Dominguez: SC ruling on LGUs’ higher share from tax collections will “create a fiscal problem”

MANILA, Philippines — The head of the Duterte administration’s economic team on Wednesday warned that the High Court’s ruling granting local governments a share of all tax-collection agencies’ revenues beginning 2022 will “create a fiscal problem.”

Responding to questions of Senate finance committee chair Sen. Sonny Angara on the so-called “Mandanas petition,” Finance Secretary Carlos Dominguez III said the Supreme Court’s ruling last year will “drive up our [budget] deficit from 3.2 percent to 4.1 percent” of gross domestic product (GDP) if the government if will not do anything about it.

“That is not acceptable,” Dominguez said.

The High Court had ruled that local government units’ (LGUs) internal revenue allotment (IRA) shares must come from 40 percent of collections of “all” national taxes or including collections from import duties and other levies by the Bureau of Customs (BOC), and not just from national internal revenue taxes collected by the Bureau of Internal Revenue (BIR) as being done at present.

Dominguez offered three possible “solutions” to the looming fiscal disaster.

“The first solution is we pass on additional costs to local governments,” Dominguez said, citing that spending on education, health care, agriculture and infrastructure such as roads can be shouldered by LGUs instead of the national government.

The second option, Dominguez said, was for Congress to pass a law that will cut to 30 percent the share of LGUs’ IRA share from all national taxes.

For Dominguez, “the third option is for the President to declare this as  unmanageable fiscal deficit and return to the original formula, but that’s also a fight.”  /muf