Review of Laws Enacted After 1991, Supreme Court Decisions and Proposed Bills Affecting the Local Government Code

Yüklə 465.21 Kb.
ölçüsü465.21 Kb.
  1   2   3   4   5   6   7
Review of Laws Enacted After 1991, Supreme Court Decisions and Proposed Bills Affecting the Local Government Code


A. Laws Directly Amending Book of the LGC 4

B. Summary of Laws with Fiscal Implications 5

1. Expenditure Assignment 5

2. Revenue Assignment 6

3. National Gov’t-LGU Fiscal Transfers 7

4. Fiscal Incentives/Tax Exemptions 8

5. Inter-LGU Alliances 9

6. Creation of LGUs 10

7. Fiscal Administration 10

C. Laws Granting Franchises to Various Entities 10

Power of LGUs to impose local franchise tax 12

Exemption of GOCCs from Real Property Tax 14

Exemption of charitable and educational

institutions from RPT 14




Real Property Taxation 16

Business and Other Taxes, Fees and User Charges 16









Annex A. Amendments to the Local Government Code from

1991-2014 21

Annex B. Summary of Laws Enacted (1991-2014) with Fiscal

Implications 22

Annex C. Creation of LGUs 34

Annex D. Laws Granting Franchise, 1992-2014 41





The Government of the Philippines has incorporated into the work plan of the Cabinet Cluster on Good Governance and Anticorruption for 2013-2015 a review of the Local Government Code (LGC). Since its enactment in 1991, the LGC has regulated intergovernmental fiscal relations in the Philippines. Over 22 years since its approval, there is widespread agreement among stakeholders that the LGC has structural deficiencies that need to be addressed through a government-led review. The deficiencies include lack of clarity in functional assignments, limited and unproductive sources of local revenues, and inadequate and inequitable transfer mechanisms. In addition, the LGC requires a review of the criteria defined for jurisdictional formation, and the simplification of procedures for LGUs to access commercial sources of credit.
In 2014, the LGC will undergo a government-led substantive review led by the Department of the Interior and Local Government (DILG). The review is articulated under the Coordinating Committee on Decentralization (CCD). Upon completion of the review, the proposed amendments to the LGC will be submitted through the Cabinet Cluster on Good Governance and Anti-corruption to the Oversight Committee on Devolution (OCD) and to the Legislative- Executive Development Advisory Council. The OCD includes representation from national agencies, the leagues of local governments, and the legislature (House of Representatives and Senate).
The scope of the review includes LGU expenditure and revenue assignments, and fiscal transfers. The review may be structured around seven (7) main topics, to be developed in position papers. A tentative list of the relevant topics, to be decided by the CCD, may include the following:

  1. Expenditure assignment

  2. Revenue assignment & taxing powers

  3. Intergovernmental fiscal transfers

  4. LGU borrowing and credit finance

  5. Creation of LGUs

  6. Inter-LGU alliances

  7. Fiscal administration

To jumpstart the review of the LGC on fiscal matters, a brief scanning of laws enacted and Supreme Court decisions for the last 23 years since the passage of RA 7160 will be conducted. Then, a cursory mapping of the proposed Congressional bills covering the 7 topics mentioned earlier will be undertaken to establish legislative priorities.

From 1991 to 2014, a total of 340 laws were enacted affecting LGU fiscal matters. Six (6) laws directly amended the Book 2 of the Local Government Code, more than half (199) granted franchises mostly on telecommunications and mass media. Of the 135 fiscal-related laws enacted in 23 years, ninety three (93) laws involved the creation of LGUs, mainly the conversion of cities numbering 81, 11 laws pertain to expenditure assignment, 3 laws on revenue assignment/taxing powers; 9 laws national government transfers or revenue sharing, 13 on fiscal incentives, 3 on inter-LGU alliances; and 2 on fiscal administration. For details, see Table 1 below.
Table 1. Number Enacted Laws on Fiscal Matters, 1991 - 2014

