Local execs to have SC clarify 40% tax share
Quezon City Mayor Joy Belmonte said local executives like herself are considering a petition before the Supreme Court seeking clarification on the numerous deductions in computing the 40-percent share of local government units (LGUs) from all national government revenues.
Belmonte, who is also acting national president of the League of Cities of the Philippines, raised the matter during the group’s 79th national executive board meeting on March 13.
“Our lawyers argue that the 40 percent NTA (national tax allotment) for LGUs must first be deducted from the national tax base before any deductions,” she told local executives as part of her report during the assembly.
The 2019 Mandanas-Garcia ruling of the Supreme Court, which took effect in 2022, increased the NTA shares of LGUs to 40 percent of all national taxes beyond those collected by the Bureau of Internal Revenue (BIR) to include imposts generated by the Bureau of Customs (BOC).
During a meeting with local officials led by Baguio City Mayor Benjamin Magalong last January, the Department of Finance explained that the cuts in NTAs included special allotments and special purpose funds (SPF) for important national obligations that were provided by law.
Magalong had earlier called for a full and transparent accounting of the NTA after a review showed that LGUs were receiving only 32 to 34 percent of all national taxes.
Conflict points
Belmonte said that, according to the analysis of their lawyers, 20 out of the 40 deductions identified by the DOF were “questionable,” with seven from the BIR collections and nine from the BOC tax take.
“Specifically, six of these deductions fail to satisfy the third requisite, that these funds should serve a specific purpose, and 15 out of these deductions fail to satisfy the fourth requisite, which states that if fulfilled or unutilized for the specific purpose, the balance shall revert to the general fund,” she said.
“Assuming our lawyers are correct, then it follows that a significant majority of the deductions should not be considered special purpose funds because they do not adhere to the constitutional guidelines on fund utilization and reversion,” she pointed out.
As a result, the LGUs “will never enjoy the full 40 percent of the national tax base” because of the deduction of the SPFs, according to the analysis.
Intent of the law
During the meeting of the Union of Local Authorities of the Philippines last month, Belmonte said a representative of the Department of Interior and Local Government had proposed asking the Supreme Court whether all DOF-identified projects could be considered SPFs and special allotments.
It should also be clarified “whether the interpretation that (SPFs) should be deducted prior to the 40 percent NTA is in accordance with the spirit and intent of the law rather than the other way around, with the LGUs receiving the full 40 percent of national taxes before deductions are made.”
Belmonte told local officials that “a coordinated approach may strengthen our position and provide a more compelling argument before the Supreme Court,” given the significance of the issue.
