Mandanas VS Ochoa

9/13/22, 9:15 AM Advanced Decisions July 2018
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EN BANC
CONGRESSMAN HERMILANDO
G.R. No. 199802
I. MANDANAS; MAYOR EFREN
B. DIONA; MAYOR ANTONINO
A. AURELIO; KAGA WAD
MARIOILAGAN;BARANGAY
CHAIR PERLITO MANALO;
BARANGA Y CHAIR MEDEL
MEDRANO;BARANGAY
KAGA WAD CRIS RAMOS;
BARANGA Y KAGA WAD ELISA
D. BALBAGO, and ATTY. JOSE
MALVAR VILLEGAS,
Petitioners,
- versus -
EXECUTIVE SECRETARY
PAQUITO N. OCHOA, JR.;
SECRETARY CESAR
PURISIMA, Department of
Finance; SECRETARY
FLORENCIO H. ABAD,
Department of Budget and
https://central.com.ph/sfsreader/session/00000183346afb00c1a71f35000d00d40059004a/t/?o=False 1/131
Management; COMMISSIONER
KIM JACINTO-HENARES,
Bureau of Internal Revenue; and
NATIONAL TREASURER
ROBERTO TAN, Bureau of the
Treasury,
Respondents.
x------------------------------------------x
HONORABLE ENRIQUE T. G.R.
No. 208488
GARCIA, JR., in his personal and
official capacity as Representative
Present:
of the 2°d District of the Province of
Bataan,
Petitioner,
CARPIO, Acting C.J.,
VELASCO, JR.,
LEONARDO-DE CASTRO,
.;I
Decision 2
- versus-
HONORABLE [PAQUITO) N.
OCHOA, JR., Executive Secretary;
HONORABLE CESAR V.
PURISIMA, Secretary, Department
of Finance; HONORABLE
FLORENCIO H. ABAD, Secretary,
Management; HONORABLE KIM
S. JACINTO-HENARES,
Commissioner, Bureau of Internal
Revenue; and HONORABLE

ROZZANO RUFINO B. BIAZON,
Commissioner, Bureau of Customs,
Respondents.
G.R. Nos. 199802 & 208488
PERALTA,
BERSAMIN,
DEL CASTILLO,
PERLAS-BERNABE,
LEONEN,
JARDELEZA,
CAGUIOA,
MAR TIRES,
TIJAM,
REYES, JR., and
GESMUNDO, JJ
Promulgated: ,,, J
July 3, 2018 -~A(!
x------------------------------------------------
----------------~-----------------x
DECISION
BERSAMIN, J.:
The petitioners hereby challenge
the manner in which the just share in
the national taxes of the local
government units (LGUs) has been
computed.
Antecedents
One of the key features of the 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.1 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, otherwise
known
as the Local Government Code
(LGC), in order to guarantee the fiscal
autonomy of the LGUs by
specifically providing that:
Pimentel, Jr. v. Aguirre, G.R. No.
132988, July 19, 2000, 336 SCRA 201,
218.
'--1
Decision 3 G.R. Nos. 199802 &
208488
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 as follows:
(a) On the first year of the
effectivity of this Code, thirty percent
(30%);
(b) On the second year, thirty-five
percent (35%); and
(c) On the third year and
thereafter, forty percent (40%).
Provided, That in the event that
the National Government incurs an
unmanageable public sector deficit,
the President of the Philippines is
hereby authorized, upon the
recommendation of Secretary of
Finance,
Secretary of Interior and Local
Government, and Secretary of Budget
and
Management, and subject to
consultation with the presiding
officers of
both Houses of Congress and the
presidents of the "liga", to make the
necessary adjustments in the
internal revenue allotment of local
government units but in no case
shall the allotment be less than thirty
percent (30%) of the collection of

national internal revenue taxes of the
third fiscal year preceding the
current fiscal year: Provided, further,
That
in the first year of the effectivity of
this Code, the local government units
shall, in addition to the thirty
percent (30%) internal revenue
allotment
which shall include the cost of
devolved functions for essential public
services, be entitled to receive the
amount equivalent to the cost of
devolved personal services.
The share of the LGUs, heretofore
known as the Internal Revenue
Allotment (IRA), 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 (BIR).2
G.R. No. 199802 (Mandanas, et al.)
is 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.
Mandanas, et al. allege herein that

certain collections of NIR Ts 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.
Article 378, Administrative Order
No. 270, Series of 1992.
!)J
208488
In G.R. No. 208488, Congressman

Enrique Garcia, Jr., the lone
petitioner, 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. His
petition insists on a literal reading
of Section 6, Article X of the 1987
Constitution. He avers 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 VA Ts 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.
It is noted that named as common
respondents were the then
incumbent Executive Secretary,
Secretary of Finance, the Secretary of
the
Management (DBM), and the
Commissioner of
Internal Revenue. In addition,
Mandanas, et al. impleaded the
National
Treasurer, while Garcia added the
Commissioner of Customs.
The cases were consolidated on
October 22, 2013. 3 In the meanwhile,
Congressman Garcia, Jr. passed
away. Jose Enrique Garcia III, who
was
subsequently elected to the same
congressional post, was substituted for
Congressman Garcia, Jr. as the
petitioner in G.R. No. 208488 under
the
resolution promulgated on August
23, 2016.4
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.
Anent the procedural
considerations, the OSG argues that
the petitions
are procedurally defective because,
firstly, 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, secondly, 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.
Rollo (G.R. No. 208488), p. 50.
Id. at 310.
4
208488
On the substantive considerations,
the OSG avers 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 VA Ts, excise taxes and
DSTs
collected by the BIR, on one hand,
and the VA Ts, 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
The issues for resolution are
limited to the following, namely:
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.
Simply stated, the petitioners raise
the novel question of 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.
Ruling of the Court
The petitions are partly
meritorious.
.Pi
208488
I
Mandamus is an improper
remedy
Mandanas, et al. seek the writs of
certiorari, prohibition and
mandamus, while Garcia prays for
the writ of mandamus. Both groups of
petitioners impugn the validity of
Section 284 of the LGC.
The remedy of mandamus is

