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Business

'Mandanas' funds boost LGUs' income in Q1

Ramon Royandoyan - Philstar.com
covid
High-rise buildings light up the night as seen from Estrella-Pantaleon Bridge, also known as Rockwell Bridge, in Makati City on Sunday, Dec. 19, 2021.
The STAR / Walter Bollozos

MANILA, Philippines — The incomes of local government units grew in the first quarter as a result of a Supreme Court ruling that increased the revenue share of provinces, cities and municipalities.

The Department of Finance reported on Tuesday that the total current operating income of LGUs rose 19.4% year-on-year to P319.42 billion.

LGUs get their funding from two sources. Local sources, on one hand, include tax revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts from government business operations and proceeds from sale of assets.

On the other hand, external sources include the Internal Revenue Allotment (IRA) from the national government and other shares from special laws, grants, aids and borrowings.

Under the SC decision popularly known as the “Mandanas-Garcia ruling”, LGUs get a bigger share in the collections of national taxes, with the high court stating that their IRA should come from 40 percent of all national taxes collected by the Bureaus of Internal Revenue (BIR) and of Customs.

However, the DOF forecasts that LGUs' shares will be lower next year due to still weak revenue collection amid the pandemic.                                                           

Broken down, data from the Bureau of Local Government Finance showed LGUs' revenues from external sources amounted to P184.45 billion, which accounts for 58% of their income, in the first quarter. The rest came from revenues from local sources, which include tax collections and fees, totaling P134.97 billion, up 8.6% year-on-year.

Among locations, cities had the highest locally-sourced revenues in the first quarter at P175.3 billion, accounting for 68% of the total collections. Revenues generated by municipalities clocked in second at P49.97.57 billion while provinces fell last at P30.94 billion.

Last year, LGUs continued to depend on the National Tax Allotment, renamed from the old IRA. Data showed national tax allotments comprised 64% of LGUs' total income in 2021 to P554.02 billion, up 7.35% year-on-year.

For Zyza Suzara, executive director at think tank iLEAD, there's always a danger of abuse and corruption when bigger funds are involved.

“That's more likely among governments that do not have a culture of transparency," Suzara said. “With the download of additional funds, the national government is also pushing for greater devolution of functions.”

Leonardo Lanzona, economist at Ateneo De Manila University, believes it is important for LGUs to spend their money on the right programs. He added that some functions must continue to be performed by the national government.

"Crucial that they initiate the proper economic programs to spur growth and provide the social protection needed to ensure equitable distribution of benefits. However, infrastructure, as well as health and education programs, should continue under the national government to guarantee the quality of these services and stem corruption," Lanzona said.

INTERNAL REVENUE ALLOTMENT

PHILIPPINE ECONOMY

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