Local Government Code of 1991 – City, Urban, Regional, & Environmental Planning

Mandanas-Garcia Ruling; Unconstitutionality of the Internal Revenue Allotment (IRA); and the National Government and Fiscal Autonomy of Local Government Units

LGUs should not celebrate too early by embarking on expensive projects that they cannot sustain. LGUs should always review Art. 17 of RA 7160 to both guide them in choosing projects to implement and manage the expectations of their stakeholders.

One of the key features of the Philippine 1987 Constitution is its push towards decentralization of government and local autonomy. Local autonomy has two facets, the administrative and the fiscal. Fiscal autonomy means that local governments have the power to create their own sources of revenue in addition to their equitable share in the national taxes released by the National Government, as well as the power to allocate their resources in accordance with their own priorities. Such autonomy is as indispensable to the viability of the policy of decentralization as the other.

Implementing the constitutional mandate for decentralization and local autonomy, Congress enacted Republic Act No. 7160 (RA 7160), otherwise known as the Local Government Code (LGC), in order to guarantee the fiscal autonomy of the LGUs by specifically have a share in the national internal revenue taxes. The internal revenue allotment (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 (BIR).

Mandanas and his group as well as Garcia challenged the national government by filing a case in the Supreme Court to address whether or not the exclusion of certain national taxes from the base amount for the computation of the just share of the LGUs in the national taxes is constitutional. Mandanas’ group and Garcia filed a petitioned to release the additional and unpaid IRA, respectively to LGUs.

Mandanas et. al Petition – Following the Petitioned Base Amount of LGU Shares in FY 2012
Release of the additional amount of to the LGUs as their IRA for FY 2012	P60,750,000,000.00
Release of the total unpaid IRA for FY 1992 to FY 2011	P438,103,906,675.73

To know more about the Mandanas-Garcia Ruling check out https://cityplanningcoordinator.blog/2021/07/09/mandanas-garcia-vs-executive-secretary-case-digest/

Let us simplify the story.

Imagine you are the head of your family. A person promised to pay you yearly a certain amount that you will use to provide for the needs of your family. Eventually, you realized that the amount being paid to you for almost two decades is not the agreed amount that should have been given to you and your family. You filed a case in court and it took several years before the court decided that the amount being paid to you is not the right amount.

You started to look back and imagined how your family should have benefitted from the withheld payment. You thought that with the said amount, you could have provided your children very good education and health care as well as widened possible opportunities (opportunity cost). But, all is well, you’ve won, you are right in asserting what is just.

However, the court ruled that this person would not pay anymore the two decades withheld amount and will just give the correct (just share) amount the following year. You cannot argue with the court because that is their final decision and must respect it. You are excited that you’ve won your case, proved you are right, and will have more resources for your family the following year.

But there’s more, the person realized that since you will be getting more, there is a need to give you more responsibilities that will entail additional expenditures on your part. This person is thinking of ways on how to give you more/additional tasks or responsibilities so that your just share (not additional) is spent according to what they want you to spend on your family.

In fairness, in the last two decades, the said person, aside from giving you your yearly agreed support, helps your family by providing casual assistance in different forms.

This is the current situation of the Local Government Units (LGUs) in the Philippines. The family is the LGU, the person is the national government, the children are the LGU constituents, and the support is the Internal Revenue Allotment (IRA) which is now called the National Tax Allocation (NTA).

Executive Order 138

The National Government enacted Executive Order No. 138 entitled “Full Devolution of Certain Functions of the Executive Branch to Local Governments, Creation of a Committee on Devolution, and for other purposes” on June 1, 2021 in response to the Mandanas-Garcia ruling.

To know more about EO 138 check out https://www.officialgazette.gov.ph/2021/06/01/executive-order-no-138-s-2021/

The recitals of EO No. 138 state that in the Constitution, LGUs shall have a just share, as determined by law, in the national taxes which shall be automatically released to them and that the President shall exercise general supervision over local governments; that RA 7160 devolved the delivery of certain basic services from national to LGUS (Section 17, RA 7160) in accordance with established national policies, guidelines and standards; and that the total shares of the LGUs from the national taxes is expected to significantly increase starting FY 2022 in line with the implementation of the Mandanas ruling; among others.

