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Increase IRA share of municipalities to spur inclusive economic growth in countryside, says Chiz

By Office of Senator Chiz Escudero
September 8, 2015

PASAY CITY – Sen. Francis Escudero called for the restructuring of the distribution of the Internal Revenue Allotment (IRA) to local government units (LGUs) by increasing the allocation for municipalities in order to promote inclusive growth and spur economic development in the countryside.

“Inclusive growth is possible only if countryside development is provided with the much needed support. To make it happen, municipalities should be given a bigger share of the IRA,” Escudero said.

Escudero, who used to head the Senate Committee on Finance, lamented that the present set-up of IRA allocation has resulted in a lopsided distribution of funds among LGUs such that a few provinces and cities receive greater share while the majority, comprising of less developed or poor towns, receive less.

Republic Act No. 7160, or the Local Government Code of 1991, provides that the LGUs shall have a 40-percent share from the national government’s internal revenue collection.

The 40 percent share of the LGUs is distributed as follows: 23 percent for provinces, 23 percent for cities, 34 percent for municipalities, and 20 percent for the barangays.

At present, there are a total of 81 provinces, 114 cities, 1,490 municipalities and 42,028 barangays nationwide.

“Certainly, the 34 percent shared by close to 1,500 municipalities is not enough to support economic activities in the countryside, especially in towns that have no sufficient sources of revenue and merely dependent on the IRA,” Escudero pointed out.

Escudero believes that even if the IRA allocation for cities is cut in half, it would not make much difference considering that they have more sources of local revenues like property and local business taxes unlike most municipalities.

He cited the cities of Quezon and Makati, which in 2014 received P3.18 billion and P775 million in IRA, respectively.

That same year, the annual budget of Quezon City was P13.8 billion while Makati City was P10.3 billion. Both spending plans were funded mainly by local revenues.

“Sa totoo lang kahit kalahatiin mo ‘yung IRA ng mga siyudad hindi nila halos mararamdaman. Pero kapag binigay mo ang kalahati ng IRA nila sa mga munisipyo, mabilis itong mararamdaman at kitang-kita kung saka-sakali ang magagawa ng maliit na halagang iyan para sa mga munisipyo,” Escudero explained.

Moreover, Escudero said the current formula for computing the IRA share violates the true meaning or intent of the 1987 Constitution on the right of LGUs to a just share in national taxes.

“Article XI, Section 6 of the 1987 Constitution mandates that LGUs shall have a just share, as determined by law, in the national taxes, which shall be automatically released to them,” Escudero said.