Local Government Units and National Taxes

Shares of Local Government Units in National Taxes

• This presentation covers the allocation of national tax proceeds to local government units (LGUs).

Allotment of Internal Revenue

• LGUs receive a share of national internal revenue taxes.
• This share is based on the previous fiscal year's collections.
• The percentage share varies by the year after the effective date of the allocation.
  • 30% in the first year.
  • 35% in the second year.
  • 40% in the third year and beyond.
• The Mandanas-Garcia Supreme Court case declared the previous term "internal revenue" unconstitutional.
• The national government must include all national tax collections in calculating the fair share of LGUs according to the ratio in the Local Government Code.
• Allocations begin in Fiscal Year 2022.

Allocation to LGUs

• The allocation of internal revenue allotment (IRA) follows Section 285 of the Local Government Code of 1991.
• Provinces, cities, municipalities, and barangays receive allocations based on different formulas and percentages.
  • Provinces receive 20%.
  • Cities and municipalities receive 45% each.
  • Barangays receive 35%.
• Barangays with a population over 100 people receive at least P80,000 annually.
• The remaining allocation proceeds are based on a formula considering population and land area.

Automatic Release of Shares

• Funds are automatically released to provincial, city, municipal or barangay treasurers quarterly.
• Funds are released immediately following the end of each quarter.
• The national government cannot impose any lien or holdback on these funds.

Local Development Projects

• Local government units must dedicate at least 20% of their IRA to development projects.
• Copies of the development plans must be submitted to the Department of Interior and Local Government.

Rules and Regulations

• The Secretary of Finance will develop necessary rules and regulations for a simplified, efficient disbursement method, via consultation with the Secretary of Budget and Management.

Share in the Proceeds from Development and Utilization of the National Wealth

• LGUs have an equitable share in national wealth-related proceeds in their respective areas.
• Proceeds are shared with the people through direct benefits.

Amount of Share of LGUs

• LGUs receive 40% of the national government's gross collections from mining taxes, royalties, forestry, and fishery charges, other taxes, surcharges, interests, or fines.
• This is in addition to their internal revenue allotment.

Share of LGUs from GOCCs

• LGUs have a share of either 1% of gross sales/receipts or 40% of various charges (mining taxes, etc,).
• The share selected is whichever produces the highest share for the LGU.

Allocation Shares

• Shares are distributed based on the location of natural resources.
• Shares are based on formulas considering percentages for provinces, component cities/municipalities, and barangays, but can be altered according to formulas based on population and land area in cases where natural resources are located in more than one geographic area or in urbanized component cities.

Remittance of the Share of LGUs

• LGUs' share of national wealth proceeds from the utilization and development of national wealth is remitted per Section 286.
• Government agencies/GOCCs will directly allocate these funds to the relevant provincial, city, municipal or barangay treasurer within five days following the end of the quarter.

Development Projects

• Local government units should allocate 80% of proceeds from development and utilization of hydrothermal, geothermal, or other energy sources to reduce electricity costs in the local area.
• Funds are appropriated by the LGUs per sanggunian.

This quiz covers the allocation of national tax proceeds to local government units (LGUs) in relation to internal revenue. It discusses the percentage shares LGUs receive based on previous fiscal year collections and the implications of the Mandanas-Garcia Supreme Court case. You will learn about the historical context and legal frameworks governing LGU allocations.