The general policy of EO 138 is that the National Government (NG) is fully committed to the policy of decentralization enshrined in the Constitution and relevant laws which are aimed at the following:

Developing capabilities of local governments to deliver basic social services and critical facilities to their constituents, increase productivity and employment, and promote local economic growth.
Ensuring accountability, competence, professionalism and transparency of local leaders through the development of institutional systems that uphold good governance and strengthen their capacities for managing public resources.

According to the EO the role of the NG is to set the national policy, development strategy, and service delivery standards, and to assist, oversee and supervise the LGUs, complementary to the stronger implementing role that the LGUs shall assume by reason of devolution; to determine functional assignments between and among different levels of government; to formulate and pursue an institutional development program in collaboration and to support the LGUs in order to strengthen their capacities and capabilities to fully assume the devolved functions based on RA 7160 and other relevant laws; and to resolve any ambiguity as to the interpretation of the power granted to an LGU in favor of devolution.

According to EO 138, the role of LGUs include the preparation of their Devolution Transition Plans (DTPs) in Close Coordination with the NGAs concerned, formulation of their Capacity Development Agenda based on the assessment framework and guidelines issued by the Department of Interior and Local Government – Local Government Academy (DILG-LGA), and the formulation of their respective Communications Plans and Strategies which are aligned and complementary to the communications plan formulated and approved by the Committee on Devolution.

The Mandanas-Garcia ruling prompted the national Government to enact EO 138 to ensure full devolution of certain functions. However, specific functions were already devolved to LGUS in 1992 via RA 7160. Did RA7160 only mandate partial devolution? Why is it called full devolution? Is there something new to devolve?

For me, EO 138 showed obvious realities at the LGU levels.

First is that the NG is aware that there are LGUs that cannot provide all the required devolved services to them as enumerated in Sec. 17 RA7160 due to inadequate financial resources. This is the reason NG provides Assistance to LGU programs and projects.

Second is that the Mandanas-Garcia ruling will help promote LGUs further pursue their desired development. Align with the concept of local autonomy and with the just share of the national taxes, LGUs can now fund their needed projects.

Third is that with the transfer of the remaining “just share” of the LGUs from the NG, wherein the NGs enjoyed the said share for almost two decades, the NG is worried that some of their programs will be affected by the decrease in their available fund, thus, the NG is clearly delineating projects that will be funded by them and by the LGUs and in part ensure that the LGUs perform their devolved services or add to those already devolved services.

Department of Budget and Management Local Budget Memorandum No. 82-2021

The DBM LBM No. 82 – 2021 entitled “Indicative FY 2022 National Tax Allotment (NTA) Shares of LGUs and Guidelines on the Preparation of the FY 2022 Annual Budgets of LGUs” was released on June 14, 2021.

To know more about DBM LBM No. 82 – 2021 check out https://www.dbm.gov.ph/index.php/279-latest-issuances/local-budget-memorandum/local-budget-memorandum-2021/1887-local-budget-memorandum-no-82

According to DBM LBM No. 82 – 2021, the NTA shares of LGUs significantly increased in FY 2022 as a result of the implementation of the SC decision on the Mandanas-Garcia Case. Consequently, starting FY 2022, there shall be scaling down of the financial subsidy of National Government Agencies (NGAs) for local programs and projects of LGU.

However the memorandum reminds LGUs to consider the expected down trend of NTA in the succeeding years, specifically in FYs 2023-2024. This is because of the lower revenue collections of the Government in FY 2020 and possibly in FY 2021 as a result of the continuous imposition of community quarantines and restrictions on the mobility of the general public due to the COVID-19 pandemic.

DBM LBM No. 82 – 2021 showed the NTA allotment of LGUs for fiscal year 2022. LGUs will have more resources to fund their preferred projects (if not negatively affected by the impact of EO 138). However, LGUs should be very careful in choosing projects that will require the same resources to maintain or sustain. The memorandum warned LGUs that their just share in 2023-2024 will be lower than in 2022.

What are its implications?

