By Vann Marlo M. Villegas, April 10 2019; Business World

Image Credit to Business World

THE Supreme Court (SC) denied a government motion to reconsider a key ruling that had expanded the basis for reckoning the size of fund transfers from the national government to local government units (LGUs).

But it also ruled that the new, expanded basis for calculating the LGUs’ share of national government revenue will first apply in 2022, thereby denying a “back pay” claim made on behalf of local governments that had sought to apply the new revenue-sharing formula retroactively to 1992.

Sitting en banc, the court voted 8-3 to deny the government motion to reconsider the original ruling on Internal Revenue Allotments (IRAs), a share of national government revenue which many LGUs depend on for a significant part of their operating funds.

The original ruling had held that LGUs’ IRA entitlement should include all government taxes, and not just those generated from internal revenue. The ruling could oblige the national government to increase its future IRA payments to LGUs, though the court also issued a separate ruling rejecting claims of IRA arrears dating back to 1992, when the revenue structure of LGUs was first defined by the Local Government Code.

The court denied a motion for partial reconsideration filed by Enrique T. Garcia, which had sought IRA back payments to 1992.

“In denying both Motions for Reconsideration, the Supreme Court clarified that the adjustment amounts of the IRAs of the LGUs is deemed effective only after the finality of the ruling of the Court,” SC Public Information Office Chief Brian Keith F. Hosaka said in a news conference.

“Hence, the adjustment amounts will be given to the LGUs starting with the 2022 budget cycle. The Court, in ruling such, reiterated the ‘operative fact’ doctrine,” he added.

On July 3, 2018, the court ruled that the “just share” of LGUs should be based on all national taxes and not only in the national internal revenue taxes.

This stemmed from the petition filed by former Batangas governor Hermilando I. Mandanas in January 2012, who was then a member of the House of Representatives for the second district of Batangas.

In the petition, he claimed that LGUs are owed around P500 billion, covering underpayments of the IRA between 1992 and 2012.

According to Section 284 of the Local Government Code of 1991, LGUs are entitled to a share of the national internal revenue taxes collected by the Bureau of Internal Revenue which include income tax, value-added tax, excise tax, and other taxes the bureau collects.

National taxes should also include remaining taxes collected by the government such as those raised by the Bureau of Customs, of which Mr. Mandanas claimed LGUs received no share. — Vann Marlo M. Villegas