Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

THIRTEENTH CONGRESS
First Regular Session

108
HNO,

INTRODUCED BY HONORABLE JUAN EDGARDO “SONNY” M. ANGARA

EXPLANATORY NOTE

The primary objective for distributing Internal Revenue Allotments (IRA) to local
government units (LGU’s) is to lessen fiscal disparities among urban and rural communities. It
is widely known fact that urban communities are better off than rural communities because they
have bigger tax bases than the former. It is hoped that through the IRA, this disparity among the
“haves” and “have-nots” could be lessen, if not completely eliminated. “This is referred to as the
“equity objective” of the Internal Revenue Allotment.

Unfortunately, many studies have long pointed out that the IRA distribution formula
under RA No. 7160 (The Local Government Code) does not in actuality provide this equity
objective. Rather the Matthean principle predominates where the rich gets richer and the poor
poorer. In effect, many LGUs, whose areas are already well-developed in socio-economic terms,
get bigger IRA shares than those which need them the most. In short, LGUs beset by massive
Poverty are, in turn, plunged further by the existing policies perpetuated by the vicious system of
having weak tax base and high density of population.

This proposed measure, therefore, seeks to correct this inequity by introducing poverty-
sensitive factors in the IRA formula in lieu of population, land area and equal sharing. ‘These are
population density, poverty incidence and the income class of LGUs. Studies show that these
factors, if used to calculate for IRA shares of LGUs, would favor poorer provinces, cities,
municipalities and barangays.

This bill, further, seeks to provide safeguard against the full cost of devolution by
institutionalizing the so-called guaranteed fund which shall be sourced from the forty percent
(40%) shares of LGUs.

This bill, finally, allows LGUs to automatically retain their IRA shares thereby avoiding
additional costly expense on the part of LGUs to claim whatever is already meagerly allocated
for them.

For this reason, immediate approval of this bill is eamestly sought.

Lee Gu joa

JUAN EDGARDO M. ANGARA
Lone District, Province of Aurora


THIRTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
0
w.B.No,_108

Introduced by HON. JUAN EDGARDO “SONNY” M. ANGARA

AN ACT
AMENDING SECTIONS 285 AND 286 OF REPUBLIC ACT NO. 7160, OTHERWISE
KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991, PROVIDING FOR AN
EQUITABLE DISTRIBUTION OF THE INTERNAL REVENUE ALLOTMENT (IRA)
TO LOCAL GOVERNMENT UNITS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Sections 285 and 286 of Republic Act No. 7160 are hereby amended to
read as follow:

“SECTION 285. Allocation to Local Government Units. - The share of local
government units in the internal revenue allotment shall be allocated [in the following
manner:] BEGINNING IN 1996 AFTER DEDUCTING THERE FROM THE COSTS
OF DEVOLUTION, OTHERWISE KNOWN AS GUARANTEED FUND. THE
GUARANTEED FUND SHALL BE DISTRIBUTED AND REMITTED DIRECTLY
TO THE LOCAL GOVERNMENT UNITS CONCERNED AND THE NET OR
BALANCE OF THE INTERNAL REVENUE ALLOTMENT SHALL BE
ALLOCATED IN THE FOLLOWING MANNER:

(a) Provinces - Twenty-three percent (23%);

(b) Cities - Twenty-three percent (23%);

(c) Municipalities - [Thirty-four percent (34%)] THIRTY-PERCENT (30%); and
(@ Barangays - Twenty percent (20%):

Provided, however, That the share of each province, city and municipality shall be
determined on the basis of the following formula:

(a) Population DENSITY - Fifty percent (50%); AND
(b) [Land Area - Twenty-five percent (25%); and]

POVERTY INCIDENCE - FIFTY PERCENT (50%);
[© Equal Sharing - Twenty-five percent (25%):]”

“Provided, further, XXX”

“Provided, finally, That the financial requirements of barangays created by the
local government units after the effectivity of this Code shall be the responsibility of the
Jocal government units concerned.”

“SECTION 286, Automatic Retention of Shares. - (a) The share of each local
government unit shall be released AUTOMATICALLY RETAINED BY IT, without need of any
farther action, directly to 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 of local government
under existing laws.”

SEC..2. All laws, executive orders, rules, regulations and other issuances inconsistent
with this Act are hereby repeated or modified accordingly.

SEC. 3. This Act shall take effect upon its approval.

Approved,