FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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SENATE 
5.13. No.1 D_~ 
Introduced by Senator FRANCIS G. ESCUDERO 
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 government 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. 


FIFTEENTH CONGRESS OF THE 
REPUBLIC OF TI-IE PHILIPPINES 
First Regular Session 
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) 
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SENATE 
S.ltNo.104 
i' , •. ~. 
Introduced by Senator FRANCIS G. ESCUDERO 
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 Sennte and the House of Representatives of tile Philippines in 
Congress asse111bled: 
SECTION 1. Section 284 of Republic Act No. 7160 is hereby amended as to 
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read as follows: 
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"Section 284. Allotment of Internal Revenue Taxes. - Local government units 
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shall have a share in the national internal revenue taxes based on the collection of 
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the third fiscal year preceding the current fiscal year as follows: 
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(a) On the first year of the effectivity of this Code, thirty percent 
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(30%); 
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(b) On the second year, thirty-five (35%); and 
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(c) On the third year and thereafter, forty percent (40%). Provided, 
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that in the event that the national government incurs and 
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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 


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(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 
NOTWITHST ANDING, BEGINNING FISCAL YEAR TWO 
THOUSAND AND NINE (2009), THE INTERNAL REVENUE 
ALLOTMENT 
OF 
THE 
CURRENT 
YEAR 
SHALL 
BE 
EQUIV ALENT TO THE SUM OF (A) FORTY PERCENT (40'\"0) 
OF THE COLLECTION or 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 
NATIONAL 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 PRECEDING 
THIRD 
FISCAL 
YEAR, 
THE 
INTERNAL 
REVENUE 
ALLOTMENT SHALL BE EQUIVALENT TO FORTY PERCENT 
(40%) OF THE COLLECTION OF NATIONAL INTERNAL 
REVENUE TAXES OF THE THIRD FISCAL YEAR PRECEDING 
THE CURRENT FISCAL YEAR. 
AT LEAST TEN PERCENT (10%) IN THE SHARE or 
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 
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to read as follows: 
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"Section 286. Automatic Release of Shares. - (a) The share of each 
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local 
government 
unit 
shall 
be 
AUTOMATICALLY 
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ALLOCATED, released AND DIRECTLY REMITTED TO IT, 
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without the need of any further action, directly to the provincial, 
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city, municipality or barangay treasurer, as the case may be, on a 
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quarterly basis within five (5) days after the end of each quarter, 
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and which shall not be subject to any lien or holdback that may be 
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imposed by the national government for whatever purpose. 
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(b) Nothing in this Chapter shall be understood to diminish the 
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share of local government units under existing laws." 
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(C) ANY DELAY IN FULL REMITTANCE OF THE SHARE OF 
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EACH LOCAL GOVERNMENT UNIT AS PROVIDED FOR IN 
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THIS ACT SHALL IN ADDITION ENTITLE THE LOCAL 
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GOVERNMENT UNIT CONCERNED TO AN INTEREST AT 
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THE RATE OF SI~ (6%) PERCENT PER ANNUM APPLIED ON 
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SAID SHARE OR UNREMITTED PORTION THEREOF." 
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SEC 3. Implementing Rules lind Regulations. The Secretaries of the Department 
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of Finance, the Department of Budget and Management and the Department of the 
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Interior and Local Government, and the presidents of the liga shall promulgate the 
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required rules and regulations for the speedy and effective implementation of this 
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Act. 
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SEC 4. Seprlrllbility Clause. If any provision or part hereof is held invalid or 
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unconstitutional, the remainder of the law or the provision not otherwise affected 
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shall remain valid and subsisting 
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SEC 5. Repealing Clause. 
All laws, presidential decrees, executive orders, 
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proclamations and/ or administrative regulations which are inconsistent with the 
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provisions of this Act are hereby amended, modified, superseded or repealed 
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accordingly. 
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SEC 6. Effeeliz/ity Clausc. This Act shall take effect fifteen (15) days from its 
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publication in at least two newspapers of national circulation. 
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Approued, 
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