LGU-generated revenue hit P169B in Q2, IRA dependence still high

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REVENUE generated by local government units (LGUs) in the second quarter rose 5% from a year earlier to P168.96 billion, leaving their share of National Government revenue as their largest source of income, the Department of Finance (DoF) said.

Citing data from the Bureau of Local Government Finance (BLGF), the DoF said in a statement over the weekend that locally-generated provincial, city and municipal revenue rose 36% quarter on quarter.

The second-quarter collections accounted for 37% of their total operating income of P273.21 billion, improving from 35% a year earlier.

Local business and real property taxes were up 4% year on year to P135.07 billion, making up 80% of LGUs’ locally-sourced revenue.

Income generated from non-tax measures rose 6.4% to P33.88 billion.

Income from other sources fell, among them transfers from the National Government, which fell 57.5% year on year to P18.69 billion due to the high year-earlier base.

At the height of the pandemic last year, the National Government released one-time financial assistance to LGUs equivalent to a month’s worth of their Internal Revenue Allotment (IRA) to help them and their constituents cope with the crisis. The IRA is a 40% share mandated by law that LGUs are entitled to out of the National Government’s tax income.

IRA continued to dominate LGU income sources, accounting for 59% of their overall revenue in the second quarter, against 55% in 2020.

IRA grew to P273.21 billion between April and June, up 8% from a year earlier.

BLGF Executive Director Nino Raymond B. Alvina said provinces were the most dependent on IRA at 79% in the second quarter, followed by municipalities at 75% and cities 38%.

“Based on the performance targets set by this bureau to local treasurers for Fiscal Year 2021, the locally-sourced revenues of provinces, cities and municipalities as of Q2 FY2021 already account for 74% of the full-year collection target of P223.89 billion,” Mr. Alvina said.

LGUs have hit 80% of their full-year goal for local business taxes and 75% for real property taxes.

Income from fees and charges were on a 74% pace by the second quarter while receipts from economic enterprises accounted for 47% of the target.

He said 22% of the 375 LGUs reported lower locally-sourced revenue in the second quarter, 29 of them provinces, 56 cities and 290 municipalities.

The National Capital Region (NCR) topped the collection tables with P72.34 billion, or 43% of the total.

This was followed by Region IV-A or Cavite-Laguna-Batangas-Rizal-Quezon (Calabarzon) which collected P26.14 billion in the second quarter (16% of the total) and Region III or Central Luzon with P15.54 billion (9%).

When the Supreme Court Mandanas ruling takes effect next year, LGUs will also receive 40% of Customs revenue. The Local Government Code of 1991 had defined IRA as 40% of the National Government’s internal revenue, which the National Government used as the basis for denying LGUs access to the Customs take. The Supreme Court has since struck down this interpretation and removed the distinction between internal revenue and Customs collections for the purposes of calculating the IRA pot.

LGUs are poised to receive P959.04 billion from the national taxes next year. Provinces and cities will receive P220.58 billion each, municipalities will get P326.07 billion and barangays P191.81 billion.

A proposed measure to improve the property valuation systems of LGUs, part of the government’s comprehensive tax reform program, is currently pending in Congress. The reforms are expected to boost the capacity of LGUs to generate their own revenue. — Beatrice M. Laforga

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