THE indicative National Tax Allotment (NTA) share of local government units (LGUs) for 2024 has been pegged at P871.38 billion, 6.23 percent higher than in 2023, the Department of Budget and Management (DBM) said on Friday, June 16, 2023, reflecting a recovery in pandemic-era tax collection and auguring well for economic and social development projects steered by local governments.
In a statement, the DBM said Secretary Amenah Pangandaman signed on June 9, 2023 Local Budget Memorandum (LBM) 87, which indicates the budgets of LGUs for the fiscal year 2024 in compliance with the codal formula provided in the Local Government Code (LGC) of 1991 and the Mandanas ruling.
Starting in the Fiscal Year (FY) 2022 General Appropriations Act, the term “Internal Revenue Allotment” (IRA) has been replaced with “National Tax Allotment” consistent with the Supreme Court decision on the Mandanas-Garcia Case that widened the base from which the LGUs’ shares in national taxes is computed.
The NTA shares of the LGUs for 2024 was based on the certifications issued by tax collecting agencies like the Bureau of Internal Revenue or BIR (P688 billion), Bureau of Customs or BOC (P183.36 billion) and other agencies certified by the Bureau of the Treasury (P19.60 million).
Based on the LBM, municipalities are entitled to an NTA share of P295.47 billion; cities, P201.22 billion; provinces, P200.42 billion; and barangays, P174.28 billion.
This follows the mandate in the 1991 LGC that provinces and cities should get a 23 percent share each in the NTA; municipalities, a 34 percent share; and barangays, a 20 percent share.
The DBM also released guidelines for the preparation of the annual budget, which includes the priorities in the use of the NTA and other local resources.
The DBM said the NTA and other local resources should first cover the cost of providing the basic services and facilities enumerated in Section 17 (b) of the 1991 LGC, particularly those devolved by the National Government, before being applied for other purposes.
“All LGUs are likewise reminded to appropriate funds in its annual budget no less than 20 percent of its NTA share for development projects, which is commonly known as the 20 percent Development Fund, and to allocate funds for programs, projects and activities as mandated by pertinent laws,” it said.
Mandanas-Garcia ruling
The Mandanas-Garcia Supreme Court (SC) ruling refers to the SC’s final decision on two separate petitions (consolidated in 2013) filed by then Batangas second district representative Hermilando I. Mandanas and other local officials, and by then Bataan second district representative Enrique T. Garcia Jr., versus Executive Secretary Paquito N. Ochoa Jr. et al., challenging the manner in which the National Government (NG) computed the IRA shares of local government units (LGUs).
Section 284 of the 1991 LGC provides that LGUs get a 40 percent share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year.
In its July 3, 2018 decision, the SC granted the Mandanas-Garcia petition, declaring as unconstitutional the phrase “internal revenue” appearing in Section 284 of the LGC, saying the determination of the just share of the LGUs should not be based solely on national internal revenue taxes but on all national taxes.
The ruling significantly increased the tax base from which the share of the LGUs is computed, as national internal revenue taxes include only taxes collected by the BIR while “national taxes” comprise all taxes and duties collected by the NG through the BIR, the BOC and other collecting agencies. The SC Ruling became final and executory on April 10, 2019.
This bigger allocation for LGUs now gives LGUs the opportunity to assume the functions that have been devolved to them under the LGC of 1991 and other laws, while diminishing the fiscal resources of the NG for its own key priorities, starting 2022, the DBM explained.
Thus, in 2022, the share of LGUs increased 37.89 percent to a record P959.04 billion from their FY 2021 IRA share of P695.51 billion.
However, in 2023, the NTA of LGUs slid to P820.27 billion from 2022 due to the government’s lower collection of tax revenues in 2020 when the Covid-19 pandemic struck.
Blessed outside NCR
Steven Yu, former president of the Mandaue Chamber of Commerce and Industry, said the increase in LGUs’ share in national taxes will particularly benefit cities and provinces outside the National Capital Region as it means more funds for local infrastructure and projects, which will bring economic progress and upliftment to the concerned LGUs.
“Local businesses will experience more vibrant and dynamic developments in their respective areas, which translates to business expansions and more jobs available for local residents. It will become a circular flow of benefits and economic cycle lifting more people out of poverty and providing a better future for the next generations,” Yu told SunStar Cebu Friday.
Because of this increased local budget, Yu said they expect more support for education, and skills upliftment and retooling of workers for a better equipped workforce that will support the growth of businesses.
They also expect constant upgrades of local infrastructure and development, translating to higher asset prices for businesses and attractive returns on investment, helping to achieve inclusive growth for all. (SUNSTAR PHILIPPINES, WITH KOC)