HITTING the jackpot, winning the lotto or receiving a huge inheritance could be both a boon and a bane. We have heard of real-life stories of instant millionaires eventually ending up poorer than when they started. Growing up in Muntinlupa in the 50s, I heard a famous story of a local policeman who won a major prize in the Philippine Charity Sweepstakes. He went on a blowout binge. It is said that in order to impress his friends (who were also policemen) he would light his cigarette with a crisp peso bill. You can imagine what happened to him later.
Starting 2022, many local government units (LGUs), especially the less developed municipalities and barangays, will become instant millionaires, if not billionaires, thanks to the implementation of the Mandanas-Garcia ruling, which defined the proper computation of the Internal Revenue Allotment (IRA) due to LGUs. Then-congressman Hermilando Mandanas (Batangas) and congressman Enrique “Tet” Garcia (Bataan) challenged before the Supreme Court the manner LGUs were being shortchanged of their just and equitable shares of the national wealth.
The IRA is an LGU share of revenues from the national government. Provinces, independent cities, component cities, municipalities, and barangays each get a separate allotment. Provinces are allocated 23 percent, cities, 23 percent, municipalities, 34 percent and barangays, 20 percent. Within and among each LGU category, the IRA is distributed according to a formula that takes into account land area, population and equal sharing. A portion of each local government unit's allotment is set aside for their Sangguiang Kabataan (SK) or youth council.
Typically for municipalities, the IRA accounts for 90 percent of total revenues. Since cities have more sources of local revenues, their IRA ranges from 50 to 70 percent of their total budget.
Section 284 of RA No. 7160 or the Local Government Code of 1991 provides that LGUs shall have a 40-percent share from the national internal revenue taxes on collection of the third (3rd) fiscal year preceding the current fiscal year. Before the Mandanas-Garcia ruling, the IRA share of LGUs were limited to internal revenue, particularly cited in the local government code.
The Supreme Court agreed with petitioners Mandanas and Garcia that henceforth the computation should be based on “ALL collections of national taxes including, among others, those that are collected by the Bureau of Customs (BOC), except those that are accruing to special-purpose funds and special allotments for the utilization and development of the national wealth.”
These additional taxes include 1.) National Internal Revenue taxes, inclusive of value-added tax (VAT), excise taxes, doc stamps collected by the Bureau of Internal Revenue and BOC 2.) Tariffs and customs duties collected by the BOC; 3.) Share of VAT and other taxes collected in the Autonomous Region in Muslim Mindanao 4.) 60 percent of the national taxes collected from the exploitation and development of the national wealth 5.) 85 percent of the excise taxes collected from locally manufactured Virginia and other tobacco products; 6.) 5 percent of the franchise taxes in favor of the national government paid by franchise holders (Manila Jockey Club, Inc. and Philippine Racing Club, Inc.) This is equivalent to a P234.39-billion increase to the funds that will be redistributed to all LGUs in the country on top of the P848.44 billion based on the previous computation.
The World Bank sees the implementation of the ruling both as an opportunity and a threat.
“We look at the implementation of the Mandanas-(Garcia) Ruling not just as a transfer of resources but an opportunity to strengthen decentralization and improve social service delivery in the Philippines,” said Ndiame Diop, World Bank Country Director from Brunei, Malaysia, Philippines and Thailand. “If this ruling leads to better coordination in planning and implementation across levels of government, taking into account the capacity and needs of LGUs, it could improve the lives of people and communities especially those that are far from the country’s economic growth centers.”
At the same time, however, Mr. Diop has taken note that some local governments have started to raise concerns regarding their financial and technical capacity to absorb re-devolved mandates while maintaining full autonomy in planning and managing the additional resources from the ruling.
“Underspending by local governments may worsen, as many local governments do not have the capacity to absorb a significant increase in revenues,” Mr. Diop said.
The new LGU billionaires must be taught how to spend. But unlike the Muntinlupa policeman of my youth, they must be taught to spend wisely and judiciously.
House-to-house vaccination in Muntinlupa City
I glad to hear from Muntinlupa OIC City Health Officer Juancho Bunyi, that effective June 1st, the city health office has organized home vaccination teams now going house-to-house in the depressed communities to minister to the needs of bed-ridden residents. Barangay Sucat Chairman Rafael Sevilla is also raffling off grocery baskets to lucky vaccinees to speed up vaccination in his area. I am supposed to get my second shot of AstraZeneca on June 29. My earlier schedule on June 12 was moved back by 17 days under new guidelines by the Department of Health (DOH). DOH supposedly advised that AstraZeneca requires a longer interval for better results.
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