Mandanas-Garcia ruling, full devolution of the LGUs (1st of 3 parts)

The year 2022 ushers in a new era in local governance in the Philippines as it embarks towards full devolution as the result of the landmark 2019 Mandanas-Garcia Ruling.

Before 1992, the Philippine government was highly centralized in terms of powers, responsibilities and resources. But the passing of the Local Government Code on October 10, 1991, paved the way for the government to be decentralized through the devolution of several national government agencies’ functions such as health, social welfare, agriculture environment, public works among other basic services. 

It was even one of the pioneering decentralization models in Asia. However, the full devolution was not attained due to budgetary limitations in accordance with the devolved functions and establishment of facilities. 

For years many lawmakers tried to amend the 60/40 Internal Revenue Sharing in favor of the Local Government Units to compensate the growing demands for basic services of their constituents and the local officials’ vision to effect countryside development. 

Finally, in 2013, then Batangas Representative (now Governor) Hermilando I. Mandanas, Mayors Efren B. Dion and Mayor Antonino Auerilo and other local officials filed a complaint against the National Government Officials led by Executive Secretary Paquito Ochoa, Finance Secretary Cesar Purisma, Budget Secretary Florencio H. Abad, Internal Revenue Commissioner Kim Henares and National Treasurer Roberto Tan. 

At the same time, the late Bataan 2nd District Representative Enrique T. Garcia Jr. also filed a petition against the same respondents excluding National Treasurer Roberto Tan, though he included Custom Commissioner Rozzano Rufino B. Biazon. 

The separate petitions were docketed as G.R. No. 199802 and G.R. No. 208488 respectively and were joined in 2013. The main questions of the petitions were the manner in which the NGAs computed the IRA shares of LGUs and accordingly asked the Supreme Court to mandate the NGAs to compute the IRA based on all national taxes, encompassing national internal revenue taxes and customs duties; and Demands for the payment of additional unpaid IRA of around P500 billion for the years 1992 to 2012 claiming that the computation of the IRA then was wrong since the inception of the LGC in 1991. 

On July 3, 2018, the Court promulgated its decision in finality, disposed and partially granted the petition of the petitioners and declares the phrase “internal revenue” appearing in Section 284 of Republic Act No. 7160 (Local Government Code) unconstitutional, and deletes the phrase from Section 284. It means that the share of the LGUs will also include those of the custom duties and tariffs collected by the Bureau of Customs, not just the taxes remitted by the Bureau of the Internal Revenue to the National Treasurer.

But the Supreme Court did not grant the petition to pay back to the local government the 500 Billion IRA since 1991. Since it explicitly mandated the Prospective application of its ruling and only noted the suggestion of the Office of the Solicitor General in giving the amounts due to the LGUs beginning of the Fiscal Year 2022.

Because of the landmark Supreme Court Ruling, the LGUs will have increased financial resources that could provide them effective and efficient service delivery, foster participatory, just, responsive, and transparent local governance. 

The impact lies primarily with the correction of the just share from internal revenue to national taxes that will now include all other national government agencies like the Bureau of Customs and other agencies as tax base in computing the just share of the LGUs. Hence, beginning 2022, the LGUs just share will no longer be called Internal Revenue Allotment but National Tax Allocations.*