First is if the LGU embarks on big projects like building hospitals, hiring more personnel, etc., it may afford to implement it on 2022 but will have difficulty sustaining it in 2023-2024.

Second is that the LGUs are still recovering from their unplanned expenses brought about by the illegal drug war and the pandemic. 2022 is the time wherein hopefully they can resume their programs related to their desired local development with the help of its “just share” from the NG.

The Pandemic displayed how LGUs stepped-up to the global problem by taking care of its constituents. The NG and LGUs partnered in delivering support (food and health) to ensure the survival of the people. It may be enough or ideal but I believe they are doing their best specially the LGUs.

Just Share and Beyond

The “just share” is not an additional fund. It is the right fund that should have been given to LGUs to ensure to reach their self-determination via their political and fiscal autonomy. It is not correct to treat it as an additional fund. It is also not proper to add responsibilities to the LGUs because they will now get what they should have gotten yearly in the past two decades.

Devolved Services (RA 7160 Sec. 17)
Barangay	Municipality	Province
(i) Agricultural support services which include planting materials distribution system and operation of farm produce collection and buying stations; (ii) Health and social welfare services which include maintenance of barangay health center and day-care center; (iii) Services and facilities related to general hygiene and sanitation, beautification, and solid waste collection; (iv) Maintenance of katarungang pambarangay; (v) Maintenance of barangay roads and bridges and water supply systems; (vi) Infrastructure facilities such as multi-purpose hall, multi-purpose pavement, plaza, sports center, and other similar facilities; (vii) Information and reading center; and (viii) Satellite or public market, where viable; Devolved Services to Municipalities + Provinces = Devolved Services to Cities	(i) Extension and on-site research services and facilities related to agriculture and fishery activities which include dispersal of livestock and poultry, fingerlings, and other seeding materials for aquaculture; palay, corn, and vegetable seed farms; medicinal plant gardens; fruit tree, coconut, and other kinds of seedling nurseries; demonstration farms; quality control of copra and improvement and development of local distribution channels, preferably through cooperatives; interbarangay irrigation systems; water and soil resource utilization and conservation projects; and enforcement of fishery laws in municipal waters including the conservation of mangroves; (ii) Pursuant to national policies and subject to supervision, control and review of the DENR, implementation of community-based forestry projects which include integrated social forestry programs and similar projects; management and control of communal forests with an area not exceeding fifty (50) square kilometers; establishment of tree parks, greenbelts, and similar forest development projects; (iii) Subject to the provisions of Title Five, Book I of this Code, health services which include the implementation of programs and projects on primary health care, maternal and child care, and communicable and non-communicable disease control services; access to secondary and tertiary health services; purchase of medicines, medical supplies, and equipment needed to carry out the services herein enumerated; (iv) Social welfare services which include programs and projects on child and youth welfare, family and community welfare, women’s welfare, welfare of the elderly and disabled persons; community-based rehabilitation programs for vagrants, beggars, street children, scavengers, juvenile delinquents, and victims of drug abuse; livelihood and other pro-poor projects; nutrition services; and family planning services; (v) Information services which include investments and job placement information systems, tax and marketing information systems, and maintenance of a public library; (vi) Solid waste disposal system or environmental management system and services or facilities related to general hygiene and sanitation; (vii) Municipal buildings, cultural centers, public parks including freedom parks, playgrounds, and other sports facilities and equipment, and other similar facilities; (viii) Infrastructure facilities intended primarily to service the needs of the residents of the municipality and which are funded out of municipal funds including, but not limited to, municipal roads and bridges; school buildings and other facilities for public elementary and secondary schools; clinics, health centers and other health facilities necessary to carry out health services; communal irrigation, small water impounding projects and other similar projects; fish ports; artesian wells, spring development, rainwater collectors and water supply systems; seawalls, dikes, drainage and sewerage, and flood control; traffic signals and road signs; and similar facilities; (ix) Public markets, slaughterhouses and other municipal enterprises; (x) Public cemetery; (xi) Tourism facilities and other tourist attractions, including the acquisition of equipment, regulation and supervision of business concessions, and security services for such facilities; and (xii) Sites for police and fire stations and substations and municipal jail;	(i) Agricultural extension and on-site research services and facilities which include the prevention and control of plant and animal pests and diseases; dairy farms, livestock markets, animal breeding stations, and artificial insemination centers; and assistance in the organization of farmers’ and fishermen’s cooperatives and other collective organizations, as well as the transfer of appropriate technology; (ii) Industrial research and development services, as well as the transfer of appropriate technology; (iii) Pursuant to national policies and subject to supervision, control and review of the DENR, enforcement of forestry laws limited to community-based forestry projects, pollution control law, small-scale mining law, and other laws on the protection of the environment; and mini-hydroelectric projects for local purposes; (iv) Subject to the provisions of Title Five, Book I of this Code, health services which include hospitals and other tertiary health services; (v) Social welfare services which include programs and projects on rebel returnees and evacuees; relief operations; and population development services; (vi) Provincial buildings, provincial jails, freedom parks and other public assembly areas, and similar facilities; (vii) Infrastructure facilities intended to service the needs of the residents of the province and which are funded out of provincial funds including, but not limited to, provincial roads and bridges; inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems; reclamation projects; and similar facilities; (viii) Programs and projects for low-cost housing and other mass dwellings, except those funded by the Social Security System (SSS), Government Service Insurance System (GSIS), and the Home Development Mutual Fund (HDMF); Provided, That national funds for these programs and projects shall be equitably allocated among the regions in proportion to the ratio of the homeless to the population; (ix) Investment support services, including access to credit financing; (x) Upgrading and modernization of tax information and collection services through the use of computer hardware and software and other means; (xi) Inter-municipal telecommunications services, subject to national policy guidelines; and (xii) Tourism development and promotion programs;

