The Philippines: LGUs to absorb NG programs in 2022

  • FINANCE Secretary Carlos G. Dominguez III on 5 Oct 20 told local government units (LGUs) to prepare to absorb programs of the National Government (NG) in 2022, when the Supreme Court (SC) ruling that expanded their share of internal revenue allotments (IRA) will take effect.
  • “The Supreme Court ruling on the Mandanas case is scheduled for implementation in 2022. The LGUs, therefore, must prepare themselves to effectively assume new responsibilities. The LGUs and the National Government must plan and prepare for the seamless transfer of devolved functions, services, and facilities,” Mr. Dominguez said during a webinar organized by the Union of Local Authorities of the Philippines (ULAP).
  • Economic managers expect the Supreme Court’s ruling on the Mandanas-Garcia petition to cost the National Government PHP234.4bn or equivalent to 0.92% of gross domestic product (GDP) once it takes effect in 2022.
  • The ruling clarified that the IRA share of LGUs should be coming from all national taxes collected and not just from the Bureau of Internal Revenue (BIR).
  • Mr. Dominguez said the huge increase in IRAs should help the local governments boost their economies and recover from the impact of the coronavirus pandemic.
  • The DBCC said the impact on local tax revenues will likely be more pronounced in 2021 since local tax assessments will be based on 2020’s weak collections and the reduced capacity of taxpayers who are affected by the economic slowdown.
  • The DBCC has set a PHP144.89bn collection target for LGUs in 2021, 16% less y/y than the already-revised goal.
  • “Anticipating improvements in the economy, local revenue collection would still grow conservatively with a projected increase of 10% annually and reach PHP159.38bn to PHP192.85bn from FY 2022 to FY 2024. These projections would be adjusted once the 2Q20 data becomes available,” it said.

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