The local government units are expected to receive bigger internal revenue allotments, representing their “just share” of all national taxes, not only the internal revenue taxes as provided for in the Local Government Code, according to a Supreme Court ruling.
In a landmark decision, the SC voted 10-3 to partially grant the petition filed by Batangas Gov. Hermilando Mandanas who questioned the process of allocating IRA funds for the LGUs.
This ruling will mean an increase in IRA funds for local government units, which include tax collections of other agencies apart from the Bureau of Internal Revenue.
“The court… interpreted the basis for the ‘just share’ of local government units under Section 6, Article X of the 1987 Constitution as being based on all national taxes and not only national internal revenue taxes, as provided in Section 284 of the Local Government Code,” the SC said in a media briefer.
Acting Chief Justice Antonio Carpio, Associate Justices Teresita Leonardo-de Castro, Presbitero Velasco Jr,, Diosdado Peralta, Lucas Bersamin, Mariano del Castillo, Estela Perlas Bernabe, Noel Tijam, Samuel Martires and Alexander Gesmundo voted in the majority.
Associate Justices Marvic Leonen, Benjamin Caguioa, and Andres Reyes Jr. dissented, while Associate Justice Francis Jardeleza did not take part in the voting.
The ruling effectively allows allocation of bigger IRA funds for LGUs under the national budget.
Section 284 of Republic Act No. 7160, the law which created the LGUs, stated that provincial, city and municipal governments must receive 40 percent of the total national internal revenue taxes collected by the central government.
On the other hand, Section 6, Article X of the Charter stated that LGUs “shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.”
The national taxes include customs tariffs and taxes collected by other state agencies such as the Bureau of Customs.
Internal revenue taxes, meanwhile, refer to taxes imposed by the Bureau of Internal Revenue such as income taxes, estate and donor’s taxes, value-added tax, excise taxes and documentary stamp taxes.
In his petition filed in January 2012, Mandanas argued that the IRA should include the revenue of the Bureau of Customs.
He specifically questioned the appropriation of P60.75 billion in funds from BoC collections to national projects.
Petitioner had argued that LGUs have been failing to perform their duties and responsibilities mandated by law, including the delivery of basic services and projects in housing, livelihood, health, and education, because of the wrongful allocation of IRA funds.