DILG welcomes SC final ruling that LGU's IRA should be based on all national taxes

April 11, 2019

The Department of the Interior and Local Government (DILG) welcomes the Supreme Court (SC) final ruling declaring that local government units (LGUs) are entitled to internal revenue allotments (IRA) based on the collections of all national taxes and not just from national internal revenue taxes.

“We are pleased with the decision of the SC since it gives life to the Constitutional mandate that LGUs must be given a just share in national revenues. By affirming its ruling that the source of IRA should come from all national taxes, the delivery of basic services will improve impacting directly on the lives of our countrymen,” says DILG Undersecretary and Spokesperson Jonathan E. Malaya.

Malaya says that while the Department has yet to read the court’s decision, “we are glad because implementing this decision will allow LGUs to improve its services particularly on anti-poverty and peace and order.”

“We urge LGUs to utilize these additional funds well and we in the DILG commit ourselves to monitor closely the use of these funds to ensure that they contribute to national development goals and objectives,” he says.

On Wednesday, the SC en banc voted 8-3 to affirm its earlier decision in expanding the basis of the IRA of LGUs based on the petition of former Batangas Representative and now Batangas Gov. Hermilando Mandanas.

The SC held that the IRA of LGUs under the Local Government Code (Republic Act 7160) is understood to be based on the collections of all national taxes as expressly stated in Section 6 of the Constitution.

National taxes include customs tariffs and taxes collected by other state agencies such as the Bureau of Immigration.

Internal revenue taxes, meanwhile, refer to taxes imposed by BIR such as income taxes, estate and donor’s taxes, value-added tax, excise taxes, and documentary stamp taxes.

The DILG Spokesperson also says that the bigger IRA share of LGUs in the coming years will prove to be useful in bringing down the services of the government up to the grassroots level and to the farthest sitios and barangays of the country.

“With bigger funds come more quality essential services for our people, most especially the poor,” he says.

LGUs, however, will start receiving their bigger IRA starting with the 2022 budget cycle after the Court denied a motion to award to the LGUs all arrears resulting from the application of the expanded basis in computing the IRAs.