defined in Section 3, Rule 65 of the
Rules of Court, which provides:
Section 3. Petition for mandamus. -
When any tribunal,
corporation, board, officer or person
unlawfully neglects the performance
of an act which the law specifically
enjoins as a duty resulting from an
office, trust, or station, or
unlawfully excludes another from the
use and
enjoyment of a right or office to
which such other is entitled, and there
is
no other plain, speedy and
adequate remedy in the ordinary
course of law,
the person aggrieved thereby may
file a verified petition in the proper
court, alleging the facts with
certainty and praying that judgment
be
rendered commanding the
respondent, immediately or at some
other time
to be specified by the court, to do
the act required to be done to protect
the
rights of the petitioner, and to pay
the damages sustained by the
petitioner
by reason of the wrongful acts of

the respondent.
The petition shall also contain a
sworn certification of non-forum
shopping as provided in the third
paragraph of section 3, Rule 46.
For the writ of mandamus to issue,
the petitioner must show that the
act sought to be performed or
compelled is ministerial on the part of
the
respondent. An act is ministerial
when it does not require the exercise
of
judgment and the act is performed
pursuant to a legal mandate. The
burden
of proof is on the mandamus
petitioner to show that he is entitled
to the
performance of a legal right, and
that the respondent has a
corresponding
duty to perform the act. 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. 5
Considering that its determination

of what constitutes the just share of
the LGUs in the national taxes
under the 1987 Constitution is an
entirely
discretionary power, Congress
cannot be compelled by writ of
mandamus to
act either way. 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. This conclusion
should at
once then demand the dismissal of
the Garcia petition in G.R. No.
208488,
but we do not dismiss it. Garcia has
attributed the non-release of some
In the Matter of' Save the Supreme
Court Judicial Independence and
Fiscal Autonomy Movement v.
Abolition of Judiciary Development
Fund (JDF) and Reduction of Fiscal
Autonomy, UDK-15143, January
21, 2015, 746 SCRA 352, 371, citing
Uy Kiao Eng v. Lee, G.R. No. 176831,
January 15, 2010, 610 SCRA
211,217.
~
208488
portions of their IRA balances to an
alleged congressional indiscretion -
the
diminution of the base amount for
computing the LGU' s just share. He
has
asserted that Congress altered the
constitutional base not only by
limiting the
base to the NIRTs instead of
including therein all national taxes,
but also by
excluding some national taxes and
revenues that only benefitted a few
LGUs
to the detriment of the rest of the
LG Us.
Garcia's petition, while dubbed as a
petition for mandamus, is also a
petition for certiorari because it
alleges that Congress thereby
committed
grave abuse of discretion
amounting to lack or excess of
jurisdiction. It is
worth reminding that the actual
nature of every action is determined
by the
allegations in the body of the

pleading or the complaint itself, not by
the
nomenclature used to designate the
same. 6 Moreover, neither should the
prayer for relief be controlling;
hence, the courts may still grant the
proper
relief as the facts alleged in the
pleadings and the evidence introduced
may
warrant even without a prayer for
specific remedy.7
In this regard, Garcia's allegation
of the unconstitutionality of the
insertion by Congress of the words
internal revenue in the phrase
national
taxes justifies treating his petition
as one for certiorari. It becomes our
duty,
then, to assume jurisdiction over
his petition. In Araullo v. Aquino Ill, 8
the
Court has emphatically opined that
the Court's certiorari jurisdiction
under
the expanded judicial power as
stated in the second paragraph of
Section 1,
Article VIII of the Constitution can
be asserted:
xxxx to set right and undo any act

of grave abuse of discretion amounting
to lack or excess of jurisdiction by
any branch or instrumentality of the
Government, the Court is not at all
precluded from making the inquiry
provided the challenge was
properly brought by interested or
affected
parties. The Court has been
thereby entrusted expressly or by
necessary
implication with both the duty and
the obligation of determining, in
appropriate cases, the validity of
any assailed legislative or executive
action. This entrustment is
consistent with the republican system
of checks
9 and balances.
Further, observing that one of the
reliefs being sought by Garcia is
identical to the main relief sought
by Mandanas, et al., the Court should
rightly dwell on the substantive
arguments posited by Garcia to the
extent
that they are relevant to the
ultimate resolution of these
consolidated suits.
6 Ruby Shelter Builders and Realty
Development Corporation v.
Formaran, Ill, G.R. No. 175914,

February 10, 2009.
7 Evangelista v. Santiago, G.R. No.
157447, April 29, 2005, 457 SCRA
744, 762.
G.R. No. 209287, July 1, 2014, 728
SCRA 1.
9 Id. at 75.
~
208488
II.
Municipal corporations and
their relationship with
Congress
The correct resolution and fair
disposition of the issues interposed for
our consideration require a review
of the basic principles underlying our
system of local governments, and of
the extent of the autonomy granted to
the LGUs by the 1987 Constitution.
Municipal corporations are now
commonly known as local
governments. They are the bodies
politic established by law partly as
agencies of the State to assist in the
civil governance of the country. Their
chief purpose has been to regulate
and administer the local and internal
affairs of the cities, municipalities
or districts. They are legal institutions
formed by charters from the

sovereign power, whereby the
populations
within communities living within
prescribed areas have formed
themselves
into bodies politic and corporate,
and assumed their corporate names
with
the right of continuous succession
and for the purposes and with the
authority of subordinate self-
government and improvement and the
local
administration of the affairs of the
State. 10
Municipal corporations, being the
mere creatures of the State, are
subject to the will of Congress,
their creator. Their continued
existence and
the grant of their powers are
dependent on the discretion of
Congress. On
this matter, Judge John F. Dillon of
the State of Iowa in the United States
of
America enunciated in Merriam v.
Moody's Executors11 the rule of
statutory
construction that came to be oft-
mentioned as Dillon's Rule, to wit:
[A] municipal corporation possesses

