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Sen. Bongbong Marcos explores options for more equitable IRA sharing

Press Releases
16 April 2013

16-April-2013-ADB-Equitable-IRA-SharingSenator Ferdinand “Bongbong” R. Marcos, Jr. continues to explore options towards a more equitable sharing of the Internal Revenue Allotment (IRA) among the country’s local government units.

This developed as Sen. Marcos received a briefing from Asian Development Bank (ADB) Senior Public Sector Specialist Juan Luis Gomez last April 15, 2013.

The briefing was part of the data gathering process being conducted by Marcos as chair of the Select Oversight Committee on the Local Government Code (LGC) of 1991, in connection with several proposed measures in the Senate to amend the 23-year old law.

“The objective (of amending the LGC) is for all LGUs to be able to provide a comparable level in the delivery of basic services,” Marcos said.

Among the proposed amendments include Senate Bill 2987, filed by Sen. Aquilino “Koko” Pimentel III, which sought to increase the current share of LGUs from 40 percent of the national internal revenue taxes to 50 percent share in all national taxes.

Gomez noted that while the proposed increase of 10% in the share of LGUs in the national taxes would somehow ease the problem by providing additional funds for LGUs.

On the other hand the, ADB proposal consists of twin moves, meant to allow richer LGUs to enjoy from bigger collection of local taxes and to change the manner of IRA distribution so more resources can be allocated for poorer LGUs.

For the first component, the ADB suggests that LGUs should be authorized to impose a limited rate increase in tax collected by the national government and the additional rate is returned to the LGU for its own use. This would benefit largely rich LGUs.

As for the second component, ADB proposes to change the formula of IRA distribution to measure the fiscal capacity of LGUs so that the more they are able to collect local taxes the less IRA they would get.

LGUs with less local tax collection will be supported with a larger share in the IRA pie.

According to Gomez, a similar system has been in place in Peru since 2009 and is apparently doing well.

Marcos said he likes the idea of a mechanism where LGUs would be better off if they earn more revenues from local taxes, as it would also address the concern of LGUs being too dependent on IRA.

However, the senator said he would study the ADB proposals further before drafting any legislative proposal he would file in the coming 16th Congress meant to provide LGUs with the funding support based on their respective needs and capacities.

Marcos had conducted public consultations in Gen. Santos City, Paoay in Ilocos Norte province, and Cotabato City on proposed amendments to the 23-year old Local Government Code of 1991.