Devolved Services to LGUs (RA 7160)

Mandanas-Garcia vs. Executive Secretary Case Digest

Mandanas, et. al vs. Executive Secretary et. al
G.R. No. 199802, July 03, 2018
Garcia vs. Executive Secretary et. al
G.R. No. 208488, July 3, 2018
En Banc
Ponente; BERSAMIN, J.:

Facts:

Mandanas et. al and Garcia both filed a case against Executive Secretary et. al challenging the manner in which the just share in the national taxes of the local government units (LGUs) has been computed.

The 1987 Constitution continued to push towards decentralization of government and local autonomy. Republic Act 7160 also known as the Local Government Code of 1991 further strengthened the local autonomy and fiscal capability of Local Government Units (LGUs).

Local autonomy has two facets, the administrative and the fiscal. Fiscal autonomy means that local governments have the power to create their own sources of revenue in addition to their equitable share in the national taxes released by the National Government, as well as the power to allocate their resources in accordance with their own priorities. Such autonomy is as indispensable to the viability of the policy of decentralization as the other.

The Internal Revenue Allotment (IRA) is the basis of the share of LGUs from the national taxes. 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 (BIR).

Below are details of the petitions of Mandanas, et. al and Garcia.

G.R. No. 199802 (Mandanas, et al.)	G.R. No. 208488 (Congressman Enrique Garcia, Jr.)
a special civil action for certiorari, prohibition and mandamus assailing the manner the General Appropriations Act (GAA) for FY 2012 computed the IRA for the LGUs	seeks the writ of mandamus to compel the respondents thereat to compute the just share of the LGUs on the basis of all national taxes
– allege herein 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; – that, consequently, the release of the additional amount of P60,750,000,000.00 to the LGUs as their IRA for FY 2012 should be ordered; and – that for the same reason the LGUs should also be released their unpaid IRA for FY 1992 to FY 2011, inclusive, totaling P438,103,906,675.73.	– insists on a literal reading of Section 6, Article X of the 1987 Constitution. – that the insertion by Congress of the words internal revenue in the phrase national taxes found in Section 284 of the LGC caused the diminution of the base for determining the just share of the LGUs, and should be declared unconstitutional; – that, moreover, the exclusion of certain taxes and accounts pursuant to or in accordance with special laws was similarly constitutionally untenable; – that the VATs and excise taxes collected by the BOC should be included in the computation of the IRA; and – that the respondents should compute the IRA on the basis of all national tax collections, and thereafter distribute any shortfall to the LGUs.
The cases were consolidated on October 22, 2013

In response to the petitions, the several respondents, represented by the Office of the Solicitor General (OSG), urged the dismissal of the petitions upon procedural and substantive considerations.

