SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S. No. 
986 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
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The enactment of Republic Act (RA.) No. 7160 otherwise known as the Local Government 
Code of 1991 was a major step in bringing administrative and organizational reforms to our local 
government units (LGUs), highlighted by decentralization and local autonomy. LGUs are now 
mandated to deliver the priority needs and basic services of its communities such as agricultural 
services, health and social welfare services, information services, waste management and 
environmental protection, maintenance of roads and highways, infrastructure facilities and tourism 
development, among others.t 
As mandated in the Code, LGUs have the power to create and broaden their own sources of 
revenue coupled with the right to a just share in national taxes in order to discharge local powers and 
effectively carry out devolved functions. 
The internal revenue allotment (IRA), is the share of the LGUs out of the national 
government's overall revenue collections. The Philippines consists of80 provinces, 143 cities, 1,491 
municipalities and 42,028 barangays. Since only a fraction of the 43,742 LGUs belong to the 1st and 
2nd income classes,2 most of these LGUs depend on their share from the IRA to perfonn their 
devolved powers and functions. Thus, majority of the LGUs have become dependent on their IRA 
and fails to exet1 effort to look for other resources to fund programs and projects. 
MOI:e than 20 years since the enactment of the Code, most local governments have yet to 
exercise genuine autonomy from the national government and still lack the capability to become 
effective partners of the national government in national progress. 
This bill seeks to promote good governance by LGUs through the amendment of Section 284 
of the Code thereby increasing LGU share in the IRA from forty percent (40%) to fifty percent 
(50%). With the increase of their share in the national taxes, local governments are expected to 
ensure efficient and effective delivery of basic services; increase local government capacities to 
generate revenues, enhance financial management and improve the performance of public economic 
entelprises; and improve their mechanisms for transparency and accountability. 
In view of the foregoing, the immediate approval of this measur,-,e~'_"""reby requested. 
MjliW 
I Eleuterio c. Dumogho. "Relevant Provisions of Local Government Code." Comparative Study Tour on Local 
Government Administration and Management. 8 May 2006. http://pcij.orglblog/wp-
docslDumogho LGC Relevant Provisions. pdf 
2 National Statistical Coordination Board. Philippine Standard Geographic Code. 
http://www.nscb.gov.pblactivestats/psgc 


SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
'13 
JUL ,'i' l' 1 :39 
SENATE 
986 
S.No. __ _ 
Introduced by Senator Ralph G. Recto 
AN ACT 
STRENGTHENING LOCAL GOVERNMENT PARTICIPATION IN NATIONAL 
DEVELOPMENT BY INCREASING 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 House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Section 284 of Republic Act No. 7160, otherwise known as the "Local 
2 
Government Code of 1991" is hereby amended to read as follows: 
3 
"Section 284. Allotment of Internal Revenue Taxes. - Local government units 
4 
shall have a share OF FIFTY PERCENT (50%) in the national internal revenue taxes 
5 
based on the collection of the third fiscal year preceding the current fiscal year. [as 
6 
follows: 
7 
(a) On the first year of the effectivity of this Code, thirty percent (30%); 
8 
(b) On the second year, thirty-five percent (35%); and 
9 
(c) On the third year and thereafter, forty percent (40%).) 
10 
"X X X." 
11 
SEC. 2. Separability Clause. If any provision of this Act is declared unconstitutional or 
12 
invalid, other parts or provision hereof not affected thereby shall continue to be in full force and 
13 
effect. 
14 
SEC. 3. Repealing Clause. All other laws, orders, decrees, issuances, circulars, rules and 
15 
regulations or parts thereof which are inconsistent with any of the provisions of this Act are 
16 
hereby repealed or modified accordingly. 
17 
SEC. 4. Effectivity Clause. This Act shall take effect fifteen (15) days from the date of 
18 
publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved,