Press Release
January 20, 2018

No need for Cha-Cha when simple bill can raise local gov't funds by P283 B--Recto

More public funds can be sent to the grassroots without tinkering with the Constitution, Senate President Pro Tempore Ralph Recto said today, demolishing an argument that only through a Charter revision can local governments have a bigger share of tax collections.

Recto said if the intention is to raise the share of provinces, cities, towns and barangays from government income, then such can be done through ordinary legislation.

By Recto's count, local governments stand to lose P121.5 billion this year due to the "longstanding faulty interpretation of the rule on how the Internal Revenue Allotment (IRA) shall be computed."

Republic Act No. 7160, or the Local Government Code of 1991, grants LGUs (Local Government Units) a 40-percent share from the national government's internal revenue collection.

But under the current system, the 40 percent is taken from Bureau of Internal Revenue collections, "but does not include excise and VAT collections of the Bureau of Customs."

"This is wrong because VAT and excise taxes are classified as internal revenue, and the BOC is a mere collecting agent of the BIR, so in computing the share of LGUs in determining their IRA, BOC's VAT and excise tax collections must be factored in," Recto said.

"'Yung taga-barrio, pag bumili ng gasolina para sa traktora nya, eh di nagbayad sya ng excise tax. Kung ganoon, bakit hindi mo ituturing na internal revenue 'yun?" Recto said.

"At dahil hindi nga kasama ang BOC, ang IRA ng mga lokal na pamahalaan ngayong 2018 ay P522.7 billion lamang, pero ito dapat ay P644 billion," Recto explained.

Recto believes that this injustice to LGUs can be rectified through an Executive Order by President Duterte, "as I am sure that this is an advocacy he believes in, being a former mayor himself."

But Recto believes a law passed by Congress is needed to raise the LGUs' IRA share to 50 percent, to usher in a "fair 50-50, hating kapatid sharing arrangement" on taxes paid by the people.

Recto has filed three "equal IRA share" bills, which contain other reform provisions like basing the IRA on internal revenues collected two years before, instead of the present three, and allowing the direct remittance of national wealth income, like share from mining, to host LGUs.

"It is unfair for LGUs to wait for three years before they can get their dividends. It is also not right that their share from the exploitation of natural resources in their own places will have to detour to Manila first," Recto said.

Recto said if "the 50 percent IRA + BOC VAT and excise collections formula" were applied this year, the IRA would have been P804.9 billion, or P282.2 billion bigger than the present P522.7 billion.

"Iyang ganyang panukala na marami sa Senado at sa House, pwede pabilisin ang pag-apruba. Kaysa nagtatalo-talo tayo sa Charter Change, magkaisa muna tayo sa IRA change. Sa isyung 'yan, walang debate."

Recto said the LGU share can be pegged at 60 percent. "Pwede nga 60 percent, in favor of local governments, payag ako diyan."

He said the IRA, which is the mechanism which plows back national tax collections to local governments, is in need of improvement.

IRA is distributed as follows: 23 percent for provinces, 23 percent for cities, 34 percent for municipalities, and 20 percent for the barangays.

News Latest News Feed