DOF takes LGUs to task for failing to generate income

MANILA, Philippines–More than two decades after local government units (LGU) were allowed to generate their own revenues, most provinces still rely heavily on the coffers of the national government in funding their respective projects.

According to the Department of Finance (DOF), the LGUs’ failure to generate revenues has put a strain on the national government’s resources that are already stretched.

And because LGUs continue to rely on the national government’s internal revenue allotments (IRA)—computed based on the size of a province’s population and land area—local governments’ spending is limited.

“To be effective partners in nation-building, LGUs are given powers by the Local Government Code to generate income to fund basic social services,” the DOF’s latest ‘Tax Watch’ ad said. “However, after more than 20 years of fiscal decentralization, locally sourced income still shares very little to the annual regular income of provinces.”

Based on 2012 data, 70 percent of the country’s 80 provinces generated revenues that were less than 15 percent of what they spent that year. The LGUs sourced the rest of the funds from the IRAs.

The worst performer was the province of Sulu. Its local income made up just a tenth of a percent of its total regular income for 2012. The best performer was Aklan, with 45.3 percent of its income in 2012 coming from local taxes and other forms of revenue.

The DOF issues Tax Watch ads to shine a spotlight on the LGUs’ fiscal responsibility. In the past month, the ads detailed the failure of most LGUs to make enough money to fund their projects.