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    LOGODEF organized a Capacity Building Program for the Municipality of Tuba, Benguet

Revision of the Local Government Code is long over due

Evidently, much has changed since the Code’s promulgation. The law needs to be adjusted in order for it to remain congruent with the needs of the time. However, Congress has yet to conduct a comprehensive review of the Code more than 20 years after its enactment– despite the law stating that it needs to be revisited every after 5 years of implementation.

 

The Internal Revenue Allotment (IRA) is the single most-dominant tool that can influence the direction, substance and outcome of the devolution program in the country . IRA distribution and control may be affected by two factors: Its sheer magnitude imbues it with much potential for political use; and Congress’ failure to approve the national budget on time, resulting to a re-enacted budget, which means that LGUs are likely to receive less than what they should have received

Ideally, it was supposed to:

  • Equalize to some level the fiscal capacity of LGUs
  • Provide sufficient resources to enable all local governments, even the poorest and the smallest, to provide a basic package of local services

If the IRA were to serve these purposes, the IRA formula needs to be restructured for the following fundamental reasons :

  1. It resulted to vertical imbalance(mismatched expenditure and revenue assignment between the central and local governments) as LGUs are inclined to depend on central government subsidies rather than utilizing their revenue raising powers through local taxation and in the process, earning the ire local constituents.

But in defense of LGUs, noted economist Rosario Manasan identified the following flaws and restrictions in local taxation as stated in the LGC:

  • The law fixes the rate of some of the taxes that are assigned to LGUs;
  • It sets limits (floors and ceilings) on the tax rates that LGUs may impose and maximum allowable rates are rather low;
  • In terms of real property assessment levels, the Code sets maximum assessment rates for different classes of property;
  • It mandates the tax rates to be adjusted only in five years and not by more than 10%.
  1. The transfer scheme also created horizontal inequity as it failed to fiscalize resources among LGUs. It did little to help match revenues with the expenditure functions that have been allocated among the levels of LGUs.