About the Mandanas-Garcia Ruling
Lifted from the Frequently Asked Questions published by the Department of Budget and Management)
In 2018, the Supreme Court (SC) ruled the petitions filed by Congressman Hermilando I. Mandanas, and Congressman Enrique T. Garcia, et al., about the National Government’s manner of computer the Internal Revenue Allotment (IRA) shares of the local government units (LGUs). The SC decided that the just share of LGUs from the national taxes is not only based on the national internal revenue taxes collected by the Bureau of Internal Revenue (BIR), but also on all national taxes, which became final and executory last April 10, 2019. To carry out the decision of the SC, President Rodrigo Duterte released on June 1, 2021 Executive order (EO) No. 138 mandating the full devolution of basic services from the national government agencies (NGAs) to local government units (LGUs).
The Impact of the Mandanas-Garcia Ruling
The impact of the SC decision significantly increased the tax base on which the share of the LGUs is computed from, and thus, strengthened fiscal decentralization. It clarifies the distinction between “national internal revenue taxes” and “national taxes” as base in the computation of the IRA of LGUs.
National internal revenue taxes include only taxes collected by the Bureau of Internal Revenue (BIR) while “National taxes,” consists of all taxes and duties collected by the NG through the BIR, the Bureau of Customs (BOC), and other collecting agencies.
The Implications of the Mandanas-Garcia Ruling on the National Governments and the Local Government Units
Based on the certifications issued by the BIR, BOC, and Bureau of the Treasury (BTr), the fiscal implication of the SC ruling implementation is about PhP959.04 Billion, which is equivalent to a 37.89 percent increase or around PhP263 billion from the FY 2021 IRA shares of LGUs.
The implications of this bigger allocation for LGUs are as follows:
For fiscal sustainability, however, the devolved functions under the LGC should be fully and permanently, albeit gradually, be turned over by the NGAs to the LGUs. The NGAs should then pursue a long-term institutional development program for the LGUs to strengthen their capacities and capabilities to assume the devolved functions.
Salient Features of Executive Order (EO) No. 138 and its Implementing Rules and Regulations (IRR)
Delineation of National and Local Government Roles
Creation of Committee on Devolution (ComDev)
Preparation of Devolution Transition Plans (DTPs)
National Government Agencies (NGAs)
Local Government Units (LGUs)
All provinces, cities, municipalities, and barangays have to prepare their DTPs in close coordination with NGAs concerned.
DTPs shall guide LGUs towards full assumption of devolved functions and services, and serve as guide by NGAs concerned, DBM and DILG on monitoring and performance assessment of LGUs.
Local chief executives have to spearhead preparation of LGU DTPs and organize the LGU DTC; Local Sanggunian to review and approve LGU DTP through a Sanggunian Resolution.
DBM and DILG will jointly issue the guidelines on the preparation of the NGA and LGU DTPs
DBM is tasked to review and approve NGA DTPs; DILG to guide and monitor the submission of LGU DTPs.
Establishment of Growth Equity Fund
A Growth Equity Fund shall be established starting FY 2022 to address problems of marginalization, unequal development, high poverty incidence, and disparities in net fiscal capacities of LGUs.
Capacity Building for National Government Agencies (NGAs) and Local Government Units (LGUs)
Strengthening of Planning, Investment Programming, and Budgeting Linkage and Monitoring and Evaluation Systems
Options for Affected NGA Personnel
Roles of Non-Government Organizations (NGOs), Civil Society Organizations (CSOs), and People’s Organizations (POs)
In cooperation with:
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