and can exercise the
following powers and no others:
First, those granted in express words;
second, those necessarily implied or
necessarily incident to the powers
expressly granted; third, those
absolutely essential to the declared
objects
and purposes of the corporation-not
simply convenient but indispensible;
fourth, any fair doubt as to the
existence of a power is resolved by the
courts against the corporation-
against the existence of the powers. 12
The formulation of Dillon's Rule
has since undergone slight
modifications. Judge Dillon himself
introduced some of the modifications
through his post-Merriam writings
with the objective of alleviating the
original formulation's harshness.
The word fairly was added to the
second
proviso; the word absolutely was
deleted from the third proviso; and the
words reasonable and substantial
were added to the fourth proviso,
thusly:
10 Black's Law Dictionary, 6th ed.,
Nolan, J., & Nolan-Haley, J., West
Group, St. Paul, Minnesota, 1990,
Pi· 1017.
1 25 Iowa 163 ( 1868).
12 Id. at 170.
ry
208488
x x x second, those necessarily or
fairly implied in or incident to the
powers expressly granted; third,
those essential to x x x. Any fair,
reasonable, doubt. 13
The modified Dillon's Rule has been
followed in this jurisdiction, and
has remained despite both the 1973
Constitution and the 1987
Constitution
mandating autonomy for local
governments. This has been made
evident in
several rulings of the Court, one of
which was that handed down in
Magtajas v. Pryce Properties
Corporation, lnc.: 14
In light of all the above
considerations, we see no way of
arriving
at the conclusion urged on us by
the petitioners that the ordinances in
question are valid. On the contrary,
we find that the ordinances violate
P.D. 1869, which has the character
and force of a statute, as well as the
public policy expressed in the

decree allowing the playing of certain
games of chance despite the
prohibition of gambling in general.
The rationale of the requirement
that the ordinances should not
contravene a statute is obvious.
Municipal governments are only
agents
of the national government. Local
councils exercise only delegated
legislative powers conferred on
them by Congress as the national
lawmaking body. The delegate
cannot be superior to the principal or
exercise powers higher than those
of the latter. It is a heresy to suggest
that the local government units can
undo the acts of Congress, from
which they have derived their
power in the first place, and negate by
mere ordinance the mandate of the
statute.
Municipal corporations owe their
origin to, and derive
their powers and rights wholly from
the legislature. It
breathes into them the breath of
life, without which they
cannot exist. As it creates, so it
may destroy. As it may
destroy, it may abridge and control.

Unless there is some
constitutional limitation on the
right, the legislature might,
by a single act, and if we can
suppose it capable of so great
a folly and so great a wrong, swe~p
from existence all of the
municipal corporations in the
State, and the corporation
could not prevent it. We know of no
limitation on the right
so far as to the corporation
themselves are concerned. They
are, so to phrase it, the mere
tenants at will of 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.
Without meaning to detract from
that policy, we here confirm that
Congress retains control of the local
government units although in
significantly reduced degree now
than under our previous
Constitutions. The power to create
still includes the power to destroy.
The power to grant still includes

the power to withhold or recall.
13 l J. Dillon, Municipal
Corporations, § 89 (3rd Ed. 1881 ). See
Dean, K.D., The Dillon Rule - a Limit
on
Local Government Powers, Missouri
Law Review, Vol. 41, Issue 4, Fall
1976, p. 547.
14 G.R. No. 111097, July 20, 1994,
234 SCRA 255, 272-273, citing The
City of Clinton v. The Cedar
Rapids and Missouri River
Railroad Company, 24 Iowa (1868):
455 at 475.
"2.,
208488
True, there are certain notable
innovations in the Constitution, like
the direct conferment on the local
government units of the power to
tax, which cannot now be
withdrawn by mere statute. By and
large,
however, the national legislature is
still the principal of the local
government units, which cannot
defy its will or modify or violate it.
[Bold underscoring supplied for
emphasis]
Also, in the earlier ruling in

Ganzon v. Court of Appeals, 15 the
Court
has pointed out that the 1987
Constitution, in mandating autonomy
for the
LGUs, did not intend to deprive
Congress of its authority and
prerogatives
over the LGUs.
Nonetheless, the LGC has
tempered the application of Dillon's
Rule
in the Philippines by providing a
norm of interpretation in favor of the
LGUs
in its Section 5(a), to wit:
xx xx
(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]
xx xx
III.
The extent of local autonomy in the
Philippines
Regardless, there remains no
question that Congress possesses and
wields plenary power to control and
direct the destiny of the LGUs, subject
only to the Constitution itself, for
Congress, just like any branch of the
Government, should bow down to
the majesty of the Constitution, which
is
always supreme.
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."
The autonomy of the LGUs as thereby
ensured does not contemplate the
fragmentation of the Philippines into
a
collection of mini-states, 16 or the
creation of imperium in imperio. 17
The
grant of autonomy simply means
that Congress will allow the LGUs to
15 G.R. No. 93252, August 5, 1991,
200 SCRA 271, 281.
16 Id. at 281.
17 Land Transportation Office v.

City of Butuan, G.R. No. 131512,
January 20, 2000, 322 SCRA 805,
808.
-."'{
208488
perform certain functions and
exercise certain powers in order not
for them
to be overly dependent on the
National Government subject to the
limitations that the 1987
Constitution or Congress may impose.
18 Local
autonomy recognizes the wholeness
of the Philippine society in its
ethnolinguistic, cultural, and even
religious diversities. 19
The constitutional mandate to
ensure local autonomy refers to
decentralization. 20 In its broad or
general sense, decentralization has
two
forms in the Philippine setting,
namely: the decentralization of power
and
the decentralization of
administration. The decentralization
of power
involves the abdication of political
power in favor of the autonomous
LGUs
as to grant them the freedom to
chart their own destinies and to shape
their
futures with minimum intervention
from the central government. This
amounts to self-immolation because
the autonomous LGUs thereby become
accountable not to the central
authorities but to their constituencies.
On the
other hand, the decentralization of
administration occurs when the
central
government delegates
administrative powers to the LGUs as
the means of
broadening the base of
governmental powers and of making
the LGUs more
responsive and accountable in the
process, and thereby ensure their
fullest
development as self-reliant
communities and more effective
partners in the
pursuit of the goals of national
development and social progress. This
form
of decentralization further relieves
the central government of the burden
of
managing local affairs so that it can

