Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

15™ CONGRESS
First Regular Session

HOUSE BILLNO.__1752

Introduced by REP. SALVADOR H. ESCUDERO III

EXPLANATORY NOTE

When the government embarked on a devolution process in 1991, local government
units have been empowered with significant authorities and responsibilities.

‘The law provides for local government units to get their rightful share of the taxes and
other revenues the National Government collects or generates, thus ensuring provinces, cities,
towns and barangays a specific amount to fund their operations.

Delivery of services such as health, social welfare and agriculture has been entrusted
to the annual internal revenue allotment.

But while the power and authority is devolved to the local level, limited funding for
its operational cost has challenged the very agenda of devolution. Thus, programs that should
directly benefit the people have been denied.

This proposal is but consistent with the constitutional prescription on the just share of
local government units in the national taxes.

The just share of local govemment units, which is to be determined by law, is
redefined in this bill. Such redefinition includes not only an increase in share but also the
imposition of legislative measures to ensure that this share is received by local government
units automatically, without hindrance and on time to deliver quality services

It is in this foregoing light, among others, that this representation seeks the support of
Congress for the immediate passage of this bill

WEE, a
SALV. RH. ESCUDERO Il

Representative
”" District, Sorsogon


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

15™ CONGRESS
First Regular Session

HOUSE BILL NO. 1752

Introduced by REP. SALVADOR H. ESCUDERO III

AN ACT
REDEFINING THE JUST SHARE OF LOCAL GOVERNMENT UNITS IN THE
INTERNAL REVENUE TAXES AMENDING FOR THAT PURPOSE SECTIONS 284
AND 286 OF REPUBLIC ACT NO. 7160, AS AMENDED, 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 is hereby amended as to read as

follows:

“Section 284. Allotment of Intemal 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

(@) On the first year of the effectivity of this Code, thirty percent (30%):
(b) On the second year, thirty-five (35%); and

(©) On the third year and thereafter, forty percent (40%). Provided, that in the
event that the national government incurs and 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 internal
revenue allotment of local government units but in no case shall the
allotment be less than [thirty percent (30%)] FORTY 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 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.

THE PROVISIONS IN THE FOREGOING PARAGRAPH
NOTWITHSTANDING, BEGINNING FISCAL YEAR TWO
THOUSAND AND NINE (2009), THE INTERNAL REVENUE
ALLOTMENT OF THE CURRENT YEAR SHALL BE
EQUIVALENT TO THE SUM OF (A) FORTY PERCENT (40%) OF
THE COLLECTION OF NATIONAL INTERNAL REVENUE
TAXES OF THE THIRD FISCAL YEAR PRECEDING THE
CURRENT FISCAL YEAR AND (2) FIFTY PERCENT (50%) OF
THE DIFFERENCE BETWEEN THE COLLECTIONS OF
TIONAL INTERNAL REVENUE TAXES OF THE THIRD
FISCAL YEAR AND OF THE SECOND FISCAL YEAR
PRECEDING THE CURRENT FISCAL YEAR. WHERE THE
COLLECTION IN THE PRECEDING SECOND FISCAL YEAR IS
LOWER THAN THE COLLECTION IN THE %) OF THE
COLLECTION OF NATIONAL INTERNAL REVENUE
PRECEDING THIRD FISCAL YEAR, THE INTERNAL REVENUE
ALLOTMENT SHALL BE EQUIVALENT TO FORTY PERCENT
(40TAXES OF THE THIRD FISCAL YEAR PRECEDING THE
CURRENT FISCAL YEAR.

AT LEAST TEN PERCENT (10%) IN THE SHARE OF
INTERNAL REVENUE TAX SHALL BE SOLELY DEVOTED TO
PROGRAMS AND PROJECTS CONCERNING JOBS AND
INCOME GENERATION, AND/OR LIVELIHOOD.

SEC. 2. Section 286 of Republic Act No. 7160 is hereby amended to read as

follows

“Section 286. Automatic Release of Shares. — (a) The share of each
local government unit shall be AUTOMATICALLY ALLOCATED,


released AND DIRECTLY REMITTED TO IT, without the need of any
further action, directly to the provincial, city, municipality or barangay
treasurer, as the case may be, on @ 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 govemment for whatever

purpose,

(b) Nothing in this Chapter shall be understood to diminish the share of

local government units under existing laws.”

(C) ANY DELAY IN FULL REMITTANCE OF THE SHARE OF
EACH LOCAL GOVERNMENT UNIT AS PROVIDED FOR IN
THIS ACT SHALL IN ADDITION ENTITLE THE LOCAL
GOVERNMENT UNIT CONCERNED TO AN INTEREST AT THE
RATE OF SIC (6%) PERCENT PER ANNUM APPLIED ON SAID
SHARE OR UNREMITTED PORTION THEREOF.”

SEC. 3. Implementing Rules and Regulations. The Secretaries of the Department of
Finance, the Department of Budget and Management and the Department of the Interior and
Local Government, and the presidents of the liga shall promulgate the required rules and
regulations for the speedy and effective implementation of this Act.

SEC. 4. Separability Clause. If any provision or part hereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain
valid and subsisting

SEC. 5. Repealing Clause. All laws, presidential decrees, executive orders,
proclamations and/or administrative regulations which are inconsistent with the provisions of
this Act are hereby amended, modified, superseded or repealed accordingly.

SEC. 6. Effectivity Clause. This Act shall take effect fifteen (15) days from its
publication in at least two newspapers of national circulation

Approved,