EMPOWERMENT OF REGIONS

PROPOSED AMENDMENTS TO SECTIONS 6 AND 14 OF

ARTICLE X, 1987 CONSTITUTION
 FISCAL
STRENGTHENING OF
LOCAL GOVERNMENTS

SECTION 6, ARTICLE X
1987 CONSTITUTION

2
• Congress enacts the General
Appropriations Act (GAA) which provides
for the allocation of the National Budget.
•
One of the items indicated in the GAA is the
Internal Revenue Allotment (IRA).

• The IRA is the share of the Local

Government Units (LGUs) in the National
Internal Revenue Taxes which should be
automatically released to them.

3
Add existing condition

4
SPECIAL PROVISION(S)
OFFICIAL GAZETTE

▰ 1. Internal Revenue Allotment of Local Government Units.

- In addition to LGU shares, ₱ 575,520,580,000 is automatically
appropriated for the LGU share in the national internal revenue
taxes in accordance with Section 4 of R.A. No. 9358 and shall be
allocated pursuant to Section 285 of R.A. No. 7160 and the
General Provisions of this Act. 

5
SPECIAL PROVISION(S)
OFFICIAL GAZETTE

▰ 2. Shares in National Wealth. The amount of ₱ 3, 161,337,000

appropriated herein for the LGU share in mining taxes, royalties from
mineral reservations, forestry charges, and fees and revenues
collected from energy resources in the utilization and development of
national health shall be subject to the following:
▰ (a) Use- accordance with Section 294 of R.A. No. 7160;
▰ (b) Allocation - pursuant to Section 292 of R.A. No. 7160; and
▰ (c) Release- upon certification of actual collections by the revenue
collecting agencies concerned and remittance to the BTr

6
SPECIAL PROVISION(S)
OFFICIAL GAZETTE

▰ 3. Shares in Excise Taxes from Locally Manufactured Virginia-type

Cigarettes. P14,401,782,000) appropriated herein for the LGU share
in excise taxes from locally manufactured Virgina-type cigarettes shall
be subject to the following:
▰ (a) Use 50% of all shares accruing to the LGUs are used for
barangay economic projects duly approved by the Local Development
council concerned
▰ (b) Allocation - the respective shares of the LGUs of of a beneficiary
province shall be distributed as follows:

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SPECIAL PROVISION(S)
OFFICIAL GAZETTE

i.  30% - provincial government of the beneficiary province

ii. 40% - municipalities and cities to be further distributed as follows :
 (a) 50% - to be divided equally among all the municipalities and cities of
the beneficiary province,
 (b) 50% to be divided according to volume of their respective tobacco
production

iii. Thirty percent (30%) to the municipalities and cities in the congressional
districts of a beneficiary province. The share of each congressional district
shall be based on the volume of tobacco production within each district and
devoted solely for the objectives stated under R.A. No. 7171 and used
exclusively for the benefit of the municipalities and cities in the
congressional districts of a beneficiary province in accordance with Section
289 of the National Internal Revenue Code 8
 INTERNAL REVENUE
ALLOCATION (IRA)

The local government

CURRENT IRA SHARING units share 40% of the
national taxes

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 YEAR NATIONAL BUDGET IRA PERCENTAGE
(Php) (Php)
2010 1.541 Trillion 249,988,867,000 16%
2011 1.645 Trillion 265,802,377,000 16%
2012 1.816 Trillion 273,309,592,000 15%
2013 2.006 Trillion 302,304,001,000 15%
2014 2.265 Trillion 341,544,726,000 15%
2015 2.606 Trillion 389,860,429,000 15%

2016 3.002 Trillion 428,619,518,000 14%

2017 3.35 Trillion 486,885,005,000 15%
2018 3.767 Trillion 522,748,165,000 14%
2019 3.757 Trillion 575,520,580,000 15%

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IRA SHARING

20%
23% The total annual IRA shares
due to all LGUs shall be
allocated as follows:
34% 23%

Source: Article 382 (a), IRR of the LGC

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IRA SHARING

The share of every

25%
province, city and
municipality shall be
determined on the basis of
50% the following distribution
formula

25%

Source: Article 328 (b), IRR of the LGC

Population Land Area Equal Sharing 12

 MANDATED FUNCTIONS OF LGUs

Besides spending on social services, the LGC also mandated that LGUs must
perform the following responsibilities:

Land use planning Agricultural extension Services and Research Community Based
Forest Management

