SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

20 August 2014 Eastwood Richmonde Hotel, Quezon City

Review of Laws, Supreme Court Decisions & Congress Bills On Local

Gov’t Code Fiscal Matters

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

SCOPE OF THE REVIEW: WHERE WE AREon laws, jurisprudence and bills filed

• Expenditure assignment• Revenue assignment & taxing powers• Intergovernmental fiscal transfers• LGU borrowing and credit finance• Creation of LGUs• Inter-LGU alliances• Fiscal administration

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

OBJECTIVES OF THE REVIEW

1. Facilitate the understanding and consideration of earlier laws and jurisprudence on fiscal matters of the Local Government Code of 1991

2. Map existing proposals and the views of Congress in the form of pending bills

3. Identify pending bills that may allow certain stakeholder proposals to be put forward

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

No. of Laws on Fiscal Matters Enacted, 1991-2014

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Laws Amending the LGC• R.A. 8185 (6/11/1996) amended Sec. 324 (d) of

the LGC by providing that the 5% calamity fund shall be used for relief, rehabilitation, reconstruction and other works or services

• R.A. 9009 (1/24/2001) amended Sec. 450 of the LGC by increasing the annual income requirement for conversion into a component city from P20 million to P100 million

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Laws Amending the LGC• RA 9184 (1/10/2003) amended Title Six,

Book II of RA 7160 on property and supply management in the local government units

• R.A. 9640 (5/21/2009) reduced the rate of amusement tax from not more than 30% to 10% of gross receipts

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

No. of laws on fiscal-related matters, 1991-2014

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Expenditure Assignment• Social welfare and development - RA 9994 mandated the

creation of OSCA, RA 9593 the creation of a permanent tourism officer, and RA 9344 the appointment of licensed social worker as its local social welfare and development officer tasked to assist children in conflict with the law

• Agriculture extension - RAs 9296 & 10536 on meat inspection, RA 10611 on sanitation & food safety, RA 10601 on agric’l & fisheries mechanization development

• Environment and natural resource management - RA 9003 on solid waste management, RA 9275 on water quality management

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Revenue Assignment• Mining and quarry permits and fees. RA 7942 on the

Philippine Mining Act of 1995.

• Professional tax. RA 9646 regulated the practice of real estate service expanding the tax subject.

• Fees for correction of clerical/typographical errors in civil registry. RA 10172 authorized the city or municipal civil registrar to collect reasonable fees as a condition for accepting the petition.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

National Gov’t-LGU Fiscal Transfers

• Special share in excise tax on cigarettes – RA Nos. 7171, 8240, 9334, and 10351

• Share in incremental VAT - RA 7643

• Capitation payments from PhilHealth - RA 7875, otherwise known as the National Health Insurance Act Of 1995, as amended by RA 9241 & RA 10606 augmented LGUs’ income from its health facilities through the capitation payments given by the PHIC

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Fiscal Incentives/Tax Exemptions

• Exemption of residential facilities/retirement villages for senior citizens and PWDs from payment of real property taxes - RA 7432 & RA 9442

• Exemption of ancestral domains from real property tax and other forms of exaction under RA 8371

• Different LGU sharing scheme in the 5% gross income tax on ecozones – RA Nos. 7916, 8748, 7922, 9728, 9490, 10083, & 9593

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Inter-LGU Alliances

• RA 7820 created Partido Dev. Administration (PDA) to accelerate the development of 10 municipalities in Camarines Sur.

PDA is a legal entity endowed with corporate power, e.g. enter into contract, incur indebtedness, etc. RA 8989, approved on 31 December 2000, streamlined the organization of the PDA .

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Creation of LGUs

• In the past 23 years since the enactment of RA 7160, there were 93 laws passed by Congress creating LGUs broken down as follows:

4 provinces, 81 cities, 4 municipalities and 4 barangays.

• Two laws were passed that consolidated municipalities to become a city – RA 8471 (Samal City) and RA 8806 (Sorsogon City).