concentrate on national concerns.21
Two groups of LGUs enjoy
decentralization in distinct ways. The
decentralization of power has been
given to the regional units (namely,
the
Autonomous Region for Muslim
Mindanao [ ARMM] and the
constitutionally-mandated
Cordillera Autonomous Region
[CAR]). The
other group of LGUs (i.e.,
provinces, cities, municipalities and
barangays)
enjoy the decentralization of
administration.22 The distinction can
be
reasonably understood. The
provinces, cities, municipalities and
barangays
are given decentralized
administration to make governance at
the local levels
18 See Ganzon v. Court of Appeals,
note 15.
19 Disomangcop v. Datumanong,
G.R. No. 149848, November 25, 2004,
444 SCRA 203, 227.
20 Basco v. Philippine Amusement
and Gaming Corporation, G.R. No.
91649, May 14, 1991, 197 SCRA
52, 65.
21 Limbona v. Mange/in, G.R. No.
80391, February 28, 1989, 170 SCRA
786, 795.
22 In Cordillera Board Coalition v.
Commission on Audit, G.R. No. 79956,
January 29, 1990, 181 SCRA
495, 506, the Court observed that:
"It must be clarified that the
constitutional guarantee of local
autonomy
in the Constitution [Art. X, sec. 2]
refers to the administrative autonomy
of local government units or, cast
in more technical language, the
decentralization of government
authority [Villegas v. Subido, G.R. No.
L-
31004, January 8, 1971, 37 SCRA
l]. Local autonomy is not unique to the
1987 Constitution, it being
guaranteed also under the 1973
Constitution [Art. II, sec. 10]. And
while there was no express guarantee
under the 1935 Constitution, the
Congress enacted the Local Autonomy
Act (R.A. No. 2264) and the
Decentralization Act (R.A. No.
5185), which ushered the irreversible
march towards further enlargement of
local autonomy in the country
[Villegas v. Subido, supra.]
On the other hand, the creation of

autonomous regions in Muslim
Mindanao and the Cordilleras, which
is peculiar to the 1987 Constitution,
contemplates the grant of political
autonomy and not just
administrative autonomy to these
regions. Thus, the provision in the
Constitution for an autonomous
regional government with a basic
structure consisting of an executive
department and a legislative
assembly and special courts with
personal, family and property law
jurisdiction in each of the autonomous
regions [Art. X, sec. 18]"
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208488
more directly responsive and
effective. In tum, the economic,
political and
social developments of the smaller
political units are expected to propel
social and economic growth and
development. 23 In contrast, the
regional
autonomy of the ARMM and the
CAR aims to permit determinate
groups
with common traditions and shared
social-cultural characteristics to freely
develop their ways of life and

heritage, to exercise their rights, and
to be in
charge of their own affairs through
the establishment of a special
governance
regime for certain member
communities who choose their own
authorities
from within themselves, and
exercise the jurisdictional authority
legally
accorded to them to decide their
internal community affairs. 24
It is to be underscored, however,
that the decentralization of power in
favor of the regional units is not
unlimited but involves only the
powers
enumerated by Section 20, Article
X of the 1987 Constitution and by the
acts of Congress. For, with various
powers being devolved to the regional
units, the grant and exercise of
such powers should always be
consistent
with and limited by the 1987
Constitution and the national laws. 25
In other
words, the powers are guardedly,
not absolutely, abdicated by the
National
Government.
Illustrative of the limitation is
what transpired in Serna v.
Commission
on Elections,26 where the Court
struck down Section 19, Article VI of
Republic Act No. 9054 (An Act to
Strengthen and Expand the Organic
Act
for the Autonomous Region in
Muslim Mindanao, Amending for the
Purpose
Republic Act No. 6734, entitled "An
Act Providing for the Autonomous
Region in Muslim Mindanao," as
Amended) insofar as the provision
granted
to the ARMM the power to create
provinces and cities, and consequently
declared as void Muslim Mindanao
Autonomy Act No. 201 creating the
Province of Shariff Kabunsuan for
being contrary to Section 5, Article VI
and Section 20, Article X of the
1987 Constitution, as well as Section 3
of
the Ordinance appended to the
1987 Constitution. The Court clarified
therein
that only Congress could create
provinces and cities. This was because
the
creation of provinces and cities

necessarily entailed the creation of
legislative districts, a power that
only Congress could exercise pursuant
to
23 Pimentel v. Aguirre, supra note
1, at 217.
supra note 19, at 231.
25 Section 20, Article X of the 1987
Constitution states:
Section 20. Within its territorial
jurisdiction and subject to the
provisions of this
Constitution and national laws, the
organic act of autonomous regions
shall provide for
legislative powers over:
( 1) Administrative organization;
(2) Creation of sources ofrevenues;
(3) Ancestral domain and natural
resources;
(4) Personal, family, and property
relations;
(5) Regional urban and rural
planning development;
(6) Economic, social, and tourism
development;
(7) Educational policies;
(8) Preservation and development
of the cultural heritage; and
(9) Such other matters as may be

authorized by law for the promotion of
the general
welfare of the people of the region.
26 G.R. No. 177597, July 16, 2008,
558 SCRA 700, 743-744.
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208488
Section 5, Article VI of the 1987
Constitution and Section 3 of the
Ordinance appended to the
Constitution; as such, the ARMM
would be
thereby usurping the power of
Congress to create legislative districts
and
national offices.27
The 1987 Constitution has surely
encouraged decentralization by
mandating that a system of
decentralization be instituted through
the LGC in
order to enable a more responsive
and accountable local government
structure.28 It has also delegated
the power to tax to the LGUs by
authorizing
them to create their own sources of
income that would make them
selfreliant.
29 It further ensures that each and

every LGU will have a just share in
national taxes as well in the
development of the national wealth.30
The LGC has further delineated in
its Section 3 the different operative
principles of decentralization to be
adhered to consistently with the
constitutional policy on local
autonomy, viz.:
Sec. 3. Operative Principles of
Decentralization-
The formulation and
implementation of policies and
measures on
local autonomy shall be guided by
the following operative principles:
(a) There shall be an effective
allocation among the different
local government units of their
respective powers, functions,
responsibilities, and resources;
(b) There shall be established in
every local government unit an
accountable, efficient, and dynamic
organizational structure
and operating mechanism that will
meet the priority needs and
service requirements of its
communities;
(c) Subject to civil service law, rules
and regulations, local
officials and employees paid wholly

or mainly from local funds
shall be appointed or removed,
according to merit and fitness,
by the appropriate appointing
authority;
(d) The vesting of duty,
responsibility, and accountability in
local government units shall be
accompanied with provision for
reasonably adequate resources to
discharge their powers and
effectively carry out their functions:
hence, they shall have the
power to create and broaden their
own sources of revenue and
the right to a just share in national
taxes and an equitable share
in the proceeds of the utilization
and development of the
national wealth within their
respective areas;
27 Id. at 730-732.
28 See Article X, Section 3.
29 Id., Section 5.
30 Id., Section 5 and Section 6.
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208488
( e) Provinces with respect to
component cities and
municipalities, and cities and

