Chiz backs higher IRA to spur growth of LGUs

Senator Francis "Chiz" Escudero yesterday backed proposals to increase the Internal Revenue Allotment (IRA) share of municipalities to spur inclusive economic growth and economic development in the countryside.

Escudero, former head of the Senate committee on finance, noted that the present setup of IRA allocation has resulted in a lopsided distribution of funds among local government units (LGUs) that only a few provinces and cities receive greater share while the majority, comprising of less developed or poor towns, receives less.

Under Republic Act No. 7160, or the Local Government Code of 1991, LGUs are entitled to a 40 percent share from the national government’s internal revenue collection.

“Inclusive growth is possible only if countryside development is provided with the much needed support. To make it happen, municipalities should be given a bigger share of the IRA,” Escudero said.

Presently, the 40 percent share of the LGUs is distributed as follows: 23 percent for provinces, 23 percent for cities, 34 percent for municipalities, and 20 percent for the villages (barangays).

The Philippines has a total of 81 provinces, 114 cities, 1,490 municipalities and 42,028 barangays nationwide.

“Certainly, the 34 percent shared by close to 1,500 municipalities is not enough to support economic activities in the countryside, especially in towns that have no sufficient sources of revenue and are merely dependent on the IRA,” Escudero said.

Even if the IRA allocation for cities is cut in half, the senator said it would not make much difference considering that they have more sources of local revenues like property and local business taxes unlike most municipalities.

He cited the cities of Quezon and Makati, which in 2014 received 3.18billion and 775 million in IRA, respectively.

The annual budget of Quezon City was 13.8 billion while Makati City’s was 10.3 billion that same year. Both spending programs were funded mainly by local revenues.

“Sa totoo lang kahit kalahatiin mo ’yung IRA ng mga siyudad hindi nila halos mararamdaman (the fact is even if you split the IRA among cities, they won’t feel the difference),” Escudero said.

“Pero kapag binigay mo ang kalahati ng IRA nila sa mga munisipyo, mabilis itong mararamdaman at kitang-kita kung saka-sakali ang magagawa ng maliit na halagang iyan para sa mga munisipyo (but if you give half of their IRA to municipalities, you will immediately see the improvement),” Escudero explained.

He further said the actual formula for computing the IRA share violates the true meaning or intent of the 1987 Constitution on the right of LGUs to a just share in national taxes.