Lead Researcher(s): Weena Jade Gera
Status: Published
Introduction:
In 2019, local governments in the Philippines celebrated the Supreme Court decision known as the Mandanas-Garcia Ruling, which effectively expanded the base for the share of local government units (LGUs) of the national taxes. The ruling mandated that the just share of LGUs should not be based solely on internal revenue taxes but on all national taxes, including those collected by the Bureau of Customs and other agencies. As a result, the previous Internal Revenue Allotment (IRA) was redefined as the National Tax Allotment (NTA), leading to a 38 per cent increase in LGU shares in its first year of implementation in 2022-equivalent to a PHP 263.5 billion increase from the FY 2021 IRA shares of PHP 761.5 billion (DBM 2021). This constitutes nearly 20 per cent of the total budget (Diokno-Sicat and Palomar 2021). While LGUs saw this as a victory for fiscal decentralization and local autonomy, the national government faced significant budgetary strain in absorbing the financial impact.