municipalities with respect to
component barangays, shall ensure
that the acts of their
component units are within the
scope of their prescribed
powers and functions;
(f) Local government units may
group themselves, consolidate
or coordinate their efforts, services,
and resources commonly
beneficial to them;
(g) The capabilities of local
government units, especially the
municipalities and barangays, shall
be enhanced by providing
them with opportunities to
participate actively in the
implementation of national
programs and projects;
(h) There shall be a continuing
mechanism to enhance local
autonomy not only by legislative
enabling acts but also by
administrative and organizational
reforms;
(i) Local government units shall
share with the national
government the responsibility in
the management and
maintenance of ecological balance
within their territorial
jurisdiction, subject to the

provisions of this Code and national
policies;
(j) Effective mechanisms for
ensuring the accountability of
local government units to their
respective constituents shall be
strengthened in order to upgrade
continually the quality of
local leadership;
(k) The realization of local
autonomy shall be facilitated
through improved coordination of
national government policies
and programs an extension of
adequate technical and material
assistance to less developed and
deserving local government
units;
(1) The participation of the private
sector in local governance,
particularly in the delivery of basic
services, shall be
encouraged to ensure the viability
of local autonomy as an
alternative strategy for sustainable
development; and
(m) The national government shall
ensure that decentralization
contributes to the continuing
improvement of the performance
of local government units and the

quality of community life.
Based on the foregoing delineation,
decentralization can be
considered as the decision by the
central government to empower its
subordinates, whether
geographically or functionally
constituted, to exercise
authority in certain areas. It
involves decision-making by
subnational units,
and is typically a delegated power,
whereby a larger government chooses
to
delegate authority to more local
governments.31 It is also a process,
being
the set of policies, electoral or
constitutional reforms that transfer
.fi
208488
responsibilities, resources or
authority from the higher to the lower
levels of
government.32 It is often viewed as
a shift of authority towards local
governments and away from the
central government, with total
government
authority over society and economy
imagined as fixed.33
As a system of transferring
authority and power from the
National
Government to the LGUs,
decentralization in the Philippines
may be
categorized into four, namely: ( 1)
political decentralization or
devolution;
(2) administrative decentralization
or deconcentration; (3) fiscal
decentralization; and ( 4) policy or
decision-making decentralization.
Political decentralization or
devolution occurs when there is a
transfer
of powers, responsibilities, and
resources from the central government
to the
LOU s for the performance of
certain functions. It is a more liberal
form of
decentralization because there is an
actual transfer of powers and
responsibilities. It aims to grant
greater autonomy to the LGUs in
cognizance of their right to self-
government, to make them self-
reliant, and
to improve their administrative and

technical capabilities.34 It is an act by
which the National Government
confers power and authority upon the
various LGUs to perform specific
functions and responsibilities.35 It
encompasses reforms to open sub-
national representation and policies to
"devolve political authority or
electoral capacities to subnational
actors. "36
Section 16 to Section 19 of the LGC
characterize political decentralization
in
the LGC as different LGUs
empowered to address the different
needs of
their constituents. In contrast,
devolution in favor of the regional
units is
more expansive because they are
given the authority to regulate a wider
array of subjects, including
personal, family and property
relations.
Administrative decentralization or
deconcentration involves the
transfer of functions or the
delegation of authority and
responsibility from
the national office to the regional
and local offices. 37 Consistent with
this
concept, the LGC has created the
Local School Boards,38 the Local
Health
Boards39 and the Local
Development Councils,40 and has
transferred some of
32 Does Decentralization Improve
Perceptions of Accountability?
Attitudinal Evidence from Colombia.
Escobar-Lemmon, M. & Ross, A.
Midwest Political Science Association,
American Journal of Political
Science, Vol, 58, No. 1 (January
2014), p. 176 accessed at
http://www.jstor.org/stable/I 0.1017
/s002238 I 612000667 last October 4,
2017.
33 Comparative Federalism and
Decentralization: On Meaning and
Measurement. Rodden, J.
Comprative Politics, Ph.D.
Programs in Political Science, City
University of New York. Comparative
politics, Vol. 36, No. 4 (July 2004),
p. 482. Accessed at
http://www.jstor.org/stable/4150172
last October
6, 2017.
35 Section 17, LGC.
36 Does Decentralization Improve

Perceptions of Accountability?
Attitudinal Evidence from Colombia.
Escobar-Lemmon, M. & Ross, A.
Midwest Political Science Association,
American Journal of Political
Science, Vol, 58, No. 1 (January
2014), p. 176 accessed at
http://www.jstor.org/stable/10.10 l
7/s00223816 l 2000667 last October 4,
2017.
38 Section 98, LGC.
39 Section I 02, LGC.
40 Section 107, LGC.
<;
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the authority from the agencies of
the National Government, like the
Department of Education and the
Department of Health, to such bodies
to
better cope up with the needs of
particular localities.
Fiscal decentralization means that
the LGUs have the power to create
their own sources of revenue in
addition to their just share in the
national
taxes released by the National

Government. It includes the power to
allocate
their resources in accordance with
their own priorities. It thus extends to
the
preparation of their budgets, so
that the local officials have to work
within
the constraints of their budgets.
The budgets are not formulated at the
national level and imposed on local
governments, without regard as to
whether or not they are relevant to
local needs and resources. Hence, the
necessity of a balancing of
viewpoints and the harmonization of
proposals
from both local and national
officials, who in any case are partners
in the
attainment of national goals, is
recognized and addressed.41
Fiscal decentralization emanates
from a specific constitutional
mandate that is expressed in
several provisions of Article X (Local
Government) of the 1987
Constitution, specifically: Section 5 ;42
Section 6;43
and Section 7.44
The constitutional authority

