Finance dept wants LGU fund allocation scheme revised

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Finance dept wants LGU fund allocation scheme revised
Posted: 3:26 AM Jan. 14, 2006
Michelle V. Remo
Inquirer

THE Department of Finance wants Congress to restructure the Internal Revenue Allotment -- the funds the national government gives local government units (LGUs) -- to prompt LGUs to maximize their own revenue-raising capabilities, according to a paper on the department's legislative proposals for 2006.

The current structure of the IRA "does not encourage LGUs to generate additional revenues to support additional expenditures. Thus, it does not have any fiscal stimulation effect on local finance on all levels of local governments," the paper says.

At present, under the Local Government Code, 40 percent of the national government's internal revenue collections are allocated for LGUs: 23 percent to provincial government, 34 percent to municipal government, 23 percent to city government, and 20 percent to village councils.

The department paper says the IRA should be rationalized so that more allotments would go to LGUs that really lack resources, and make the able ones lessen their financial dependence on the national government.

Adjusting the IRA has been proposed since 2004, when the President Gloria Macapagal-Arroyo called attention to the national government's large budget deficit and heavy debt.

The president of the Philippine Association of Local Treasurers and Assessors, Victor Endriga, treasurer of Quezon City, said rich cities like Quezon City should agree to give up their shares of the IRA in favor of poor LGUs.

Some LGUs have opposed the proposal, saying trimming down the IRA would hurt economic growth at the local level.

Senator Ralph Recto filed a bill protecting the LGUs' share in national government revenues. His bill proposes to amend the Local Government Code and prohibit the president from adjusting the IRA even amid a budget problem on the national government level.

Recto said allowing the president to adjust the IRA posed threat on the sufficient delivery of public services. With INQ7.net

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