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FOURTEENTH CONGRESS OF THE 
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9 A U G I I  P 3 3 6  
REPUBLIC OF THE PHILIPPINES 
1 
Third Regular Session 
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SENATE 
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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 chdlenged 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. 
FRANCIS G. ESCUDERO 


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1- 
FOURI'EENTH CONGRESS OF THE 
) 
Q 
AUG 9'1 p336 
REPUBILIC OF n-IE PHILIPPINES 
1 
Third Regular Srsszon 
1 
SENATE 
/ 
Introduced by Senator FRANCIS G. ESCUDERO 
ANACT 
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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 
Bc il eizncfed by fhe Sen& and the House of Representatives of tlze Republic of tlze 
PMippiryilzes in Coizpss nssernbled: 
SECTION 1. Section 284 of Republic Act No. 7160 is hereby amended 
to read as follows: 
"Section 284. Allofrnenf of Internal Revenue Taxes. - 
I,ocal 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 
~'e'cent (30%); 
(12) On the second year, thirty-five percent (35%); and 
(c) On the third year and thereafter, forty percent (40%). 
Provided, 'l'liat in tlie event that the national government 
incLirs an u runanageable public sector deficit, the President 
of 
the l'hilippines 
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 
oliicers of both I-Iouses of Congress and the presidents of the 
liga, to make the necessary adjustments in the internal 
rcvenue allotment of local government units but in no case 
slinll the allotment be less than [thirty percent (30%)] 
1;OIITY I'IIZCENT 
(40%) of the collection of national 
inkriial revenue taxes of the third fiscal year preceding the 
current fiscal year: Provided, further That in the first year of 
the eIfectivity of this Code, the local government units shall, 
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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 Y E A R  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 OF 
INTERNAL 
REVENUE 
TAX 
SHALL BE 
SOLELY 
DEVOTED 
TO 
PROGRAMS 
AND 
PROJECTS 
CONCERNING JOBS AND INCOME GENERATION, 
AND/OR LIVELIHOOD. 
SEC. 2. 
LOCAL GOVERNMENT UNITS FROM THE NATIONAL 
Section 286 of Republic Act No. 7160 is hereby amended 
to read as follows: 
“Scction 286. Automatic Release of Shams. - (a) The 
share 
of 
each 
local 
government 
unit 
shall 
be 
AUTOMATICALLY 
ALLOCATED, 
released 
AND 
DIRECTLY REMITTED TO IT, without need of any further 
act-ion, directly to the provincial, city, municipal or barangay 
treasurer, 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. 
(b) Nothing in this Chapter shall be understood to diminish 
the share 01 local government units under existing laws.” 
(C) ANY DELAY IN THE FULL REMITTANCE OF THE 
SIHARE Or: EACH LOCAL GOVERNMENT UNIT AS 
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1’ROVII)EI~ FOR IN THIS ACT SHALL IN ADDITION 
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ENTITLE 
THE 
LOCAL 
GOVERNMENT 
UNIT 
PERCENT (6%) PER ANNUM APPLIED ON SAID SHARE 
OR UNREMITTED PORTION THEREOF.” 
CONCERNED To AN INTEREST AT THE RATE OF SIX 
SEC. 3. 
lrnplerneniirrg Rules and Regulations. The Secretaries of the 
Department of I%nance, 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. 
liepealing 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. 
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Approued, 
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