Below are the answers of the OSG.

Response of the Office of the Solicitor General (OSG)
urged the dismissal of the petitions upon procedural and substantive considerations
Procedural considerations	Substantive considerations
1. mandamus does not lie in order to achieve the reliefs sought because Congress may not be compelled to appropriate the sums allegedly illegally withheld for to do so will violate the doctrine of separation of powers; and, 2. mandamus does not also lie to compel the DBM to release the amounts to the LGUs because such disbursements will be contrary to the purposes specified in the GAA; – that Garcia has no clear legal right to sustain his suit for mandamus; – that the filing of Garcia’s suit violates the doctrine of hierarchy of courts; and – that Garcia’s petition seeks declaratory relief but the Court cannot grant such relief in the exercise of its original jurisdiction.	– 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.

ISSUES

Issues

General Issue: Whether or not the exclusion of certain national taxes from the base amount for the computation of the just share of the LGUs in the national taxes is constitutional

I. Whether or not mandamus is the proper vehicle to assail the constitutionality of the relevant provisions of the GAA and the LGC;
II. Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X of the 1987 Constitution;
III. Whether or not the existing shares given to the LGUs by virtue of the GAA is consistent with the constitutional mandate to give LGUs a “just share” to national taxes following Article X, Section 6 of the 1987 Constitution;
IV. Whether or not the petitioners are entitled to the reliefs prayed for.

RULING / HELD

Ruling of the Court (Mandanas-Garcia Case)
1. Mandamus is an improper remedy	– The writ of mandamus may not issue to compel an official to do anything that is not his duty to do, or that is his duty not to do, or to obtain for the petitioner anything to which he is not entitled by law. – Congress cannot be compelled by writ of mandamus. – The discretion of Congress thereon, being exclusive, is not subject to external direction; otherwise, the delicate balance underlying our system of government may be unduly disturbed
2. Municipal corporations and their relationship with Congress	– Municipal governments are only agents of the national government. – Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. – This basic relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. – The LGC provided a norm of interpretation in favor of the LGUs in its Section 5(a), to wit: (a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned; [Bold underscoring supplied for emphasis]
3. The extent of local autonomy in the Philippines	– The 1987 Constitution limits Congress’ control over the LGUs by ordaining in Section 25 of its Article II that: “The State shall ensure the autonomy of local governments.” – Certain limitations are and can be imposed by Congress in all the forms of decentralization, for local autonomy, whether as to power or as to administration, is not absolute. The LGUs remain to be the tenants of the will of Congress subject to the guarantees that the Constitution itself imposes.
4. Section 284 of the LGC deviates from the plain language of Section 6 of Article X of the 1987 Constitution	– Section 6, Article X the 1987 Constitution textually commands the allocation to the LGUs of a just share in the national taxes – Section 6, when parsed, embodies three mandates, namely: (1) the LGUs shall have a just share in the national taxes; (2) the just share shall be determined by law; and (3) the just share shall be automatically released to the LGUs. – LGC Section 284. Allotment of Internal Revenue Taxes. – Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year – Section 6 mentions national taxes as the source of the just share of the LGUs while Section 284 ordains that the share of the LGUs be taken from national internal revenue taxes instead. – Garcia contends that Congress has exceeded its constitutional boundary by limiting to the NIRTs the base from which to compute the just share of the LGUs. – The Court agree with Garcia’s contention. – Section 284 has effectively deprived the LGUs from deriving their just share from other national taxes, like the customs duties. – Strictly speaking, customs duties are also taxes because they are exactions whose proceeds become public funds. – 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. – 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.
5. Congress can validly exclude taxes that will constitute the base amount for the computation of the IRA only if a Constitutional provision allows such exclusion	– Section 284 does not authorize any exclusion or deduction from the collections of the NIRTs for purposes of the computation of the allocations to the LGUs. – Anent the share of the affected LGUs in the proceeds of the sale and conversion of the former military bases pursuant to R.A. No. 7227, the exclusion is warranted for the reason that such proceeds do not come from a tax, fee or exaction imposed on the sale and conversion.
6. Entitlement to the reliefs sought	– The petitioners’ prayer for the payment of the arrears of the LGUs’ just share on the theory that the computation of the base amount had been unconstitutional all along cannot be granted – doctrine of operative fact * recognizes the existence of the law or executive act prior to the determination of its unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored or disregarded. * nullifies the void law or executive act but sustains its effects. It provides an exception to the general rule that a void or unconstitutional law produces no effect * applies only to cases where extraordinary circumstances exist, and only when the extraordinary circumstances have met the stringent conditions that will permit its application * the effect is prospective
7. Automatic release of the LGUs’ just share in the National Taxes	– Section 6, Article X of the 1987 Constitution commands that the just share of the LGUs in national taxes shall be automatically released to them. – The term automatic connotes something mechanical, spontaneous and perfunctory – The LGUs are not required to perform any act or thing in order to receive their just share in the national taxes – Automatic release without need of appropriation

