Baguio City—The Supreme Court on Wednesday upheld with finality its earlier decision increasing the Internal Revenue Allotment of local government units.
In its summer en banc session, the 15-member bench voted 8-3 to deny the motions for reconsideration on its decision last July that expanded the IRA allotment for LGUs to include tax collections of other agencies apart from the Bureau of Internal Revenue.
Besides the BIR, the SC ruled that the IRA of LGUs should include tariff and duties collected by the Bureau of Customs, 50 percent of value-added tax, 30 percent of national taxes collected in the Autonomous Region in Muslim Mindanao, 60 percent of national taxes collected from the exploitation and development of national wealth, 85 percent of excise tax from tobacco products, and a portion of franchise tax under Republic Acts 6631 and 6632 (Horse Racing Laws), among others.
The high court turned down the MRs filed by the Solicitor General and Bataan Rep. Enrique Garcia Jr., one of the petitioners in the case.
“In denying both motions for reconsideration, the Supreme Court clarified that the adjusted amounts of the IRAs is deemed effective only after the finality of the ruling of the Court. Hence, the adjusted amounts will be given to the LGUs starting with the 2022 budget cycle,” SC spokesman lawyer Brian Hosaka explained in a press conference.
Hosaka said the High Court applied the “operative fact” doctrine in ordering prospective application of the ruling.
The latest ruling addressed the concerns that such increase in IRA allocations for LGUs would cost the national government some P1.5 trillion in funds.
In its ruling promulgated, the SC voted 10-3 to partially grant the petition of Batangas Gov. Hermilando Mandanas, who had questioned the process of allocating IRA funds for the LGUs.
Section 284 of Republic Act 7160, which created LGUs, stated that provincial, city and municipal governments should receive 40 percent of total national internal revenue taxes collected by the national government.
But the SC rejected the petitioner’s plea for retroactive application of the increase of IRA for LGU for the past 26 years, or since the Local Government Code was implemented in 1992.
“Logic demands that LGUs should receive the difference between the just share they should have received had the Local Government Code properly reckoned such just share from all national taxes on the one hand, and the share… the LGUs have actually received since the effectivity of IRA under the LGC, on the other,” read the ruling penned by then-Associate Justice and now Chief Justice Lucas Bersamin.
