Leaders of local government units (LGUs) said they welcome and look forward to the implementation of the Mandanas Ruling, the historic Supreme Court decision that will go into effect in 2022.
The Mandanas Ruling will raise internal revenue allotments (IRA) in the 2022 national budget by 55% to P1.08 trillion or 4.8% of GDP versus 3.5% in 2021. The decision basically raises the share of national government tax revenue transferred to local governments.
“LGUs have been anticipating as welcome relief the implementation of the landmark Supreme Court ruling on the petitions filed way back in 2012 by Batangas governor Mandanas and Bataan governor Garcia,” said Dakila Carlo Cua, governor of the province of Quirino, during a recent webinar organized by the Liveable Cities Challenge Philippines.
The Mandanas Ruling is the result of the petition made by Batangas Governor Hermilando Mandanas and former Bataan Governor Enrique Garcia, Jr. before the Supreme Court to increase local government shares in internal revenue allotments.
According to the petitioners, LGU shares should include all national taxes, and the Supreme Court affirmed in 2018 that LGUs are entitled to a “just share” of all national taxes collected, not only from the Bureau of Internal Revenue (BIR).
At present, LGUs’ IRA comes from 40% of national internal revenue taxes collected by the BIR. With the implementation of the Mandanas Ruling in 2022, it is projected that LGUs will have a 27.61% increase in total IRA shares.
Cua said that under the Supreme Court ruling, the just share of LGUs from national taxes should not be limited to national internal revenue taxes collected by the Bureau of Internal Revenue (BIR) but should also include collections by the Bureau of Customs, such as customs duties.
The expected share of LGUs for 2022 will be increased by P234.4 billion, 27.61% higher than their entitlement using existing computation.
Cua also pointed out that the 1987 Philippine Constitution states that “the State shall ensure the autonomy of local government units” and that LGUs “shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.”
But over the past 30 years, he said, “LGUs in general have been in fact struggling to fund the delivery of basic services and programs at a level that meets the standards to the satisfaction of our constituencies.”
He added: “Honestly speaking the 40% share of national internal revenue taxes that LGUs receive annually could hardly cover the mandated provision of quality, full, sustainable delivery of basic public services for most localities.”
Cua said the Union of Local Authorities of the Philippines (ULAP), which he chairs, “throws its support behind the administration’s move towards full devolution vis-à-vis the Supreme Court decision in the context of pursuing meaningful local autonomy.”
But he also acknowledged that several issues are bound to arise with the implementation of the order, including the need for capacity building and funding support to enable LGUs to perform newly devolved functions such as enhancement of health facilities, school building programs, and development of communal irrigation systems.
Mayor Evelio Leonardia of Bacolod City, the national president of the League of Cities of the Philippines (LCP), during the same webinar said the LCP “commits our full support to the devolution of powers to LGUs in 2022 due to the Mandanas-Garcia ruling.”
Leonardia said full devolution “will invigorate our country’s development,” but warned that not all cities will be ready to assume the additional responsibilities, noting that not all cities are created equal.
To improve cities’ capabilities, he suggests making an assessment of areas for improvement, the holding of trainings and programs, and the release of a guidebook to equip cities with the knowledge, skills and resources for the sustainable and smooth transfer of devolved functions.
At the same time, Leonardia said there should be enhanced transparency and accountability in city operations with the implementation of the SC ruling. This can be ensured by encouraging cooperation between national government agencies and LGUs, using local government resource centers as platform for capacity development, and institutionalizing performance standards and developing mechanisms for good governance.
Meanwhile, Ateneo de Manila University law professor Alberto Agra in his presentation enumerated the benefits for LGUs of increased funds. These include greater fiscal independence, more projects, bigger development fund, room for innovation, and substantial contribution in private-public partnerships and joint ventures.
He added that full devolution should also require the expanded corporate and personal accountability of the LGU, the local chief executive and local government officials, noting that more resources mean greater accountability.