Lower House hikes LGU share in national taxes

Published December 1, 2021, 12:16 PM

by Ben Rosario

The House of Representatives has approved on final reading the bill increasing to 50 percent from 40 percent the local government share of national taxes.

House of Representatives plenary

With 175 affirmative and 0 negative votes, House Bill 10296 was passed on third and final reading last Monday, Nov. 29.

HB 10296 consolidated several bills authored by Deputy Speaker and Cagayan de Oro City 2nd District Rep. Rufus Rodriguez and Camarines Sur 2nd District Rep. Luis Raymond “LRay” Villafuerte, among others.

HB 10296 increases the current share of LGUS in national taxes by modifying the current formulation of the Internal Revenue Allotment (IRA). It thus, proposes to amend Republic Act 7160 or the Local Government Code of 1991.

It also provides for the inclusion of all forms of national taxes in the computation of IRA in order to ensure better services and the creation of more development projects by LGUs.

IRA will also be known under the bill as National Tax Allotment.

The bill also provides that in cases when the national government incurs an unmanageable public sector deficit, the president, upon the recommendation of the Secretaries of Finance, of Interior and Local Government and Budget and Management, will make the necessary adjustments in the NTA.

Reducing the NTA during such events may only be done upon consultation with Congress.

However, in no instance shall the president be allowed to reduce the NTA to less than 30 percent of the collection of taxes on the third fiscal year preceding the current fiscal year.

Further, the legislative measures provides that during the first year of the effectivity of the law, the LGUs, shall in addition to the 30 percent NTA shall include the cost of devolved functions for essential services.

However, LGUs will be entitled to receive the amount equivalent to the cost of devolved personal services.

In filing the bill, Rodriguez cited the Supreme Ruling on the Mandanas vs Executive Secretary that declared as unconstitutional the phrase ‘internal revenue’ appearing in Section 284 of RA 7160.

“It basically ruled that all references to ‘internal revenue’ in connection with the computation of the Internal REvenue Allotment (IRA) is unconstitutional and the ruling therefore widened the base amounts for the computation of the IRA,” explained Rodriguez.