The LGUs are waiting for the implementation of the Mandanas Ruling

Whether or not the basis in the computation of LGUs’ share in the Internal Revenue Allotment limited only to the National Internal Revenue taxes collected by the Bureau of Internal Revenue

Facts:

The share of the LGUs has been regularly released to the LGUs. According to the implementing rules and regulations of the LGC, the IRA is determined on the basis of the actual collections of the National Internal Revenue Taxes (NIRTs) as certified by the Bureau of Internal Revenue.

The petitioners hereby challenge the manner in which the just share in the national taxes of the local government units (LGUs) has been computed.

The petitioner argued that certain collections of NIRTs by the Bureau of Customs (BOC) – specifically: excise taxes, value added taxes (VATs) and documentary stamp taxes (DSTs) – have not been included in the base amounts for the computation of the IRA; that such taxes, albeit collected by the BOC, should form part of the base from which the IRA should be computed because they constituted NIRTs.

The OSG, on the other hand, averred that Article 284 of the LGC is consistent with the mandate of Section 6, Article X of the 1987 Constitution to the effect that the LGUs shall have a just share in the national taxes; that the determination of the just share is within the discretion of Congress; that the limitation under the LGC of the basis for the just share in the NIRTs was within the powers granted to Congress by the 1987 Constitution; that the LGUs have been receiving their just share in the national taxes based on the correct base amount; that Congress has the authority to exclude certain taxes from the base amount in computing the IRA; that there is a distinction between the VATs, excise taxes and DSTs collected by the BIR, on one hand, and the VATs, excise taxes and DSTs collected by the BOC, on the other, thereby warranting their different treatment; and that Development Budget Coordination Committee (DBCC) Resolution No. 2003-02 dated September 4, 2003 has limited the base amount for the computation of the IRA to the "cash collections based on the BIR data as reconciled with the Bureau of Treasury;" and that the collection of such national taxes by the BOC should be excluded.

Ruling of the Supreme Court

The Court affirmed the argument of the Petitioners that the Congress effectively deprived the LGU’s of its share to National Taxes by delimiting the scope of IRA share of the LGU by excluding the excise taxes, value added taxes (VATs) and documentary stamp taxes (DSTs) and custom duties in the computation thereof.

Discussion:

The Congress infringed the constitutional provision by limiting to the NIRTs the base from which to compute the just share of the LGUs. Thus, the Court DECLARES the phrase "internal revenue" appearing in Section 284 of Republic Act No. 7160 (Local Government Code) UNCONSTITUTIONAL, and DELETES the phrase from Section 284

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains subject to the limitations stated in the 1987 Constitution. The phrase national internal revenue taxes engrafted in Section 284 is undoubtedly more restrictive than the term national taxes written in Section 6. As such, Congress has actually departed from the letter of the 1987 Constitution stating that national taxes should be the base from which the just share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a statute there should be no departure).Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution.

What the phrase national internal revenue taxes as used in Section 284 included are all the taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No. 8424 particularly, Income tax; Estate and donor's taxes; Value-added tax; Other percentage taxes; Excise taxes; Documentary stamp taxes; and such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue.

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 has effectively deprived the LGUs from deriving their just share from other national taxes, like the customs duties.

It is clear from the foregoing clarification that the exclusion of other national taxes like customs duties from the base for determining the just share of the LGUs contravened the express constitutional edict in Section 6, Article X the 1987 Constitution.

Still, the OSG posits that Congress can manipulate, by law, the base of the allocation of the just share in the national taxes of the LGUs.

The position of the OSG cannot be sustained. Although it has the primary discretion to determine and fix the just share of the LGUs in the national taxes (e.g., Section 284 of the LGC), Congress cannot disobey the express mandate of Section 6, Article X of the 1987 Constitution for the just share of the LGUs to be derived from the national taxes. The phrase as determined by law in Section 6 follows and qualifies the phrase just share, and cannot be construed as qualifying the succeeding phrase in the national taxes.

Conclusion

The intent of the people in respect of Section 6 is really that the base for reckoning the just share of the LGUs should include all national taxes. To read Section 6 differently as requiring that the just share of LGUs in the national taxes shall be determined by law is tantamount to the unauthorized revision of the 1987 Constitution.

(The case of CONGRESSMAN HERMILANDO I. MANDANAS ET. AL., VS. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR. ET. AL., G.R. No. 199802, July 03, 2018 and HONORABLE ENRIQUE T. GARCIA, JR. ET. AL., VS. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR. ET. AL., G.R. No. 208488, promulgated on July 3, 2018)