extended to each and every LGU to
create
its own sources of income and
revenue has been formalized from
Section
128 to Section 133 of the LGC. To
implement the LGUs' entitlement to
the
just share in the national taxes,
Congress has enacted Section 284 to
Section
288 of the LGC. Congress has
further enacted Section 289 to Section
294 of
the LGC to define the share of the
LGUs in the national wealth. Indeed,
the
requirement for the automatic
release to the LGUs of their just share
in the
national taxes is but the
consequence of the constitutional
mandate for fiscal
decentralization. 45
For sure, fiscal decentralization
does not signify the absolute freedom
of the LGUs to create their own
sources of revenue and to spend their
revenues unrestrictedly or upon
their individual whims and caprices.
Congress has subjected the LGUs'

power to tax to the guidelines set in
Section 130 of the LGC and to the
limitations stated in Section 133 of the
LGC. The concept of local fiscal
autonomy does not exclude any
manner of
41 Pimentel, Jr. v. Aguirre, supra
note I, at 218.
42 Section 5. Each local
government unit shall have the power
to create its own sources of revenues
and
to levy taxes, fees, and charges
subject to such guidelines and
limitations as the Congress may
provide,
consistent with the basic policy of
local autonomy. Such taxes, fees, and
charges shall accrue exclusively
to the local governments.
43 Section 6. Local government
units shall have a just share, as
determined by law, in the national
taxes
which shall be automatically
released to them.
44 Section 7. Local governments
shall be entitled to an equitable share
in the proceeds of the utilization
and development of the national
wealth within their respective areas,
in the manner provided by law,

including sharing the same with
the inhabitants by way of direct
benefits.
45 Province of Batangas v. Romulo,
G.R. No. 152774, May 27, 2004, 429
SCRA 736, 760.
"")"
208488
intervention by the National
Government in the form of supervision
if only
to ensure that the local programs,
fiscal and otherwise, are consistent
with
the national goals.46
Lastly, policy- or decision-making
decentralization exists if at least
one sub-national tier of government
has exclusive authority to make
decisions on at least one policy
issue.47
In fine, 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.
IV.
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, viz.:
Section 6. Local government units
shall have a just share, as
determined by law, in the national
taxes which shall be automatically
released to them.
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.48
Congress has sought to carry out
the second mandate of Section 6 by
enacting Section 284, Title III
(Shares of Local Government Units in
the
Proceeds of National Taxes), of the

LGC, which is again quoted for ready
reference:
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 as follows:
46 Pimentel, Jr. v. Aguirre, supra
note I.
47 Decentralization and Intrastate
Struggles: Chechnya, Punjab, and
Quebec. Bakke, K. Cambridge
University Press, New York, 2015,
p. 12.
48 Province of Batangas v. Romu/o,
supra note 45.
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208488
(30%);
percent (35%); and
the national government incurs an

Finance,
Government and Secretary of Budget
and
officers of
internal . revenue allotment of local
government units but in no case
shall the allotment be less than thirty
percent (30%) of the collection of
national internal revenue taxes of the
third fiscal year preceding the
current fiscal year: Provided, further,
That
in the first year of the effectivity of
this Code, the local government units
shall, in addition to the thirty
percent (30%) internal revenue
allotment
which shall include the cost of
devolved functions for essential public
services, be entitled to receive the
amount equivalent to the cost of
There is no issue as to what

constitutes the LGUs' just share
expressed in percentages of the
national taxes (i.e., 30%, 35% and 40%
stipulated in subparagraphs (a), (b
), and ( c) of Section 284 ). Yet, Section
6,
supra, mentions national taxes as
the source of the just share of the
LGUs
while Section 284 ordains that the
share of the LG Us be taken from
national
internal revenue taxes instead.
Has not Congress thereby infringed
the constitutional provision?
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 LG Us.
We agree with Garcia's contention.
Although the power of Congress to
make laws is plenary in nature,
congressional lawmaking remains
subject to the limitations stated in the
1987 Constitution.49 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
49 See Marcos v. Manglapus, G.R.
No. 88211, September 15, 1989, 177
SCRA 668, 689.
.
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208488
no departure). 50 Equally
impermissible is that Congress has
also thereby
curtailed the guarantee of fiscal
autonomy in favor of the LGUs under
the
1987 Constitution.
Taxes are the enforced proportional
contributions exacted by the State
from persons and properties
pursuant to its sovereignty in order to
support
the Gove1nment and to defray all

the public needs. Every tax has three
elements, namely: (a) it is an
enforced proportional contribution
from
persons and properties; (b) it is
imposed by the State by virtue of its
sovereignty; and (c) it is levied for
the support of the Government.51
Taxes
are classified into national and
local. National taxes are those levied
by the
National Government, while local
taxes are those levied by the LGUs.52
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, viz.:
Section 21. Sources of Revenue. -
The following taxes, fees and
charges are deemed to be national
internal revenue taxes:
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
( d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stan1p taxes; and
(g) Such other taxes as arc 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.
Strictly speaking, customs duties
are also taxes because they are
exactions whose proceeds become
public funds. According to Garcia v.
Executive Secretary,53 customs
duties is the nomenclature given to
taxes
imposed on the importation and
exportation of commodities and
merchandise to or from a foreign
country. Although customs duties
have
5° Chavez v. Judicial and Bar
Council, G.R. No. 202242. July 17,
2012, 676 SCRA 579, 598.
51 Republic v. COCOFED, G.R. No.
147062-64, December 14, 2001, 372
SCRA 462, 482.
52 A ban, Law of Basic Taxation in
the Philippines, Revised Ed. 200 I, p.
27.
53 G.R. No. 101273, July 3, 1992,
211SCRA219, 227
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208488
either or both the generation of
revenue and the regulation of
economic or
social activity as their moving
purposes, it is often difficult to say
which of
the two is the principal objective in
a particular instance, for, verily,
customs
duties, much like internal revenue
taxes, are rarely designed to achieve
only
one policy objective.54 We further
note that Section 102(00) of R.A. No.
10863 (Customs Modernization and
Tariff Act) expressly includes all fees
and charges imposed under the Act
under the blanket term of taxes.
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 LG Us 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 LG Us.
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. The intent of the people in
respect of Section 6 is really that the
base
for reckoning the just share of the
LGUs should includes all national
taxes.
To read Section 6 differently as
requiring that the just share of LG Us
in the
national taxes shall be determined

