SC ruling on IRA to cost gov’t P1.5 T — DOF

MANILA, Philippines — The Supreme Court ruling that includes all national taxes in the internal revenue allotments (IRA) of local government units (LGUs) may cost the national government as much as P1.5 trillion if implemented retroactively, according to the Department of Finance (DOF).

In an interview, Finance Secretary Carlos Dominguez said the amount owed by the national government to LGUs could reach up to P1.5 trillion if the SC decides to enforce its ruling retroactively since the Local Government Code was implemented in 1992.

“Our calculation is between P1 trillion and P1.5 trillion. This is just speculation, between P1 trillion and P1.5 trillion in debt if its retroactive,” Dominguez said.

Because of the huge amount, the finance chief said the government may not be able to afford to pay LGUs in full if ordered so by the SC.

“We don’t know the decision, but certainly we can’t afford a one-time payment. We can’t afford that,” he said.

However, if the SC ruling is implemented prospectively, Dominguez said the national government may devolve some of its programs and projects, and give LGUs the funds for these initiatives as IRA.

“If prospective, it’s just that we sit down with the LGUs and work it out. What program they will implement and what programs they will approve,” he said.

The finance chief said such projects may include farm-to-market roads currently implemented by the Department of Agriculture, or some agrarian reform and infrastructure projects.

Dominguez also said LGUs may also take over the collection of certain taxes in the prospective scenario.

“They might want to be the one to take over taxes that we collect, who knows? Maybe they want to collect what kind of tax they want to collect, maybe they want to be the ones to collect it,” he said.

Earlier, the SC ruled that the IRA of LGUs should include all national taxes, and not just from internal revenue taxes. However, the SC has yet to release a copy of the decision.

Internal revenue taxes refer to taxes collected solely by the Bureau of Internal Revenue (BIR). National taxes, meanwhile, include taxes collected by the BIR, as well as those collected by the Bureau of Customs and other government agencies.

According to Budget Secretary Benjamin Diokno, the ruling may potentially harm the country’s fiscal position and widen the country’s budget deficit to six percent of gross domestic product, twice the current deficit ceiling of three percent.

As such, Diokno warned this may also lead to credit rating downgrades and lower confidence from the international community. He said it may also significantly cut the government’s funds for its massive infrastructure program.

Due to its detriment to the country’s fiscal position, Diokno earlier said the DBM has sought the help of the Office of the Solicitor General to appeal the SC’s decision.