CAMARINES Sur Rep. LRay Villafuerte has called for a freeze on the creation of new cities and provinces amid the increased financial resources that the local government units (LGUs) are getting starting this year as a result of the Supreme Court (SC) ruling that gave them a bigger share of national tax collections.

A former governor, Villafuerte, said the creation of new cities and provinces will merely cancel out the positive impact of the high court’s ruling on the financial viability of LGUs.

In Mandanas, Garcia et al. v. Executive Secretary et al. case, the SC held that all collections of national taxes, except those accruing to special-purpose funds and special allotments for the utilization and development of the national wealth, should be included in the computation of the base of the just share of the LGUs.

Previous to this Mandanas ruling, the LGUs’ Internal Revenue Allotment (IRA) came only from their 40%-share of national internal revenue collections by the Bureau of Internal Revenue (BIR).

“We don’t have to create new cities and provinces at this point because this will just dilute the impact of the high court’s ruling on the opportunities open for LGUs to build their independence from the national government. Instead, what should be done is to assist LGUs in strengthening their respective capabilities to provide not only basic services in their localities but in assuming a much wider set of responsibilities as many of the services provided by the national government will be devolved from hereon to the LGUs,” said Villafuerte.

With the Mandanas-Garcia ruling stating that LGUs are entitled to a “just share” of all national taxes collected, it is projected that LGUs will have a 27.61% increase in their total share of the IRA, now called the National Tax Allotment (NTA), according to the Department of the Interior and Local Government (DILG).

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

Tablan-Paredes also sought a more stringent set of criteria for promoting municipalities to cities and for municipalities to rise through the six classes based on income generated, as it is expected that many LGUs would want to graduate to a higher tier to get a bigger share of the NTA pie.

Currently, the country comprises 81 provinces, 1,489 municipalities, and 105 cities.

Villafuerte has urged the incoming crop of local elective executives this year to focus on crafting their respective development masterplans that would further strengthen their political and fiscal autonomy in view of the expanded roles that they would have to perform as a result of their respective local governments’ increased share in the proceeds from national taxes.

Department of Budget and Management (DBM) data show that LGUs are the biggest beneficiaries of the 2022 General Appropriations Act (GAA) of P5.24 trillion signed by President Rodrigo R. Duterte, as they are to collectively get P959.04 billion in NTA share from the national budget – or about a third more than their 2021 IRA of P695.49 billion.

However, Villafuerte pointed out that the higher NTA will entail bigger responsibilities for local elective officials, given that the President had signed Executive Order (EO) No. 138 devolving more powers to LGUs in the implementation of local projects, such as those on infrastructure, agriculture, healthcare, and social welfare.

Earlier, the House of Representatives (HOR) passed on third and final reading the House Bill (HB) No. 10296, the consolidated bill that seeks to increase to 50% from 40% the LGU share of national taxes.

Villafuerte is one of the principal authors of the consolidated measure. His original bill was filed long before the release of the Mandanas-Garcia ruling.

Aside from increasing the share of LGUs in the proceeds from national taxes, the bill also ensures that this would not be reduced substantially even with a ballooning public deficit and lower gross domestic product (GDP) growth because this contains a provision that states that in no instance shall the President be allowed to reduce the NTA to less than 30% of the collection of taxes on the third fiscal year preceding the current fiscal year.

Moreover, even with this possibly reduced share, the measure also provides that during the first year of its effectivity, the LGUs, in addition to the 30%-share, shall also include the cost of devolved functions for essential services.

Instead, the bill provides that in cases when the national government incurs an unmanageable public sector deficit, the President, upon the recommendation of the Secretaries of Finance, of Interior and Local Government, and of Budget and Management, shall make the necessary adjustments to the LGU share, but upon consultation with the Congress.