LGU revenues plummet

Amid a COVID-19-induced recession, local government units (LGUs) could collect only P171.9 billion in revenues this year out of the original P301.7-billion goal for 2020, the Development Budget Coordination Committee (DBCC) said.

“The fiscal stress to LGUs is expected to be very substantial as they are at the front line of the pandemic’s response and mitigation efforts. Many LGUs are expected to experience a decline in their revenues brought about by economic uncertainties, while businesses are facing unprecedented difficulties. Such situations would inevitably undermine the revenue generation capacity of LGUs and put them in a precarious fiscal position in the immediate and medium-term horizon to respond adequately to their urgent expenditure requirements, particularly for health services and subsistence relief for the marginalized and vulnerable sectors,” the DBCC said in its Fiscal Risks Statement 2021 report.

At the height of the COVID-19 lockdown, LGUs were able to collect only 41 percent of the target during the first quarter when local taxes accrue and become due for collection, especially during the business registration renewal period, the DBCC noted.

The government had extended the deadline to pay the local taxes and fees originally due in the first quarter to a uniform date of June 25, in consideration of the restrictions on the movement of people during the enhanced community quarantine imposed in Luzon and other parts of the country with high numbers of COVID-19 infections from mid-March to May.

“It is estimated that around 39 percent of the original annual collection targets of the LGUs have been deferred for collection by the third to fourth quarters of fiscal year 2020, which translates to around 20-percent deferred collections if based on the adjusted targets,” the DBCC said.

Local governments that are greatly affected by the COVID-19 crisis are expected to extend further the payment deadlines, grant additional tax relief measures or eventually condone certain taxes due to economic losses, the DBCC added.

As such, the DBCC projected LGUs to miss 44 percent of their revenue targets this year—“in nominal terms, the adjusted total local revenues collectible for fiscal year 2020 would be reduced to P171.85 billion out of the original P307.08-billion target.”

For 2021, the DBCC said that the impact of COVID-19 pandemic was expected to be more pronounced on local revenue collections as a result of financial losses in fiscal year 2020, on which local tax assessments would be based, and the lower capacity to pay of taxpayers due to job losses, lower production of goods and services and the overall contraction of the economy.

The DBCC expects LGUs’ revenue collections to further slide to P144.89 billion next year.

Anticipating improvements in the economy, local revenue collection would still grow conservatively with a projected increase of 10-percent annually and reach P159.38 billion to P192.85 billion from fiscal year 2022 to fiscal year 2024, it added. INQ