NextGen Day

MANILA, Philippines — A politician asked for a moratorium on the construction of new cities and provinces on Monday, arguing that it would dilute the impact of a Supreme Court ruling giving them a larger part of national tax collections.

Rep. Luis Raymund Villafuerte of Camarines Sur warned in a statement that the formation of new cities and provinces will simply cancel out the good impact of the high court’s verdict on local government financial sustainability (LGUs).

He was referring to the Mandanas, Garcia et al. v. Executive Secretary et al. case, in which the Supreme Court ruled that all national tax collections, with the exception of those going to special-purpose funds and special allotments for the utilization and development of national wealth, should be included in the calculation of the LGUs’ just share.

Previously, the LGUs’ internal revenue allotment (IRA) was solely derived from the Bureau of Internal Revenue’s national internal revenue collections (BIR).

“At this time, we don’t need to create additional cities or provinces because that would merely dilute the impact of the high court’s verdict on the chances available to local governments to build their independence from the national government,” he said.

Instead of constructing new cities and provinces, he believes it is more important to improve the capacity of local government units (LGUs), as more frontline activities and responsibilities would be transferred to them along with higher national tax allotment (NTA).

He also mentioned President Rodrigo Roa Duterte’s signing of Executive Order (EO) No. 138, which gives local government units (LGUs) additional power in the implementation of local projects including infrastructure, agriculture, healthcare, and social welfare.

“Instead, what should be done is to assist LGUs in strengthening their respective capabilities to provide not only basic services in their communities but also to assume a much broader set of responsibilities, as many of the national government’s services will be devolved to the LGUs from now on,” Villafuerte said.

Sandra Tablan-Paredes, Executive Director of the League of Provinces of the Philippines (LPP), said that creating new cities and provinces results in a smaller slice of the pie for all LGUs, many of which are reliant on revenue generated by the national government, in a recent webinar organized by the Philippine Institute for Development Studies (PIDS) and the House of Representatives—Congressional Policy and Budget Research Department.

According to Tablan-Paredes, there is a need to develop a strict set of criteria for promoting municipalities to cities and for municipalities to rise through the six classes based on revenue generated, as many LGUs are expected to want to graduate to a higher tier in order to get a bigger piece of the NTA pie.

There are currently 81 provinces, 1,489 municipalities, and 105 cities in the country.

According to data from the Department of Budget and Management (DBM), LGUs will benefit the most from Duterte’s signing of the PHP5.24 trillion General Appropriations Act (GAA) in 2022, as they will collectively receive PHP959.04 billion in NTA share from the national budget.

The House of Representatives has enacted House Bill No. 10296 on its third and final reading, which aims to increase local government participation in national development by boosting their share of national revenues.

The measure’s purpose is to empower local governments to deliver better services and build more development projects.

It aims to raise the local government’s portion of national taxes from 40% to 50%, starting with the third fiscal year prior to the current fiscal year and continuing thereafter.

Cagayan de Oro is a city in the Philippines. The proposed revisions, according to Rep. Rufus Rodriguez, one of the bill’s writers, will offer more municipal monies for the implementation of Covid-19 response measures.

“At this time of protracted Covid-19 (coronavirus disease 2019) pandemic, our local governments (LGUs) require additional funding to meet the health and economic requirements of their residents. Because of the pandemic, the LGUs’ resources are rapidly depleting,” Rodriguez explained.

The proposed law, according to Rodriguez, would follow the Supreme Court’s recent judgment in the Mandanas case, which “widened the base amounts” for determining the internal revenue allotment, potentially allowing LGUs to have more money for development.

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