The Supreme Court has allayed the fears raised by the Finance department that the economy will suffer if the national government is compelled to comply with its decision increasing the share of local government units in the national budget.
In a decision released on Monday, the high court said the national government does not have to shell out P1.5 trillion in additional funds for LGUs to comply with its ruling.
Earlier, Finance Secretary Carlos Dominguez warned of the adverse impact to the economy of the high court ruling because it would mean that the national government would have to incur more debt for the LGUs.
The high court effectively addressed Domingo’s concern after it turned down the appeal of the petitioners for the payment of the arrears in the just share of the LGUs over the past 26 years, even as it ordered the increase of their Internal Revenue Allotment in the national budget.
The high court denied the petition filed by Batangas Gov. Hermilando Mandanas to apply the increase in IRA funds of LGUs in previous years, declaring that the application of the increased IRA funding for LGUs was prospective.
“It is true that with our declaration today that the IRA is not in accordance with the constitutional determination of the just share of the LGUs in the national taxes, logic demands that the LGUs should receive the difference between the just share they should have received had the LGC [Local Government Code] properly reckoned such just share from all national taxes,” says the decision written by Associate Justice Lucas Bersamin.
“This puts the national government in arrears as to the just share of the LGUs. A legislative or executive act declared void for being unconstitutional cannot give rise to any right or obligation.”
Dominguez said such prospective application of the high court ruling would be manageable for the national government it would just “sit down with the LGUs and work it out.”
While the ruling did not give LGUs the right to collect higher IRAs for the previous years since 1992 when LGC took effect, it will be implemented immediately without the need to wait for legislative approval for next year’s General Appropriations Act.
The high court specifically “commands the automatic release without need of further action of the just shares of the local government units in the national taxes through their respective provincial, city, municipal or barangay treasurers, as the case may be, on a quarterly basis but not beyond five days from the end of each quarter.
“The 1987 Constitution is forthright and unequivocal in ordering that the just share of the LGUs in the national taxes shall be automatically released to them… hence the just share of the LGUs in the national taxes shall be released to them without the need of yearly appropriations.”
This means the increase in the IRA of LGUs need not wait for next year’s General Appropriations Act, which would still undergo legislative approval.
The decision increased the IRA of LGUs to include the tax collections of other agencies apart from the Bureau of Internal Revenue.