Topical Area/Subject Matter


  1. No. of laws directly amending Book 2 of LGC


  1. No. of laws on fiscal-related matters


    1. Expenditure assignment


    1. Revenue assignment/taxing power


    1. National Gov’t-LGU Fiscal Transfers


    1. LGU Borrowing and Credit Finance


    1. Fiscal Incentives/Tax Exemptions


    1. Creation of New LGUs


      1. Provinces


      1. Cities


      1. Municipalities


      1. Barangays


    1. Inter-LGU Alliances


    1. Fiscal Administration


  1. No. of laws granting franchise


T o t a l


A. Laws Directly Amending Book of the LGC
R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992 enacted on March 24, 1992 provides that LGUs may impose, in addition to the basic and SEF real property tax, a socialized housing tax at the rate of 1/2 of 1% of the assessed value of all lands in urban areas in excess of PhP50,000.00. Proceeds from the tax shall be used to fund the urban development and housing program of the LGU concerned.
R.A. 8185 enacted on June 11, 1996 amended Sec. 324 (d) the LGC by providing that the 5% calamity fund shall be used for relief, rehabilitation, reconstruction and other works or services in connection with calamities that may occur during the budget year. R.A. 8553 amended Sec. 41(b) of the LGC by specifying that 1st & 2nd class provinces shall have 10 regular members; 3rd & 4th class provinces, eight (8); and 5th & 6th class provinces, six (6).
R.A. 9009, approved on Jan. 24, 2001, amended Sec. 450 of the LGC by increasing the average annual income requirement for the conversion of a municipality to a component city from an average annual income of at least Php20,000,000.00 for the last two (2) consecutive years based on 1991 constant prices to at least Php100,000,000.00 for the last two (2) consecutive years based on 2000 constant prices.
RA 9184, Jan. 10, 2003, provided for the modernization, standardization and regulation of the procurement activities of the government including LGUs. This law amended Title Six, Book II of RA 7160 on property and supply management in the local government units. R.A. 9640, approved on May 21, 2009, reduced the rate of amusement tax on admission payable by proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement from not more than 30% to not more than 10% of gross receipts from admission fees.
See Annex A for details.
B. Summary of Laws with Fiscal Implications
The 135 fiscal-related laws enacted in 23 years covered expenditure and revenue assignment, inter-governmental transfers, credit finance, creation of LGUs and fiscal administration. See Annex B for details.
1. Expenditure Assignment
Social welfare and development. RA 7876, approved on Feb. 14, 1995, mandated the establishment of senior citizens center in all cities and municipalities of the Philippines under the direct supervision of the DSWD. This was later amended by RA 7432 mandating the creation of the Office for Senior Citizens Affairs (OSCA) to be funded by the local government units concerned. RA 9593, approved on May 12, 2009, mandated the creation of permanent tourism officer every LGU who shall be responsible for preparing, implementing and updating local tourism development plans, and enforcing tourism laws, rules and regulations. RA 9344, approved on April 28, 2006, established a comprehensive juvenile justice and welfare system and mandated the appointment of a duly licensed social worker as its local social welfare and development officer tasked to assist children in conflict with the law.
Agriculture extension. Several laws were enacted involving delivery of agricultural services. RA 9296, approved on May 12, 2004, strengthened the meat inspection system in the country by ordaining a Meat Inspection Code of the Philippines. RA 10536, approved on May 15, 2013, which amended RA 9296, stipulated that the functions of the NMIS Regional Technical Operation Centers (RTOC) in “AA” accredited meat establishments shall be devolved to the provincial government where said meat establishments are located. Related to this, RA 10611, approved on Aug. 23, 2013 strengthened the food safety regulatory system in the country by stating that LGUs, under the supervision of the DILG, DA and DOH, shall be responsible for food safety in food businesses such as, but not limited to, activities in slaughterhouses, dressing plants, fish ports, wet markets, supermarkets, school canteens, restaurants, catering establishments and water refilling stations including the street food sale and ambulant vending. It also specified that LGUs shall be responsible for the enforcement of the “Code on Sanitation of the Philippines” (PD 856, December 23, 1975).
On agricultural and fisheries mechanization development, RA 10601, approved on June 5, 2013, strengthened and institutionalized the agricultural engineering division of the provincial and city agriculture offices, and agricultural engineering section in the municipal agriculture offices into the organizational structure of the LGUs. The LGUs belonging to the first up to the third income classes shall hire at least one (1) agricultural engineer at the provincial, city and municipal levels. In the case of provincial, city and municipal LGUs belonging to the fourth up to the sixth income classes, the DA shall augment and perform such responsibilities.
