THE government could respond to a Supreme Court ruling increasing local governments’ share of national government revenue by shifting more of its functions to the local level, Finance Secretary Carlos G. Dominguez III said.
Mr. Dominguez said giving local government units (LGUs) more responsibility for tasks currently taken on by the national government was one of the options in response to the so-called Mandanas ruling, which sought to broaden the definition of “national government income” eligible for distribution to LGUs under an allocation called the Internal Revenue Allotment (IRA).
The case, Mandanas vs. Ochoa, takes its name from Hermilando I. Mandanas, a former governor and legislator from Batangas province. Mr. Mandanas in 2012 questioned the basis for determining the IRA pool, noting that local governments were owed about P500 billion in arrears since 1992 due to a more restrictive definition of “national government revenue” which left out revenue earned by the Bureau of Customs.
The Local Government Code entitles LGUs to a share of national government revenue. In July 2018, the Supreme Court ruled that the LGU’s “just share” covered all other forms of national tax, not just internal revenue taxes.
Mr. Dominguez said apart from shifting more functions to LGUs to comply with the ruling, the government is also considering requesting Congress to amend the law, or to declare the ruling “fiscally unsustainable.”
“That will be a very significant chunk of the revenue going to the LGUs,” he said.
“The first option is to comply with decision… however, in order to comply, we will also have to transfer some of the costs that are being incurred by the national government to the local government. You can’t just take the money, you should also take some of the responsibility. So that is being studied right now by the Department of Budget and Management and ourselves (DoF),” he said.
“The second option we have is to request the Congress to change the law and say it should be 30% of what the BIR collects. In that way that will defeat the decision of the Supreme Court.”
“The third option is to declare it fiscally unsustainable, so we won’t have to do it. So this is a legal problem that has become a fiscal problem,” he added.
He said the government has two years to decide before the ruling takes effect. — Beatrice M. Laforga