DOF Clarifies Local Government Tax Shares

By Francis Allan L. Angelo

Finance Secretary Ralph G. Recto has affirmed the Department of Finance’s commitment to transparent implementation of local government units’ National Tax Allotment shares.

“We assure our LGUs that we are strictly adhering to transparency and accountability, especially with the principles set by the Supreme Court, in implementing the Mandanas-Garcia ruling. Nothing is shortchanged,” Recto said.

The Supreme Court’s 2019 Mandanas-Garcia ruling, which took effect in 2022, expanded local governments’ share to 40% of all national taxes collected beyond Bureau of Internal Revenue collections.

The landmark ruling aimed to strengthen fiscal autonomy for local government units across the Philippines.

The Supreme Court ordered the DOF, Department of Budget and Management, Bureau of Internal Revenue, Bureau of Customs, and National Treasury to include all national tax collections when computing the NTA base.

The court specified excluding only those taxes “accruing to special purpose funds and special allotments for the utilization and development of the national wealth.”

The DOF bases its deduction calculations on Section 29(3), Article VI and Section 7, Article X of the 1987 Constitution.

Recto is scheduled to meet with the League of Cities in the coming week to discuss NTA computations.

The finance secretary expressed openness to continued dialogue with local governments to enhance their fiscal capabilities.

“We are very much welcome and open to having continued dialogues with our LGUs to help them strengthen their fiscal capacities and optimize resource utilization to deliver more and better services to Filipinos,” he said.

The Mandanas-Garcia ruling significantly impacted local government financing, as it expanded the tax base for computing their allotments.

Before the ruling, local governments received shares only from national internal revenue taxes collected by the BIR.

The expanded base now includes collections from customs duties and other national taxes.

This change has led to larger allocations for local governments, enabling them to fund more development projects and public services.