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Fiscal Administration • Recognition and use of e-transactions as provided under

RA 8792 (E-commerce law)

• Creation of Philippine Tax Academy under RA 10143 to serve as a learning institution for tax collectors and administrators of the government and selected applicants from the private sector. It shall handle all the trainings, continuing education programs and other courses for all the officials and personnel of the BIR, BOC & BLGF.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Supreme Court Decisions

• Over the last 10 years, the Supreme Court promulgated a number of decisions that had an impact on the revenue-raising powers of provinces.

The cases mostly concerned the franchises of telecommunications companies and the tax treatment of government-owned and controlled corporations such as the National Power Corp. and the Philippine Ports Authority. One case stemmed from the issue about the release of the internal revenue allotment (IRA) of LGUs.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

HOUSE/SENATE BILLS FILED ON LOCAL GOVERNMENT FINANCE

AND FISCAL DECENTRALIZATION

DURING THE

16TH Congress

Expenditure Assignment • Mandatory appointment of municipal agriculturists,

cooperatives officer, environment and natural resources officer, registered and licensed architects or civil engineers as local building officials, & social welfare and development officers

• 4 HBs proposed the re-nationalization of health services but no counterpart bill in the Senate

• Revert to the national gov’t the devolved basic agricultural functions/responsibilities of LGUs

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Revenue Assignment/Taxing Powers On real property taxation, the creation of Real Property Valuation

Service in the Bureau of Local Government Finance (BLGF) to conduct the review of the schedule of market values (SMVs) and recommend for approval to the Secretary of Finance, thereby separating the technical function of valuation from the political function of taxation.

Simplify the business tax structure by abolishing the graduated business tax rates and changing the tax rate to not more than 2.5% of the gross sales or receipts of the preceding year.

Abolition of the community tax and the use of the community tax certificate.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Inter-governmental Transfers • 26 House bills and 8 Senate bills filed on IRA mostly

increasing the LGU share from 40% to 50% or 60% and expanding the base of its computation from internal revenue taxes to national taxes to include collections from the Bureau of Customs and other tax collecting agencies

• 4 House bills and 2 Senate bills propose that persons, natural or juridical, engaged in utilization and development of national wealth, shall remit directly a 40% share to the host LGUs, at the same time, 60% share of the national government is remitted.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Borrowing/Credit Finance

• 2 House bills were filed on credit finance:Suggests that the accumulated loan obligations of the

LGU shall in no case exceed fifty (50%) percent of the internal revenue allotment

Bill seeking to bar local government units from obtaining loan for infrastructure projects one year prior to every national and/or local elections.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Creation of LGUs

• Most of the bills will increase the income requirements for converting a municipality to a component city, to high urbanized city, and creation of a province and municipality.

• A House bill stating that an LGU may be created, divided, merged, abolished, or its boundaries substantially altered ONLY by law enacted by Congress.

• HB 4644 creating the Agoo-Aringay City**

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

Local Fiscal Administration • Bills mandating LGUs to disclose certain documents for

the information of the public in line with the principle of transparency in local governance.

• Bill seeking to transfer the power to review appropriation ordinances of component cities and municipalities from the Sanggunian Panlalawigan to DBM.

• Bill providing for the exclusion of IRA in the income classification system of LGUs amending Sec. 4a of EO 249.

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

The Way Forward• The review of laws and SC decisions provided the

perspective of what has been done

• Pending bills in Congress have been mapped to reveal priority areas of reforms under legislative consideration

• Proposals and views from all sectors will be incorporated in the position papers that will serve as the basis for crafting proposed LGC amendments

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

SYMPOSIUM ON THE REVIEW OF THE 1991 LOCAL GOVERNMENT CODE

Improving Lives Through Local Governance Reform: Transparency, Accountability and Better Services

20 August 2014 Eastwood Richmonde Hotel, Quezon City

Thank You!