MANILA- The Supreme Court has ruled that the “just share” of local government units (LGUs), also known as Internal Revenue Allotment (IRA), must be computed based on all national taxes, and not just from national internal revenue taxes.
The ruling, via 10-3 voting, was on a petition filed in January 2012 by former Batangas 2nd District Representative and now provincial governor Hermilando Mandanas, who questioned before the high court the government’s wrong computation and alleged misappropriation of IRA funds for LGUs.
In his 23-page petition, Mandanas claimed that from 1992 to 2012, unreleased IRA due from provinces, cities, municipalities, and barangays had reached P500 billion.
“Compliance by the National Government with the Constitution and existing laws will enable the LGUs to efficiently and expediently serve the Filipino people, and hasten the delivery of much needed and long delayed basic services," Mandanas’ petition stated.
Mandanas argued that Section 284 on Allotment of Internal Revenue Taxes of Republic Act (RA) No. 7160 (Local Government Code) clearly defines “just share” regarding the IRA.
The said section states:
“Sec. 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year, as follows:
a. On the first year of the effectivity of this Code, thirty percent (30%);
b. On the second year, thirty-five percent (35%);
c. On the third year and thereafter, forty percent (40%).”
"It is clear that the legally mandated revenue base to compute the IRA should include the entire national internal revenue taxes collected annually," Mandanas said.
The national internal revenue taxes, according to Mandanas, are specifically enumerated in Sec. 21 of RA 8424 (National Internal Revenue Code):
“Sec. 21. Sources of Revenue. - The following taxes, fees, and charges are deemed to be national internal revenue taxes:
a. Income taxes;
b. Estate and donor’s taxes;
c. Value-added tax;
d. Other percentage taxes;
e. Excise taxes;
f. Documentary stamp taxes; and
g. Such other taxes as are hereafter may be imposed and collected by the BIR(Bureau of Internal Revenue).”
His petition also stated that the Bureau of Customs (BOC) collects national internal revenue taxes such as value-added tax, excise taxes, and documentary stamp taxes on imported goods as an agent of the BIR, as provided for in Sec. 12 of the National Internal Revenue Code.
"However, the BIR has not been including the collections of the BOC of the national internal revenue taxes in the legally mandated revenue base to compute the IRA for the LGUs since 1992 up to 2012."
"And when included in accordance with the Philippine Constitution and other applicable laws, then the LGUs should receive P498.85 billion or very close to P500 billion,” Mandanas’ petition explained.
Mandanas also asked the high court to order the immediate release of IRAs to LGUs.
"The National Government, in the persons of the Respondents, should automatically release the Internal Revenue Allotments (IRA) or the just shares of the Local Government Units (LGUs) in the national taxes as determined by law.”
His petition stated that the automatic release of the IRA to the LGUs is "clearly provided for in Sec. 6 of Art. X of the Constitution" which states:
“Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.”
Mandanas urged the high court to issue a temporary restraining order (TRO) and/or writ of preliminary injunction on the then Aquino government's General Appropriations Act(GAA) for 2012, specifically on some P60.75 billion appropriations for capital outlays which he said was taken off the IRA.
"This amount is equivalent to the IRA for the LGUs in accordance with law that has been misappropriated by the National Government in the 2012 GAA. And if the unconstitutional release of the P60.75 Billion is not restrained by the Supreme Court, then again the misuse of Local Funds for National Projects will go unabated."
Mandanas filed the petition along with 8 local officials. The lead counsel in the case is former Aquilino Pimentel, Jr., author of the Local Government Code.