Increasing IRA share of LGUs to 50 percent

THIS IS a welcome development for Angeles City Mayor Carmelo Pogi Lazatin Jr. in order to augment its appropriations for basic services and facilities amid the COVID19 crisis, pursuant to Section 17 of the Local Government Code (LGC) of 1991, particularly those which have been devolved by the national government, and development projects as identified in the Annual Investment Plan (Section 287 of the LGC directs local government units (LGUs) to set aside not less than 20% of their Internal Revenue Allotment – IRA for development projects).  Lazatin, former city councilor and son of the late mayor and congressman Carmelo Tarzan Lazatin, exemplified that the enactment of the LGC was a major step in instituting administrative and organizational reforms among LGUs, which was highlighted by devolution and local autonomy. He added LGUs are now mandated to deliver the priority needs and basic services such as agricultural services, health and social welfare services, information services, waste management and environmental protection, maintenance of roads, infrastructure facilities and tourism development, among others.

The IRA is a LGUs’ share of revenues from the national government. Allocations are as follows: Provinces 23%, independent and component cities 23%, municipalities 34%, and barangays 20%. The distribution of shares shall be made on the basis of their population which is 50%, land area is 25% and equal sharing is 25%. Section 286 of RA No. 7160 provides that the share of each LGU shall be released without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose (actually, the allotment for IRA is released comprehensively but cash allocation is released monthly, 80% of IRA share of LGUs on or before the 8th day of the month and the remaining 20% on or before the 24th day of every month).

All or nearly all of the revenue that an LGU has to spend comes from their IRA, though some LGUs also have additional local sources of revenue such as real  property taxes, business taxes and government fees. Typically for municipalities, most of these LGUs are totally dependent on the IRA accounts for 90% of total revenues. Since cities have more sources of local revenues, their IRA ranges from 50% to 70% of their total budget.

The IRA is automatically released to each local government unit and may not be held back by the national government for any reason, except in the extreme case of an “unmanageable public sector deficit”, in which case the allotment may be adjusted but provided it not be set to “be less than thirty percent (30%) of the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year”.

Senator Ralph Recto filed Senate Bill No. 269 to strengthen LGUs participation in national development by increasing the share of LGUs in the national internal revenue taxes. The Philippines consists of 81 provinces, 145 cities, 1,489 municipalities and 42,045 barangays. Since only a fraction of the 43,760 LGUs belong to the 1st and 2nd income classes, most of these LGUs depend on their share from the IRA to perform their devolved powers and functions. Majority of the LGUs have become dependent on their IRA share and fail to exert effort to generate other revenues to fund programs and projects. Twenty-nine years since the enactment of the Code, most LGUs have yet to exercise genuine autonomy from the national government. LGUs still lack the capability to become effective partners of the national government in national progress.

The Recto bill seeks to promote fiscal decentralization through the amendment of Section 284 of the Code thereby increasing LGU share in the IRA from forty percent (40%) to fifty percent (50%). With the increase of their share in the national taxes, LGUs are expected to ensure efficient and effective delivery of basic services. LGUs will have increased capacities to allocate funds, enhance financial management, improve the performance of public economic enterprises; and strengthen the mechanisms for transparency and accountability. 

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