Solid Waste Environmental Pollution Primary Hospital Care

Disposal System Management Control Health Care
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 MANDATED FUNCTIONS OF LGUs
Besides spending on social services, the LGC also mandated that LGUs must perform the
following responsibilities:

Social Welfare Services Local buildings and Public parks Municipal Facilities Communal
structures Housing Irrigation

Water Supply Drainage Sewerage Flood Control Inter-Municipal

Telecommunications 14
LGU SPENDING PATTERNS

Table 1: LGU SPENDING PATTERNS

Bureau of Local Government Finance-DOF

Besides spending on
public service
another trend that
can be observed is
the relative increase
in the spending for
social services

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REVISED DEFICIT TABLE (2018)
in Million Pesos
REGION 2018 IRA 2018 TOTAL EXPENDITURE DEFICIT

NCR 22,857.26 35,806.04 -12,948.78

CAR 13,720.75 15,713.99 -1,993.24
I 22,027.39 21,967 +60.39
II 22,237.87 24,170.44 -1,932.57
III 22,020.34 53,773.60 -31,753.26
CALABARZON 46,958.91 69,741.74 -22,782.83
MIMAROPA 19,434.97 13,747 +5,687.97
V 25,065.02 19,478.45 +5,586.57
VI 33,150.43 27,693.1 +5,457.33
VII 29,360.14 40,516.5 -11,156.36
VIII 25,039.66 22,169.27 +2,870.39
IX 17,225.11 18,426.78 -1,201.67
X 23,263.71 31,727.52 -8,463.81
XI 21,299.43 26,315.75 -5,016.32
XII 19,640.76 18,400.52 +1,240.24
CARAGA 17,499.65 15,808.81 +1,690.84
ARMM 20,132.29 223,737.05 -203,604.76 16
GRAND TOTAL 400,933.71 679,199.58 -278,265.87
NATIONAL TAXES V. NATIONAL INTERNAL
REVENUE TAXES
1987 Constitution
 
Article X: Local Government
SECTION 6. Local government units shall have
a just share, as determined by law, in the
national taxes which shall be automatically
released to them.
 
Local Government Code
CHAPTER I: Allotment of Internal Revenue
Section 284. Allotment of Internal Revenue
Taxes. - Local government units shall have a
share in the national internal revenue taxes
based on the collection of the third fiscal year
preceding the current fiscal year as follows:
(a) On the first year of the effectivity of this
Code, thirty percent (30%);
(b) On the second year, thirty-five percent
(35%); and
(c) On the third year and thereafter, forty percent
(40%).
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 EXISTING PROBLEMS WITH IRA
▰ Horizontal Imbalance
Local Total Cost of Mandated IRA Net Resources
Government Devolved Share (N) Transfer
Unit Functions (M) (M-N)
Province 29.00% 23.00% -6.00%
City 33.00 % 23.00% -10.00%
Municipality 59.00% 34.00% -25.00%

Budget Expenditure and Source of Financing

Local Total Cost of Mandated IRA Net Resources
Government Devolved Share Transfer
Unit Functions
Province 124,112.35 121,176.71 -2,935.64
City 169,130.87 119,774.06 -49,356.81
Municipality 385,956.36 159,982.94 -225,973.42
* 18
https://www.dbm.gov.ph/index.php/budget-documents/2018/
besf-table-2018
 EXISTING PROBLEMS WITH IRA

▰ Problems in terms of formula (Population, Land Area and Equal

Sharing) in the IRA distribution formula

Failure to equalize fiscal resources among LGUs such that disparities in fiscal
capacities are not adequately addressed;
Poor predictability in the size of the IRA, which undermines the ability of LGUs to
effectively plan and manage their expenditures
Source: Manasan, R. [2007b] “IRA design issues and challenges”, PIDS Policy
Notes, 2007-09, December.

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 EXISTING PROBLEMS WITH IRA

▰ Vertical imbalance
▻ IRA share given to the LGUs is insufficient to cover for the

INFLATION POPULATION SALARY

GROWTH ADJUSTMENTS

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Implementation of SC
Ruling to increase IRA
share

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 THE SUPREME COURT RULING

The Supreme Court Ruling on the Mandanas and Garcia Petitions

The exclusion of other national taxes like customs duties from the
base for determining the just share of the LGUs contravened the
express constitutional edict in Section 6, Article X of the 1987
Constitution.

