Local government share of national taxes to rise by P36 billion in 2018

LOCAL government units (LGUs) will receive almost P36 billion more as their share of national taxes next year, the Department of Budget and Management (DBM) said in a memorandum dated June 2.

In Local Budget Memorandum no. 75 signed by Budget Secretary Benjamin E. Diokno, the Internal Revenue Allotment (IRA) for LGUs was capped at P522.75 billion, up 7.37% from 2017.

IRAs are the automatically-earmarked 40% share of national taxes collected three years prior to the planned fiscal year, as mandated by Republic Act (RA) No. 7160, or the Local Government Code of 1991. The 40% calculation under the law is P516.27 billion.

The additional P6.48-billion beyond the 40% total reflects the cost of devolved functions and city-funded hospitals as of Dec. 31, 1992.

Of the total IRA, 82 provinces will receive P121.59 billion next year, while 145 municipalities will take P119.77 billion.

1,478 municipalities meanwhile will get P178.13 billion, with P103.25 billion set aside for 41,889 barangays.

Each LGU’s share is determined by its population (50%) and land area (25%), as well as an amount determined by an equal-sharing formula (25%).

Calabarzon will get the largest share of any region at P59.67 billion, followed by Central Luzon at P50.04 billion. The Cordillera Administrative Region and the Caraga Administrative Region however will receive the least at P15.96 billion and P20.39 billion.

On top of the IRAs, the memorandum also said LGUs will get special shares from the proceeds of national taxes including: the excise tax on Virginia Tobacco cigarettes and Burley and Native tobacco products, gross income taxes paid by all businesses and enterprises within economic zones, and shares in value-added tax payments in accordance with RAs 7643, 7953 and 8407.

“[T]he IRA and other local resources shall first cover the cost of providing basic services and facilities,” the memorandum read, in accordance with section 17 of the Local Government Code.

The law also provides for at least 20% of the IRA to be earmarked for development projects, and no less than 5% of estimated local revenue for the Local Disaster Risk Reduction and Management Fund.

The memorandum said that LGUs are “encouraged to align their programs, projects and activities with the priorities of the national government, specifically those embodied under the Philippine Development Plan and Public Investment Program for 2017-2022.”

Noting the administration’s priority to eradicate illegal drugs, the memorandum stated that LGUs are enjoined to “provide funds in their annual budgets for the: conduct of barangay clearing operations, including rehabilitation and after care of drug users in coordination with the Department of Health and the Department of Social Welfare and Development; establishment of Special Drug Education Centers; and strengthening of the criminal justice system, among others.”

In an earlier memorandum, the DBM added drug rehabilitation facilities among those projects that are eligible for IRA funding, as well as post-harvest facilities, development of alternative energy sources, and equipment for environmental protection.

“Any valid adjustments, changes, modifications or alterations in any of the factors affecting the computation of the IRA that occurred or happened during the year, including final and executory court decisions, shall be governed by the applicable general provisions of the FY (fiscal year) 2017 GAA (General Appropriations Act),” DBM said in its memorandum. —