Environment and natural resource management. Environment-related laws were also enacted giving more responsibilities to LGUs. RA 9003, approved on Jan. 26, 2001, provided for an ecological solid waste management program. This law states that, pursuant to the relevant provisions of RA No. 7160, the LGUs shall be primarily responsible for the implementation and enforcement of the provisions of this law within their respective jurisdictions. RA 9275, approved March 22, 2004, provided for a comprehensive water quality management. Each LGU shall, through its Environment and Natural Resources Office (ENRO) established in Republic Act No.7160, have be responsible for the implementation of provisions of the law.
2. Revenue Assignment
Mining and quarry permits and fees. RA 7942, approved on March 3, 1995, known as the Philippine Mining Act of 1995, granted the Provincial Governor the authority to issue the following permits and collect the corresponding fees: quarry permit, commercial sand and gravel permit, exclusive sand and gravel permit, private gratuitous permit, guano permit, gemstone gathering permit.
Professional tax. RA 9646, approved on June 29, 2009, expanded the tax base of the professional tax imposed by provinces and cities by regulating of the practice of real estate service in the Philippines e.g. real estate brokers, private and government appraisers/assessors and real estate consultants.
Fees for correction of clerical/ typographical errors in civil registry. RA 10172, approved on Aug. 15, 2012, authorized the city or municipal civil registrar to correct clerical or typographical errors in the day and month in the date of birth or sex of a person appearing in the civil register without need of a judicial order. The city or municipal civil registrar shall be authorized to collect reasonable fees as a condition for accepting the petition.
3. National Gov’t-LGU Fiscal Transfers
Special share in excise tax on cigarettes. RA 7171, approved on January 9, 1992, intends to promote the development of the farmers in the Virginia tobacco producing provinces by providing NG financial support in the form of 15% allocation from the excise taxes on locally manufactured Virginia type of cigarettes. Three (3) laws effectively increased the 15% share of the provinces producing burley and native tobacco from the incremental revenues from the excise tax on tobacco products: RA 8240, approved on Nov. 21, 1996, RA 9334, approved on Dec. 21, 2004, and RA 10351, approved on Dec. 19, 2012.
Share in incremental VAT. RA 7643, approved on Dec. 28, 1992, empowered the Commissioner of Internal Revenue to require the payment of the value added tax every month and to allow local government units to share in VAT revenue. In addition to the IRA, 50% of the VAT collection in excess of the increase in collections for the immediately preceding year shall be distributed as follows: 20% shall accrue to the city or municipality where such taxes are collected and shall be allocated in accordance with Sec. 150 of the LGC and 80% shall accrue to the national government.
Taxes, fees and fines collected by the Bureau of Fire Protection. RA 9514, approved on Dec. 19, 2008, established a comprehensive Fire Code of the Philippines repealing PD 1185. Under this law, all taxes, fees and fines shall be collected by the BFP. Twenty percent (20%) of all such collections shall be set aside and retained for use by the city or municipal government concerned, which shall appropriate the same exclusively for the use of the operation and maintenance of its local fire station, including the construction and repair of fire station.
Capitation payments from PhilHealth. RA 7875, otherwise known as the National Health Insurance Act Of 1995, as amended by RA 9241 and RA 10606 (approved on Aug. 23, 2013), amended RA 7875, augmented LGUs’ income from its health facilities through the capitation payments given by the PHIC to be used on health infrastructures or equipment, professional fees, drugs and supplies, or information technology and database. The capitation payments shall be segregated and placed into a special trust fund created by LGUs and be accessed for the use of such mandated purpose.
4. Fiscal Incentives/Tax Exemptions
Exemption of residential facilities/ retirement villages for senior citizens and PWDs from RPT. RA 7432, approved on April 23, 1992, and RA 9442, approved on April 30, 2007, granted individuals or NGOs establishing homes, residential communities or retirement villages solely for the senior citizens and persons with disability, respectively, realty tax holiday for the first five (5) years starting from the first year of operations and priority in the building and/or maintenance of provincial or municipal roads leading to the aforesaid home, residential community or retirement village.
Exemption of ancestral domains from RPT and other forms of exaction. RA 8371, approved on Oct. 29, 1997, also known as "The Indigenous Peoples Rights Act of 1997" provides that all lands certified to be ancestral domains shall be exempted from real property taxes, special levies, and other forms of exaction except such portion of the ancestral domains as are actually used for large-scale agriculture, commercial forest plantation and residential purposes or upon titling by private persons.