by law is tantamount to the
unauthorized
revision of the 1987 Constitution.
v.
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
Garcia submits that even assuming
that the present version of Section
284 of the LGC is constitutionally
valid, the implementation thereof has
been erroneous because 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. He
further submits that the exclusion of
certain NIRTs diminishes the fiscal
autonomy granted to the LGUs. He
claims that the following NIRTs
have been illegally excluded from the
base
for determining the fair share of
the LGUs in the IRA, to wit:
54 Id.
-"\.
208488
(1) NIRTs collected by the cities
and provinces and divided exclusively
among the LGUs of the
Autonomous Region for Muslim
Mindanao
(ARMM), the regional government
and the central government,
pursuant to Section 1555 in
relation to Section 9,56 Article IX of
R.A.
No. 9054 (An Act to Strengthen and
Expand the Organic Act for the
Autonomous Region in Muslim
Mindanao, amending for the purpose
Republic Act No. 6734, entitled An
Act providing for an Organic Act
for the Autonomous Region in
Muslim Mindanao);
55 SECTION 15. Collection and
Sharing of Internal Revenue Taxes. -
The share of the central
government or national
government of all current year
collections of internal revenue taxes,
within
the area of autonomy shall, for a
period of five (5) years be allotted for
the Regional Government in
the Annual Appropriations Act.
The Bureau Of Internal Revenue

(BIR) or the duly authorized treasurer
of the city or municipality
concerned, as the case may be, shall
continue to collect such taxes and
remit the share to the Regional
Autonomous Government and the
central government or national
government through duly accredited
depository bank within thirty (30)
days from the end of each quarter of
the current year;
Fifty percent (50%) of the share of
the central government or national
government of the yearly
incremental revenue from tax
collections under Sections 106 (value-
added tax on sales of goods or
properties), 108 (value-added tax
on sale of services and use or lease of
properties) and 116 (tax on
persons exempt from value-added
tax) of the National Internal Revenue
Code (NIRC) shall be
shared by the Regional
Government and the local government
units within the area of autonomy as
follows:
(a) twenty percent (20%) shall
accrue to the city or municipality
where such taxes are collected; and
(b) eighty percent (80%) shall

accrue to the Regional Government.
In all cases, the Regional
Government shall remit to the local
government units their respective
shares
within sixty (60) days from the end
of each quarter of the current taxable
year. The provinces, cities,
municipalities, and barangay
within the area of autonomy shall
continue to receive their respective
shares
in the Internal Revenue Allotment
(IRA), as provided for in Section 284 of
Republic Act No. 7160, the
Local Government Code of 1991.
The five-year (5) period herein
abovementioned may be extended
upon
mutual agreement of the central
government or national government
and the Regional Government.
56 Section 9. Sharing of Internal
Revenue, Natural Resources Taxes,
Fees and Charges. - The collections
of a province or city from national
internal revenue taxes, fees and
charges, and taxes imposed on natural
resources, shall be distributed as
follows:
(a) Thirty-five percent (35%) to the

province or city;
(b) Thirty-five percent (35%) to the
regional government; and
(c) Thirty percent (30%) to the
government.
The share of the province shall be
apportioned as follows: forty-five
percent (45%) to the province,
thirty-five percent (35%) to the
municipality and twenty percent
(20%) to the barangay.
The share of the city shall be
distributed as follows: fifty percent
(50%) to the city and fifty percent
(50%) to the barangay concerned.
The province or city concerned shall
automatically retain its share and
remit the shares of the
Regional Government and the
government to their respective
treasurers who shall, after
deducting the share of the Regional
Government as mentioned in
paragraphs (b) and (c) of this
Section, remit the balance to the
national government within the first
five (5) days of every month after
the collections were made.
The remittance of the shares of the

provinces, cities, municipalities, and
barangay in the internal
revenue taxes, fees, and charges
and the taxes, fees, and charges on the
use, development, and operation of
natural resources within the
autonomous region shall be governed
by law enacted by the Regional
Assembly.
The remittances of the share of the
government of the internal revenue
taxes, fees, and charges and on the
taxes, fees, and charges on the use,
development, and operation of the
by the rules and regulations
promulgated
by the Department of Finance of
government.
Officials who fail to remit the
shares of the central government or
national government, the Regional
Government and the local
government units concerned in the
taxes, fees, and charges mentioned
above may
be suspended or removed from
office by order of the Secretary of
Finance in cases involving the share of

government or by the Regional
Governor in cases involving the share
of
the Regional Government and by
the proper local government executive
in cases involving the share of
local government. [Bold emphasis
supplied]
7
208488
(2) The shares in the excise taxes
on mineral products of the different
LG Us, as provided in Section 287
of the NIRC57 in relation to Section
290 of the LGC;58
57 SEC. 287. Shares of Local
Government Units in the Proceeds
from the Development and Utilization
of
the National Wealth. - Local
Government units shall have an
equitable share in the proceeds
derived from
the utilization and development of
the national wealth, within their
respective areas, including sharing
the
same with the inhabitants by way
of direct benefits.
(A) Amount of Share of Local

Government Units. - Local
government units shall, in addition to
the
internal revenue allotment, have a
share of forty percent (40%) of the
gross collection derived by the
national government from the
preceding fiscal year from excise taxes
on mineral products, royalties,
and such other taxes, fees or
charges, including related. surcharges,
interests or fines, and from its
share in any co-production, joint
venture or production sharing
agreement in the utilization and
development of the national wealth
within their territorial jurisdiction.
(B) Share of the Local Governments
from Any Government Agency or
Government-owned or -
Controlled Corporation. - Local
Government Units shall have a share,
based on the preceding fiscal year,
from the proceeds derived by any
government agency or government-
owned or controlled corporation
engaged in the utilization and
based on the following formula,
whichever will produce a higher
share for the local government unit:
(1) One percent (1 %) of the gross

