Some Important Points for Discussion and Further Study Regarding the IRA
(Based on Data Presented by Dennis Lopez of the
Philippine Business for Social Progress GOLD Project)

 

On the Devolution of Services and the Budget of Line Services

 Basic services devolved to LGUs  

·        Agricultural extension and on-site research services (DA)
·        Community-based forestry projects and management of community forests (DENR)
·        Field health and hospital services and other tertiary health services (DOH)
·        Public works and infrastructure projects funded out of local funds (DPWH)
·        School building program (DECS)
·        Social welfare services (DSWD)
·        Tourism facilities and domestic tourism promotion and development (DOT)
·        Telecommunication services for provinces and cities (DOTC)
·        Low cots housing projects for provinces and cities and other services ,e.g. investment support services, industrial research and development services.
·        Plus 70,512 devolved personnel: 4,127 from DSWD, 17, 692 from the DA, 895 from the DENR, and 47,798 from the DOH.
·        Despite such devolved functions the DA budget from Php 4.420 M in1990, before devolution, to Php 22.312 M and the DOH from Php 7.6 M to Php 12.3 M. ULAP is questioning the rise is budget despite the substantial devolution of services from these agencies.

 

Laws Pertinent to the Release of IRA Shares

Article X

Section 6: Local Government Units shall have a just share, as determined by law, in the national taxes which shall be automatically release to them.

Section 7. Local government Units shall be entitled to an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas, in the manner provided by law, including sharing the same with the inhabitants by way of direct benefits.

Sec. 284. Allotment of Internal Revenue Taxes .-- Local government units shall have a share in the national internal revenues taxes based on the collection of the third fiscal year preceding the current fiscal year as follows…

(c) On the third year and thereafter, forty percent (40%)

 [Further in the same section]

Provided, that in the event that the National Government incurs an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon the recommendation of the Secretary of Finance, Secretary of Interior and Local Government, and Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year…

 Sec. 285. [Allocation formula] The share of local government units in the internal revenue allotment shall be allocated in the following manner:

 a) That in the event that the National Government incurs an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon the recommendation of the Secretary of Finance, Secretary of Interior and Local Government, and Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year…

 

a)      Provinces-- Twenty-three percent (23%)

b)      Cities-- Twenty-three percent (23%)

c)      Municipalities—Thirty-four percent (34%)

d)      Barangays—Twenty-percent (20%)

 Provided, however, that the share of each province, city, and municipality shall be determined on the basis of the following formula:

 

a)      Population—Fifty percent (50%)

b)      Land Area—Twenty-five percent (25%)

c)      Equal Sharing—Twenty-five percent (25%)

 

[for barangay shares Php 80,000 for those with a population of not less than 100 inhabitants to be taken out of the 20% share and the balance is allocated based on population (60%) and equal sharing (40%)]

 Sec. 286. Automatic Release of Shares. -- (a) The share of each local government unit 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 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.

 

Computing for the IRA Share

 ·        Computing for individual shares of LGUs

 a)      Land Area

 Land Area of LGU

-----------------------      x  [(Total IRA – Cost of Devolution Fund) x 23%] x 25%

Total Land Area of

All LGUs at that Level

b)      Population

Population of LGU

-----------------------   x  [(Total IRA – Cost of Devolution Fund ) x 50%

Total Population of

All LGU at that Level

 

c)      Equal Sharing

[(Total IRA – Cost of Devolution Fund) x 23%] x 25%

                  Total LGU at that Level

·        Computing for the IRA Base

(As an example we will use computations for CY 1999 with a 1996 base year)

 

DBM Computation

BIR Computation

Internal Revenue Collection

                  Php 259,706.163 B

                  Php 259,706.163 B

Less:          Rewards

           .027 B 

         .027 B

     Special Funds/Accounts:

 

 

                   PCSO

         3.795 B 

       3.795 B

                   Phil. TB, Inc.

         3.253 B

       3.253 B

                   White Cross

         1.084 B

       1.084 B

                    City of Makati

         1.320 B

       1.320 B

                    City of Manila

         1.391 B

       1.391 B

                    PTA/PCVC

        37.744 B

     37.744 B

                    Mining Taxes

                 (40% LGUs shares)

        49.790 B

     49.790 B

                    Tobacco

    1,841.534 B   

1,841.534 B

                    Stamp Tax

  14,292.000 B

 

                    Est. share of     LGUs (VAT Collection)

       260.453 B

 

                    Share of LGUs within Ecozone

         47.000 B

 

TOTAL deductions

                           16,539.366 B   

                              1,939.940 B

Net General Funds

                         243,166.769 B

                          257,766.223 B

Less:   COA share (1/2 of 1%)

     1,215.834 B

    1,288.831 B

           Net GF less COA share 

                          241,950.935 B

                          256,477.392 B

LGU share x 40%                     

                                     0.40

                                         0.40

Basic Income

                            96,780.000 B

                          102,590.956 B  

 

What we should notice here is the disparity in the computation of the base from which the 40% IRA is taken. The DBM reduced the base by some 15 billion pesos. This reduction in the base from which the IRA is computed results in substantial cuts to the share of LGUs. 

·        Comparative Computation of LGUs’ IRA Share

Based on the computation from the previous table, these will be the shares of LGUs in the IRA share based on the BIR 1996 collection of Php 259,706.163 B.

 

DBM Computation

BIR Computation

Net General Fund

Php 243.166 B

Php 256.477 B

LGUs IRA Share

Php  96.780 B

Php 102.591 B

Amount of Distribution

 

 

          Provinces          23%

Php  22.259 B

Php   23.596 B

          Cities                23%

Php  22.259 B

Php   23.596 B

          Municipalities  34%

Php  32.905 B

Php   34.881 B

          Barangays        20%

Php  19.356 B

Php   20.518 B

Notice that there are significant reductions from the DBM computation based on the reduction of the base of the IRA.

·        Other sources of cuts to the IRA and how much they amounted to in this budget

a)      Local Government Empowerment Fund   =         Php       1,860,000

b)      Metro Manila Development Authority      =         Php     26,029,000

c)      Municipal Development Fund                   =         Php 1,345,397,000

d)      Palarong Pambansa                                    =         Php    130,000,000

e)      Local Government Service Eualization Fund =    Php 5,000,000,000

·        Special Provisions on the IRA that amount to reductions

Special Provision No. 1

Php 5 Billion of the IRA is to be set aside for the Local Government Service Equalization Fund (a special fund to be released by the Oversight Committee on Devolution which is meant to fill gaps in the IRA distribution)

Special Provision No. 2

50% of the increment of IRA shall be devoted for food security projects in highly urbanized cities to alleviate the urban poor and resettled squatters;

No amount of the increment shall be used to increase personnel plantilla and upgrading of compensation/allowances;

IRA shall not be used for training, seminars and study tours of LGU officials and employees .

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