Decision

1. 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.

2. ORDERS the SECRETARY OF THE DEPARTMENT OF FINANCE; the SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT; the COMMISSIONER OF INTERNAL REVENUE; the COMMISSIONER OF CUSTOMS; and the NATIONAL TREASURER to include ALL COLLECTIONS OF NATIONAL TAXES in the computation of the base of the just share of the Local Government Units according to the ratio provided in the now-modified Section 284 of Republic Act No. 7160 (Local Government Code) except those accruing to special purpose funds and special allotments for the utilization and development of the national wealth.

3. DECLARES that:
(a) The apportionment of the 25% of the franchise taxes collected from the Manila Jockey Club and Philippine Racing Club, Inc. – that is, five percent (5%) to the National Government; five percent (5%) to the host municipality or city; seven percent (7%) to the Philippine Charity Sweepstakes Office; six percent (6%) to the Anti-Tuberculosis Society; and two percent (2%) to the White Cross pursuant to Section 6 of Republic Act No. 6631 and Section 8 of Republic Act No. 6632 – is VALID;
(b) Section 8 and Section 12 of Republic Act No. 7227 are VALID; and, ACCORDINGLY, the proceeds from the sale of the former military bases converted to alienable lands thereunder are EXCLUDED from the computation of the national tax allocations of the Local Government Units; and
(c) Section 24(3) of Presidential Decree No. 1445, in relation to Section 284 of the National Internal Revenue Code, apportioning one-half of one percent (1/2 of 1%) of national tax collections as the auditing fee of the Commission on Audit is VALID;

4. DIRECTS the Bureau of Internal Revenue and the Bureau of Customs and their deputized collecting agents to certify all national tax collections, pursuant to Article 378 of the Implementing Rules and Regulations of R.A. No. 7160

5. DISMISSES the claims of the Local Government Units for the settlement by the National Government of arrears in the just share on the ground that this decision shall have PROSPECTIVE APPLICATION

6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF FURTHER ACTION

SEPARATE / DISSENTING OPINIONS

Separate Opinion – Velasco, Jr., J.

Voted to partially grant the petitions

Concur with the following dispositions:
1. The phrase “internal revenue” appearing in Section 284 of RA 7160 is declared UNCONSTITUTIONAL and is hereby DELETED.
2. Respondents are hereby DIRECTED to include all forms of national tax collections, other than those accruing to special purpose funds and special allotments for the utilization and development of national wealth, in the subsequent computations for the base amount of just share the Local Government Units are entitled to.
3. In addition, the Court further DECLARES that:
a. The apportionment of specified incremental taxes is VALID and shall be observed;
b. Sections 8 and 12 of RA 7227 are hereby declared VALID. The proceeds from the sale of military bases converted to alienable lands thereunder are EXCLUDED from the computation of the national tax allocations of the Local Government Units since these are sales proceeds, not tax collections;
c. The one-half of one percent (1/2%) of national tax collections as the auditing fee of the Commission on Audit under Section 24(3) of Presidential Decree No. 1445 shall not be deducted prior to the computation of the forty percent (40%) share of the Local Government Units in the national taxes; and
d. Other special purpose funds are likewise EXCLUDED from the computation of the national tax allotment base.
4. The Bureau of Internal Revenue and Bureau of Customs are hereby ORDERED to certify to the Department of Budget and Management all their collections and remittances of National Taxes;
5. PROSPECTIVE APPLICATION from finality of this decision in view of the operative fact doctrine. Denied petitioners’ claims of arrears from the national government for the unlawful exclusions from the base amount.
6. The national tax allotments of the Local Government Units shall AUTOMATICALLY and DIRECTLY be released, without need of any further action