Share of LGUs in 5% gross income tax on Ecozones. Several laws were passed establishing ECOZONES with different distribution scheme of the 5% gross income tax. RA 7916, approved on February 24, 1995, provided the legal framework and mechanisms for the creation, operation, administration, and coordination of special economic zones. The PEZA law states that , in lieu of national and local taxes, a tax of 5% of the gross income earned by all businesses and enterprises within the ECOZONE shall be collected and remitted to the national government. The 5% tax shall be shared and distributed as follows: 3% to the national government, 1% to the affected LGUs and 1% to the development fund to be utilized in LGUs outside the ECOZONE. RA 8748, approved on June 1, 1999, amended RA 7916, changing, among others, the distribution of the 5% gross income tax as follows: 3% to the national government, 2% to the municipality or city where the enterprise is located.
On Feb. 24, 1995, RA 7922 established the Special Economic Zone And Free Port In The Municipality of Santa Ana and the neighboring islands in the Municipality Of Aparri, Province Of Cagayan. The 5% gross income tax shall be divided as follows: 2% to the national government, 1% to Cagayan Province, ½ of 1% to the municipalities and 1 1/2% to the Cagayan Economic Zone Authority.
RA 9728, approved on Oct. 23, 2009, converted the Bataan Economic zone located in the Municipality of Mariveles, Bataan, into the Freeport Area of Bataan (FAB). The 5% gross income shall be distributed as follows: 1% to the National Government, 1% to the Province of Bataan, 1% to the Municipality of Mariveles and 2% to the Freeport of Area of Bataan. It is to be noted that while there is no mention about the taxability of real properties because the local taxes mentioned in the law does not include real property taxes.
RA No. 9490, approved on June 29, 2007, established the Aurora special economic zone in the Province of Aurora and created the AURORA SPECIAL ECONOMIC ZONE AUTHORITY. In lieu of all national and local taxes, registered enterprises operating within the Aurora ECOZONE shall pay 5% of the gross income earned to be distributed as follows: 3% to national government and 2% to the municipality or city. RA 10083, April 22, 2010, changed the distribution scheme by reducing the share of the municipality ½%, giving the province the ½% share and the remaining 1% to APECO.
Tourism enterprises under the TIEZA (RA 9593, approved on May 12, 2009) shall pay a tax of 5% on their gross income in lieu of all other national and local taxes, license fees, imposts and assessments, except the real estate taxes. The 5% tax on gross income shall be distributed as follows: One-third to the National Government; One-third to be proportionately allocated among the affected local governments; and One-third to the TIEZA.
Share of LGUs in development, utilization and commercialization of renewable energy resources. RA 9513, approved on Dec. 16 2008, intends to promote the development, utilization and commercialization of renewable energy resources. Forty percent of the government share equivalent to 1% or 1.5% of the gross income of RE resource developers shall go to LGUs, 80% of which shall be used directly to subsidize the electricity consumption of end-users in the RE host communities/LGUs whose monthly consumption do not exceed one hundred kilowatt hours (100 kWh).
5. Inter-LGU Alliances
RA 7820, approved on Nov. 18, 1994, created the Partido Development Administration (PDA) to accelerate the development of lagging regions and districts in order to catch up with more advanced regions and districts through an integrated and coordinated approach. The PDA has an authorized capital stock of P50 million subscribed and paid by the member-municipalities in the Province of Camarines Sur: Sagnay, Tigaon, Goa, San Jose, Lagonoy, Tinambac, Siruma, Presentacion, Garchitorena and Caramoan.. The amount necessary for the implementation of this Act shall be charged against the member-municipalities and against the special fund provided for under Section 12 of PD 1869 (PGCOR law), as amended. PDA is a legal entity endowed with corporate power, e.g. enter into contract, incur indebtedness, etc. RA 8989, approved on Dec. 31, 2000, streamlined the organization of the PDA. It is interesting to know the progress and accomplishments of the PDA after almost 20 years since it creation by law.
6. Creation of LGUs
For the past 23 years since the enactment of RA 7160, there were 84 laws passed by Congress creating LGUs broken down as follows: 6 provinces, 71 cities, 3 municipalities and 4 barangays. See Annex C for listing of laws creating LGUs.
It is to be noted that there are two (2) laws that consolidated municipalities to become a city. RA 8471, January 30, 1998, paved the way for the integration of the three municipalities into one local government unit that is now called the Island Garden City of Samal in the Province of Davao del Norte. The City of Sorsogon was created by virtue of RA 8806, signed into law on August 16, 2000, by merging the municipalities of Sorsogon and Bacon into a component city of the Province of Sorsogon.
  1   2   3   4   5   6   7

Verilənlər bazası müəlliflik hüququ ilə müdafiə olunur © 2016
rəhbərliyinə müraciət

    Ana səhifə