serve as
concrete gesture towards ensuring the long-felt

GEORGE P. ARNAIZ
Representative
2™ District, Oriental Negros


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Fifteenth Congress
First Regular Session

HOUSE BILLNO.__2162

Introduced by: Honorable GEORGE P. ARNAIZ

AN ACT
TO INCREASE THE SHARE OF LOCAL GOVERNMENT UNITS IN
THE NATIONAL INTERNAL REVENUE TAXES, AMENDING FOR
THE PURPOSE SECTION 284 OF REPUBLIC ACT NO. 7160
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF
1991

Be it enacted by the Senate and the 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 is hereby amended
as follows:

“SECTION 284. Allotment of Internal Revenue Taxes. - Local
Government units shall have a share in the national internal
revenue taxes 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], UNTIL DECEMBER
31, 2008, forty percent (40%); [:]

(d) FROM JANUARY 1 TO DECEMBER 31, 2011, FORTY-
FIVE PERCENT (45%); AND


(e) BEGINNING JANUARY 1, 2012, AND THEREAFTER,
FIFTY PERCENT (50%):

x xX Xx x xX X

SECTION 2. The collections of the Bureau of Internal
Revenue (BIR), including the Value Added Tax (VAT) being collected
by the Bureau of Customs, shall be included in the computation of
national internal revenue taxes.

SECTION 3. The Department of Finance (DOF), in
coordination with the Budget and Management (DBM), Department
of Interior and Local Government (DILG) and the leagues of local
government units shall issue the necessary rules and regulations
within sixty (60) days after the effectivity of this Act.

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

Approved,