Local gov’ts brace for IRA cutbacks in 2012-13 | Inquirer Business

Local gov’ts brace for IRA cutbacks in 2012-13

‘Creation of new provinces to distort sharing’
By: - Reporter / @daxinq
/ 09:20 PM August 29, 2011

The Internal Revenue Allotment of local government units (LGUs)—which is expected to decline over the next two years owing to lower national revenues during the 2009-2010 period—could suffer larger cutbacks should there be an increase in the number of provinces in the country, according to local officials.

In a resolution issued at the end of a recent caucus in Mindanao, the League of Vice Governors of the Philippines (LVGP) said that aside from “distorting” the IRA sharing formula, any LGU fragmentation would “aggravate further the already substandard quality of services” delivered by LGUs and would force the government to spend more to create and maintain a new province.


The LGVP resolution was backed by the results of a joint study of the Local Government Development Foundation (Logodef) and the Berlin-based Konrad Adenauer Stiftung Foundation (KAS).

In Resolution No. 03-2011, the LVGP sought the support of all Sangguniang Panlalawigan, or provincial legislative boards, of the country’s 80 provinces by asking them to pass their own resolutions opposing the further partition of provinces.


“This resolution will be furnished to all the Sangguniang Panlalawigan of all the provinces in the Philippines seeking their support through the passage of a resolution supporting the stand of the LVGP [against the further partition of provinces],” added the vice governors in their resolution adopted during a meeting last week in Dapitan City, Zamboanga del Norte.

“LVGP opines that the proposal to create [new provinces] at this time is untimely since the internal revenue shares of the local government units for 2012 and 2013 will certainly decrease due to lower collection of internal revenue for 2009 and 2010,” the resolution said. “The League further opines that the number of provinces in 2012 will be increased from 80 to 81, in turn causing the diminution of the IRA sharing among the provinces.”

“The reduction of our IRA shares for 2012 and 2013 and the further reduction by P2,367,732.82 from equal sharing would greatly affect the delivery of basic services in our respective LGUs,” it added.

The Local Government Code provides that all provinces, cities, municipalities and barangays (villages) are to get 40 percent of the total national internal revenue tax collections under an equal sharing formula computed on the basis of every LGU’s population and land area.

The LGUs’ IRA allocation for a given year is computed based on the government’s total revenue earnings from the third fiscal year preceding the current one. LGUs are to get lower IRA allocations in 2012 and 2013 because of the national government’s lower tax collections in 2009 and 2010.

The VGLP resolution made an “urgent request” to the Senate to “set aside” bills promoting the partition of provinces that are “not in accordance” with the Local Government Code.

The vice governors also said that their opposition to the further partition of provinces is “consistent” with the Logodef-KAS study, which states that “fragmentation of LGUs hinders stabilization of local governance, distorts the IRA formula and negates the concept of fiscal decentralization, aggravates further the already substandard quality of services to the people and burdens the economy because of the high cost of creating new LGUs and the financial requirements to maintain an effective one.”

The resolution was signed by LVGP national president Cagayan Vice Governor Leonides Fausto, and its secretary general, Masbate Vice Gov. Vicente Homer Revil.

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TAGS: internal revenue allotment, local governments, Philippines, provinces
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