IRA ruling need not expand deficit, petitioner claims
THE GOVERNMENT may not need to widen its fiscal deficit to comply with a Supreme Court ruling to provide local governments with their “just share” of national government revenue, the former governor who obtained the court decision said.
Hermilando I. Mandanas, a former Batangas governor and Representative for the province’s 2nd district, who also chairs the Luzon Regional Development Committee, added that the committee signed a resolution on Thursday urging the Department of Finance and the Department of Budget and Management to implement the high court’s ruling.
He said that the ruling should be implemented retroactively, with a total liability to LGUs of internal revenue allotments (IRAs) worth about P1.5 trillion from 1992 — the year when the Local Government Code was enacted — to 2018.
The law states that local governments are entitled to a 40% share of “national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year.”
For 2019, the local government share, known as the Internal Revenue Allotment (IRA) is officially reckoned at P575.5 billion but under the ruling’s interpretation should include P200 billion more.
The high court, sitting en banc, said on July 3 in a statement that it voted 10-3 in favor of including all national taxes in the calculation of IRAs such as those collected by the Bureau of Customs and the Bureau of the Treasury. It has yet to publish its final resolution.
Department of Budget and Management Secretary Benjamin E. Diokno has said that the government will likely file a motion for reconsideration through the Office of the Solicitor General because of the risk of a credit rating downgrade because the fiscal position would become “unmanageable,” with the budget deficit expanding to 6% of gross domestic product — double the 3% planned.
Mr. Mandanas said in a briefing in Mandaluyong City, “I am asking DBM to recompute because of the SC decision because it would affect definitely the budget. But the 6% deficit — that is not true.”
Mr. Mandanas said that the additional IRA should be taken from current allocations for national line agencies, and at the same time leaving these agencies’ functions to local government units (LGUs) such as conditional cash transfers, fertilizer funds and farm-to-market roads from the Agriculture department and medical services from the Health department, among others.
“Just transfer the funds. Take that out from the national line agencies. The funds that are really for basic services that should be done by locally, give it to the local government,” Mr. Mandanas said.
“It would increase the amount of money so they will be able to perform their mandated basic services. We do not need to borrow money. We will just implement the law,” he added.
He said that the unallocated shares from previous years could be paid in tranches for up to 20 years, but added that the mode of payment still depends on the SC’s final decision.
“My suggestion is you cannot pay it one go. So the back pay will be paid in maybe five, 10, or 20 years. That can be subject to negotiations.”
Mr. Mandanas said that providing more funds to LGUs will be “more transparent” and “more efficient” as the LGUs themselves know their needs more than the national government.
“Our credit rating will even go up because we will be able to spend our money more efficiently. We would be able to spend more, infrastructure projects can even built faster. Barangays will build the roads they need. It will not damage the national government.”
The National Economic and Development Authority Assistant Secretary Mercedita A. Sombilla has said that the proposal is “rational,” adding that “their demands are valid… I really hope that things are going in a positive direction, which is really good for the regions and the LGUs.”
Many LGUs depend on income from the national government which has stunted the development of their ability to raise their own funds via real property and business taxes, among others.
Mr. Mandanas countered by saying: “The basic principle is you would just devolve the funds that they are able to spend. Like fertilizers. The soil conditions are different in the towns and municipalities.”
Finance Secretary Carlos G. Dominguez III said the government will await the formal release of the ruling before taking any action.
“As of [ Wednesday], we haven’t yet received the decision from the SC and will comment after we get a chance to study it closely and evaluate its implications,” Mr. Dominguez told reporters yesterday in a mobile phone message. —