Dissenting Opinion – Leonen, J.

Voted to Dismiss the Petitions

1. There was no unlawful neglect on the part of public respondents, particularly the Commissioner of Internal Revenue, in the computation of the internal revenue allotment. Moreover, the act being requested of them is not their ministerial duty; hence, mandamus does not lie and the Petitions must be dismissed.
2. The deductions to the Bureau of Internal Revenue’s collections made pursuant to special laws were proper.
3. The Court should exercise deference to the interpretation of Congress and of the President of what constitutes the “just share” of the local government units.
4. Congress has full discretion to determine the “just share” of the local government units, in which authority necessarily includes the power to fix the revenue base, or to define what are included in this base, and the rate for the computation of the internal revenue allotment. Absent any clear and unequivocal breach of the Constitution, this Court should proceed with restraint when a legislative act is challenged in deference to a co-equal branch of the Government.
5. The “automatic release” in Section 286 of the Local Government Code as “without need for a yearly appropriation” is contrary to the Constitution. A statute cannot amend the Constitutional requirement.
6. The release of the local government units’ share without an appropriation substantially amends the Constitution. It also gives local governments a level of fiscal autonomy not enjoyed even by constitutional bodies like the Supreme Court, the Constitutional Commissions, and the Ombudsman. It bypasses Congress as mandated by the Constitution. “Without appropriation” also substantially alters the relationship of the President to local governments, effectively diminishing, if not removing, supervision as mandated by the Constitution.

Separate Opinion – Caguioa, J.

Voted to Dismiss the Petitions

Submit that J. Leonen’s liberal approach should be upheld.
1. Posits that if any reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted. Before a law is declared unconstitutional, there must be a clear and unequivocal showing that what the Constitution prohibits, the statute permits. In other words, laws shall not be declared invalid unless the conflict with the Constitution is clear beyond reasonable doubt.
2. Constitution gave Congress the absolute authority and discretion to determine the LGUs’ “just share” — which include both the classes of national taxes and the percentages thereof.
3. Appropriation is not a judicial function, Congress, which holds the power of the purse, is in the best position to determine the “just share” of the LGUs based on their needs and circumstances
4. Agree with the ponencia’s position that the operative fact doctrine should apply to this case. The doctrine nullifies the effects of an unconstitutional law or an executive act by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences that cannot always be ignored. Petitioners cannot claim deficiency IRA from previous fiscal years as these funds may have already been used for government projects, the undoing of which would not only be physically impossible but also impractical and burdensome for the Government.

Dissenting Opinion – Reyes, Jr. J.

Voted to Dismiss the petitions

1. The national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it. despite the shift towards local autonomy, the National Government, through Congress, retains control over LGUs—albeit, in a lesser degree.
2. The plain text of Section 6, Article X of the 1987 Constitution requires Congress to provide LGUs with a just share in the national taxes, which should be automatically released to them. Nowhere in this provision does the Constitution specify the taxes that should be included in the just share of LGUs. Neither does the Constitution mandate the inclusion of all national taxes in the computation of the IRA or in any other share granted to LGUs.
3. Congress has the authority to determine the exact percentage share of the LGUs, Congress may likewise determine the basis of this share and include some or all of the national taxes for a given period of time. Congress possesses the power of the purse.
4. The determination of Congress as to the base amount for the computation of the IRA is a policy question of policy best left to its wisdom. The Court may neither bind the hands of Congress nor supplant its wisdom.

Full Case Texts can be viewed at: https://www.chanrobles.com/cralaw/2018julydecisions.php?id=530