Effective this year, local government units (LGUs) will receive 40 percent of all collections by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).
Acting on the petition filed some years ago by the then governors of Batangas and Bataan, the Supreme Court has ruled that the LGUs’ 40-percent share in “national internal revenue,” as provided for in the Local Government Code, is not limited to BIR collections (as claimed by the government’s past and present economic managers), but should include those of the BOC.
That annual allocation, plus the power of LGUs to impose fees and charges on certain products and services within their areas of governance, is aimed at giving them the funds needed to implement certain projects and minimize their dependence on the national government for additional funds.
As experiences in the past had shown, that funding assistance often came with political or kickback strings attached.
Based on the P5-trillion 2022 national budget recently signed into law by President Duterte, the LGUs’ share is equivalent to P959.04 billion.
Substantial as that amount may appear, it would have to be shared, based on official records, by 81 provinces, 146 cities, 1,488 municipalities and 42,046 barangays.
Distribution to LGUs has to be made in accordance with the following percentages: provinces (23 percent), cities (23 percent), municipalities (34 percent) and barangays (20 percent) using a formula that takes into account their respective population, land area and equal sharing.
Offhand, this means first-class provinces and highly-urbanized cities would share within their groups approximately P4.4 billion and P2.13 billion, respectively.
There is a tradeoff, however, in the increase in allotment. Some public services presently being undertaken by the national government will be devolved or passed on to the LGUs, including their facilities and personnel.
The executive order (EO) issued by the President to implement the new revenue allocation scheme cites the Local Government Code as reference on the services to be devolved which include, among others, health and social welfare services, infrastructure facilities for their residents, sites for police and fire stations and programs for mass housing.
The EO further states that the devolution of those services should be completed not later than the end of fiscal year 2024.
Thus, the LGUs have two years from today to review their organizational setup in relation to the services that will be devolved to them, plan the manner by which they shall take over and coordinate with the concerned national offices in the preparation of “devolution transition plans.”
In anticipation of the possible refusal of permanent employees of national offices that will be devolved to the LGUs to remain in the service, the EO states that they can transfer to other government offices or retire from the service with generous retirement or separation benefits.
The devolution of services would have a significant effect on the working relationship between the LGUs and the national government.
As the saying goes, the LGUs cannot have their cake and eat it too.
Since the money they will be getting as a share from BOC collections represents money the national government would have otherwise appropriated for some of its public service obligations, it’s only fair that the LGUs share in the burden of providing them to the extent that their constituencies are directly benefited.
Upon completion of the devolution, the LGUs would have to be prudent in the management of their internal tax allotment and avoid its use for unproductive (read: politically oriented) projects because the national government may, for strategic fiscal reasons, not be inclined to throw in good money after bad.
Once the national government gives in to a request for financial bailout by an LGU, that could create a precedent or moral hazard that other LGUs may exploit.
Whether the increase in tax allotment to the LGUs is a boon or bane would depend primarily on the competence of the officials who will manage it. INQ
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