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According to the Supreme Court Ruling in Mandanas vs
Executive Secretary indicated that the following taxes
will now be included in the “national taxes” and as
basis for computing the just share of the local
government units (LGUs) by virtue of Mandanas ruling
shall not be limited to:

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The national internal revenue taxes enumerated in Section 221 of the National Internal
Revenue Code collected by the Bureau of Internal Revenue and the Bureau of Customs

Tariff and customs duties collected by the Bureau of Customs

50% VAT collected from BARMM 50% VAT on Sale of Goods or

Properties (Section 106),VAT on Sale of
Services, Use or Lease of Properties
30% national tax from BARMM (Section 108)

60% from exploitation and

development of national
wealth
85% excise taxes from locally
Virginia-type cigarettes and
other tobacco products
5% of the 25% franchise taxes
given to National Government
(Section 6 of Republic Act No. 6631 and
Section 8 of Republic Act No. 6632)
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 PROPOSED SOLUTION: INCREASE IN
IRA SHARE

▰ Inclusion of customs duties and other national taxes

▰ Reassess the tax and expenditure assignment across different
levels of local government
▰ Address the vertical imbalance through greater tax
decentralization—the assignment of more tax bases to
▰ Redesign the intergovernmental transfer

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 PROPOSED SOLUTION: RE-EVALUATE
CRITERIA FOR IRA SHARING SCHEME

SUGGESTED ADDITIONAL CRITERIA FOR IRA SHARING SCHEME:

▰ Poverty incidence
▰ Geographic peculiarities
▰ Level of own-source revenue
▰ Level of financial management revenue

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http://www.psa.gov.ph/sites/default/files/2018S1POV_Tab10_xlpeh_v2.xlsx
27
As the map indicates, poverty is pronounced in several
widely scattered parts of the Philippines. Overall, the
poorest part of the Philippines is the Muslim-majority
area in the southwest, which I have therefore outlined
in red. But several non-Muslim provinces on Mindanao
also have high poverty rates, and in general terms the
island is much poorer than Luzon. Some of the
historically tribal areas of the highlands of northern
Luzon are also quite poor, quite in contrast to
neighboring Benguet. In the central Philippines, Samar
(particularly eastern Samar), eastern Negros, and
Masbate have high rates of poverty, a deeply
entrenched pattern of Philippine economic geography.
The Philippine government recently announced that
poverty in Samar and elsewhere in the eastern Visayas
has intensified in recent years, a trend linked to the
tropical cyclones that have devastated this vulnerable
area.

Source:  28
http://www.geocurrents.info/economic-geography/the-geography-of-poverty
29
Section 6, Article X Amendment: Just
Share of Resources for LGUs

Organizational
Financial needs
Capacity
Poverty incidence
Geographic peculiarities Level of financial
management revenue

Resources
Level of own-source revenue

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 SECTION 6, ARTICLE X
1987 CONSTITUTION
SECTION 6, Article X,
1987 Constitution
Local government units shall
have a just share, as
determined by law, in the
national taxes which shall be
automatically released.
Proposed Revision
Local government units and the Regional
Development Authority shall have a just
share, as determined by law on the
basis of their financial needs,
organizational capacities, and
resources, in all national taxes based
on the second year preceding the
current fiscal year and which shall be
automatically released to them.
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Specific Amendments

32
 CREATING
REGIONAL DEVELOPMENT
AUTHORITIES
SECTION 14, ARTICLE X
1987 CONSTITUTION
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What is RDC?

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 REGIONAL DEVELOPMENT
COUNCIL (E.O. 308, s.1987)

▰ The Regional Development Council (RDC) is the primary

institution that coordinates and sets the direction of all
economic and social development efforts in the region. It also
serves as a forum where local efforts can be related and
integrated with national development initiatives.

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REGIONAL DEVELOPMENT
COUNCIL (E.O. 308, s.1987)

Local Government
Government Agencies
Units Composition
of the RDC

Special
Private Sector
Members
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 FUNCTIONS OF THE REGIONAL
DEVELOPMENT COUNCIL (E.O. 308, s.1987)

▰ Coordinate the formulation of long–term, medium–term, and annual

socio– economic development plans and policies at the regional and
subregional levels;

▰ Coordinate the formulation of the medium–term and annual public

investment programs at the regional and subregional levels;

▰ Undertake the appraisal and prioritization of the region’s socio-

economic development programs and projects, consistent with the
standards and policies developed by the NEDA;

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 FUNCTIONS OF THE REGIONAL
DEVELOPMENT COUNCIL (E.O. 308, s.1987)

▰ Promote and monitor the inflow and allocation of private investment

capital in the regions, consistent with development objectives,
strategies, and policies adopted;

▰ Coordinate the implementation of programs and projects in the region

which involve several agencies in their implementation; and

▰ Monitor, evaluate and formulate recommendations on the

implementation of development plans and programs in the region.

