| Screenshot from DBM Video
The Department of Budget and Management (DBM) has raised the total National Tax Allotment (NTA) for local government units (LGUs) for fiscal year 2024 to P871.3 billion – an increase of 6.23% or P51.11 billion from the LGUs’ NTA of P820.2 billion for fiscal year 2023.
The BARMM Annual Block Grant (ABG) brings this total to Php1.008T.
Locally Sourced Revenues (LSR) collected by all provinces, cities, and municipalities from real property tax (RPT), local business tax (LBT), fees and charges (FC), and receipts from economic enterprises (REE) reached Php256.21 billion in FY2021, up by 1.44% from the Php252.57 billion collections in FY2020. Tax revenues contributed Php191.36 billion to the total LSR during the period, with local business tax (LBT) accounting for 44.2% or Php113.16 billion. (Source: Bureau of Local Government Finance)
These funds are in addition to projects funded at the national level, such as 4Ps (Pantawid Pamilyang Pilipino Program, livelihood projects, infrastructure projects, etc.)
Based on the Local Government Code of 1991, the National Tax Allotment is allocated as follows:
The National Capital Region, as in the past, had the highest locally sourced revenues. The other regions were not even close.
The local government units (LGU) depend on the national tax allotment. The average LGU revenue is 22% of their total revenue when the national tax allotment is added to their coffers.
Real property taxes or ‘amelyar’ also account for the majority of local government revenue, excluding the national tax allotment. Real property taxes partially fund the local schools. Real property taxes in the Philippines are a fraction of real property taxes in other countries.
In contrast, the Barangay of Bel-Air in Makati, the wealthiest barangay in the Philippines, had total revenues of Php232M, the City of Makati (population 582,000) revenues were Php22.4B, while the Municipality of Dulag in Leyte (a 3rd class Municipality; population 49,000) had revenues of Php169M, all revenues in 2020 (latest published data).
The Philippine Local Government Code (LGC) of 1991 allocates 50% of national tax allotments based on population without consideration of the wealth owned and controlled by that population. In the case of Barangay Bel-Air, whose residents count the wealthiest among Filipinos and are part of the heavily populated city of Makati, their share of the NTA would be greater than that of a 3rd class municipality. This is not considering Makati and Dulag will share 25% of the NTA equally.
The 1991 Local Government Code, now 32 years old, is showing its age and meandering into irrelevance. First, why should the poorest local government units (LGU) share equally with the richest LGU 25% of the national tax allotment? Second, the centers of commerce, therefore, the wealthiest LGUs, will, by logic, attract even more residents simply because there will be jobs by using population to calculate 50% of tax allotment share, and a vicious cycle of internal diaspora becomes inevitable. Third, at this point, 75% of tax allotments heavily favor the metropolitan areas and relegate the countryside to deprivation and resulting poverty.
“Would it not be possible to generate the income needed for the urban working poor in the rural setting, perhaps agriculturally based, which serves to increase food production and, more importantly, restore the dignity of living?”
The final 25% is based on land area – Makati is around 28 square kilometers, and Dulag in Leyte is 110 square kilometers. Alas, there are 148 cities and 1,486 municipalities- the rural areas strewn with poor municipalities will have to divide that final 25% amongst them. However, prosperous cities still get their cut, no matter how small.
Since 1991, what has changed? The wealthy cities have become more prosperous. The ever-burgeoning population does not quite share in that prosperity despite the disparate share of the national taxes. How are slums justified? Some of the population sources their meals on ‘pagpag.’ Would it not be possible to generate the income needed for the urban working poor in the rural setting, perhaps agriculturally based, which serves to increase food production and, more importantly, restore the dignity of living?
Whatever the debates were about in 1991 certainly no longer apply today. So, then, the requisite question needs to be asked. What can be done about it? First things first. In the words of Finance Secretary Ben Diokno, “given the current composition of the Congress of the Philippines,” will change be possible? This question is most relevant because it may be argued that the composition of the Congress of the Philippines has not changed much in 32 years. To wish this predicament away would be just as futile. The solution borders on ideological reform, but no perceptible ideological differences separate the overwhelming majority of the members of Congress, only vested interests.
Why bring tax resources to the countryside among the marginalized when the businesses owned by vested interests are in the cities and more progressive poblacions? The apparent answer also explains why slums are tolerated because the national tax allotment is calculated that way – the higher the population, the greater the share. Let the ever-increasing population live in squalor and feast on ‘pagpag.’ The intended beneficiaries of a more significant share of the tax allotment practically see none.
Clearly, the mathematics does not work, at least not as intended. Certainly not for the greater good. Maybe that’s where this writer is wrong. What’s happening was entirely intentional, just as any encomiendero or makapili would have designed it. Ahah!
The highest share of tax revenues in the Philippines in 2021 was derived from value-added taxes/goods and services tax (22.0%). The second-highest share of tax revenues in 2021 was derived from other taxes on goods and services (20.4%). Income taxes? Indeed, it is not the top source of internal revenue. The argument that the rich pay excessive taxes in the Philippines is flawed.
What is proposed? Invariably, the best part of Thinker’s Thinking – is the alternative.
The national tax allotment (NTA) should be calculated this way:
Population – 25%
Land – 25%
Equal Share – 10%
Local GDP ( L-GDP per LGU) – 40%
Total – 100%
Based on this calculation, the LGUs with the lowest local GDP get a higher share of the allotted L-GDP of 40%. The richest LGU gets zero.
When the resources shift to the poorest LGUs, assuming good local governance, the poorest can catch up to the wealthiest LGUs. Logically, work opportunities come with investment. If we’re lucky, even insurrection and secession die naturally, and the country achieves food security. Dare we say turn the Philippines into a net exporter of food? Slums will disappear because Filipinos return to the countryside to follow their investments.
It is reasonable to believe that outcomes will differ if we change the status quo. Otherwise, insanity will follow when we expect a different outcome from repeating the mistakes of the last generation and condemn the next to a fate worse than death.
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ABOUT THE AUTHOR: Dr. Crispin Fernandez advocates for overseas Filipinos, public health, transformative political change, and patriotic economics. He is also a community organizer, leader, and freelance writer.