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 ISSUES AND CHALLENGES OF THE
REGIONAL DEVELOPMENT COUNCIL

▰ RDCs are simply recommendatory body to the national

government agencies;

▰ National government agencies can set aside these

recommendations if not aligned with the agencies’ priorities;

▰ The centralized hierarchy of approval marginalizes the

development concerns of the regions.

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STRUCTURE OF REGIONAL DEVELOPMENT
COUNCIL (RDC)

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• Few regional plans are approved because dependent on the
approval of NEDA Board
• Even if approved, subject to discretion of Congress and line
agency
• Recommendatory only
• When implemented, RDC has no say as to finishing

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BICOL INTERNATIONAL AIRPORT (Daraga,
Albay - Region V)
NEDA approval: 4 September 2012
Project Implementation: 2013-2015
Status (April 2019): 57 percent compliance
MALITUBOG-MARIDUGAO IRRIGATION PROJECT - PHASE II
(North Cotabato-Maguindanao, Region XII and BARMM)
 
NEDA approval: (20 December 2010)
Project Implementation: 2011-2018
Status (October 2019): 57.46 percent compliance

 
BALOG-BALOG Multipurpose Phase II Project -
Dam (Tarlac - Region III)
NEDA approval: 19 May 2015
Project Implementation:
Status (March 2019): 25.71 percent complete
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What is now the
proposal?

43
44
 REGIONAL DEVELOPMENT
AUTHORITY
The creation of the RDA will address the policy gap under a centralized
unitary system, to wit:
▰ Transform the regional development council into a functional body vested
with both formulation, implementation, and monitoring powers with regard to
plans and programs aimed to develop the region;
▰ Provide a definite mandate and enhanced role of elected local chief
executives and regional directors of line agencies; and
▰ The President will appoint the Head of the RDA to ensure that development
plans formulated in the regions will be executed and implemented.
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 PROPOSED SECTION 14, ARTICLE X
1987 CONSTITUTION

The President shall create a Regional Development Authority

composed of provincial governors, city mayors, presidents of
the league of municipalities of each province, and regional
heads of the departments and other national government offices
within the regions for purposes of administrative
decentralization to strengthen the autonomy of the units therein
and to accelerate the economic and social growth and
development of the units in the region. Toward this end the
authority shall formulate, implement and monitor plans and
programs for the development of the region. Congress shall
allocate funds as may be necessary for this purpose.
46
 SECTION 14, ARTICLE X
1987 CONSTITUTION
SECTION 14, Article X, 1987 Constitution
The President shall provide for
regional development councils or other
similar bodies composed of local
government officials, regional heads of
departments and other government
offices, and representatives from non-
governmental organizations within the
regions for purposes of administrative
decentralization to strengthen the
autonomy of the units therein and to
accelerate the economic and social
growth and development of the units in
the region.
Proposed Revision
The President shall provide create for regional development
councils or other similar bodies a Regional Development
Authority composed of local government officials, regional
heads of departments and other government offices, and
representatives from non-governmental organizations within the
regions composed of provincial governors, city mayors,
presidents of the league of municipalities of each province,
and regional heads of the departments and other national
government offices within the regions for purposes of
administrative decentralization to strengthen the autonomy
of the units therein and to accelerate the economic and
social growth and development of the units in the region.
Toward this end the authority shall formulate, implement
and monitor plans and programs for the development of the
region. Congress shall allocate funds as may be necessary
for this purpose.
47
1. RDA empowered to plan, implement,
monitor, and evaluate projects and
programs in accordance with the specific
and distinct needs per region.
2. Have automatic funding for the
implementation of projects and programs.

48
 REGIONAL DEVELOPMENT
AUTHORITY

The amendment will allow the RDA to do the following:

▰ It will not only serve as a recommendatory organization but would

have a specific mandate on how regional plans and identification of
priority programs can be fully realized in accordance to the interests
of their respective regions;

▰ It will be in charge of the implementation of its development plans;

49
 REGIONAL DEVELOPMENT
AUTHORITY

The amendment will allow the RDA to do the following:

▰ It will ensure the funding for the operations and implementation

of various programs and projects; and

▰ It will serve as a bridge to harmonize national government

priorities with that of the regional and local government
programs and projects.

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THANK YOU!
51