sales or receipts of the preceding
calendar year, or
(2) Forty percent (40%) of the excise
taxes on mineral products, royalties,
and such other taxes, fees
or charges, including related
surcharges, interests or fines the
government agency or government-
owned or
-controlled corporations would have
paid if it were not otherwise exempt.
(C) Allocation of Shares. - The
share in the preceding Section shall be
distributed in the following
manner:
(1) Where the natural resources are
located in the province:
(a) Province - twenty percent (20%)
(b) Component city/municipality -
forty-five percent (45%); and
(c) Barangay - thirty-five percent
(35%)
Provided, however, That where the
natural resources are located in two
(2) or more provinces, or in
two (2) or more component cities or
municipalities or in two (2) or more
barangays, their respective shares
shall be computed on the basis of:
(1) Population - seventy percent (70%);
and (2) Land area - thirty
percent (30%).
(2) Where the natural resources are
located in a highly urbanized or
independent component city:
(a) City - sixty - five percent (65%);
and
(b) Barangay - thirty - five percent
(35%)
Provided, however, That where the
natural resources are located in two
(2) or more cities, the
allocation of shares shall be based
on the formula on population and land
area as specified in subsection
(C)(l) hereof. [Bold emphasis
supplied]
58 SEC. 290. Amount of Share of
Local Government Units. - Local
government units shall, in addition
to the internal revenue allotment,
have a share of forty percent ( 40%) of
the gross collection derived by
the national government from the
preceding fiscal year from mining
taxes, royalties, forestry and
fishery charges, and such other
taxes, fees, or charges, including
related surcharges, interests, or fines,
and from its share in any co-
production, joint venture or
production sharing agreement in the
utilization and

(Bold emphasis supplied)
-4
208488
(3) The shares of the relevant LGUs
in the franchise taxes paid by Manila
Jockey Club, Inc.59 and Philippine
Racing Club, Inc.;60
( 4) The shares of various
municipalities in VAT collections
under R.A.
No. 7643 (An Act to Empower the
Commissioner of Internal Revenue
to Require the Payment of the Value
Added Tax Every Month and to
Allow Local Government Units to
Share in VAT Revenue, Amending
for this Purpose Certain Sections of
the National Internal Revenue
Code) as embodied in Section 283 of
the NIRC;61
(5) The shares of relevant LGUs in
the proceeds of the sale and
conversion of former military bases
in accordance with R.A. No. 7227
59 Section 6 of R.A. No. 6631 (An
Act granting Manila Jockey Club, Inc.
a Franchise to Construct,
Operate and Maintain a Race Track
for Horse Racing in the City of Manila
or in the Province of Bulacan)

states:
Section 6. In consideration of the
franchise and rights herein granted to
the Manila Jockey
Club, Inc., the grantee shall pay
into the national Treasury a franchise
tax equal to twenty-five per
centum (25%) of its gross earnings
from the horse races authorized to be
held under this franchise
which is equivalent to the eight and
one-half per centum (8 Yi%) of the
total wager funds or gross
receipts on the sale of betting
tickets during the racing day as
mentioned in Section four hereof,
allotted as follows: a) National
Government, five per centum (5%); b)
the city or municipality
where the race track is located, five
per centum (5%); c) Philippine Charity
Sweepstakes
Office, seven per centum (7%); d)
Philippine Anti-Tuberculosis Society,
six per centum (6%); and
e) White Cross, two per centum
(2%). The said tax shall be paid
monthly and shall be in lieu of
any and all taxes, except the
income tax of any kind, nature and
description levied, established or
collected by any authority whether

barrio, municipality, city, provincial or
national, now or in the
future, on its properties, whether
real or personal, and profits, from
which taxes the grantee is
hereby expressly excepted. (Bold
emphasis supplied)
60 Section 8 of Republic Act 6632
(An Act granting the Philippine
Racing Club, Inc., a franchise to
operate and maintain a race track
for Horse Racing in the Province of
Rizal) provides:
Section 8. In consideration of the
franchise and rights herein granted to
the Philippine Racing
Club, Inc., the grantee shall pay
into the National Treasury a franchise
tax equal to twenty-five per
centum (25%) of its gross earnings
from the horse races authorized to be
held under this franchise
which is equivalent to the eight and
one fourth per centum (8 1/4%) of the
total wager funds or
gross receipts on the sale of betting
tickets during the racing day as
mentioned in Section six
hereof, allotted as follows: a)
National Government, five per centum
(5%); the Municipality of
Makati, five per centum (5%); b)

Philippine Charity Sweepstakes
Office, seven per centum
(7%); c) Philippine Anti-
Tuberculosis Society, six per centum
(6%); and d) White Cross, two per
centum (2%). The said tax shall be
paid monthly and shall be in lieu of
any and all taxes, except
the income tax, of any kind, nature
and description levied, established or
collected by any
authority whether barrio,
municipality, city, provincial or
national, on its properties, whether
real
or personal, from which taxes the
grantee is hereby expressly exempted.
61 Disposition of National Internal
Revenue. - National Internal revenue
collected and not applied as
herein above provided or otherwise
specially disposed of by law shall
accrue to the National Treasury and
shall be available for the general
purposes of the Government, with the
exception of the amounts set apart
by way of allotment as provided for
under Republic Act No. 7160,
otherwise known as the Local
Government Code of 1991.
In addition to the internal revenue

allotment as provided for in the
preceding paragraph, fifty percent
(50%) of the national taxes collected
under Sections 106, 108 and 116 of
this Code in excess of the
increase in collections for the
immediately preceding year shall be
distributed as follows:
(a) Twenty percent (20%) shall
accrue to the city or municipality
where such taxes are collected
and shall be allocated in accordance
with Section 150 of Republic Act No.
7160, otherwise known as
the Local Government Code of
1991; and
(b) Eighty percent (80%) shall
accrue to the National Government.
4
208488
62
(Bases Conversion and Development
Act of 1992);62
R.A. No. 7227 (Bases Conversion
and Development Act of 1992) states:
Section 8. Funding Scheme. - xx x
The President is hereby authorized
to sell the above lands, in whole or in
part, which are
hereby declared alienable and

disposable pursuant to the provisions
of existing laws and
regulations governing sales of
government properties: Provided,
That no sale or disposition of
such lands will be undertaken until
a development plan embodying
projects for conversion shall
be approved by the President in
accordance with paragraph (b ),
Section 4, of this Act. However,
six (6) months after approval of this
Act, the President shall authorize the
Conversion Authority to
dispose of certain areas in Fort
Bonifacio and Villamor as the latter so
detennines. The
Conversion Authority shall provide
the President a report on any such
disposition or plan for
disposition within one (1) month
from such disposition or preparation
of such plan. The proceeds
from any sale, after deducting all
expenses related to the sale, of
portions of Metro Manila military
camps as authorized under this
Act, shall be used for the following
purposes with their
corresponding percent shares of
proceeds:
(1) Thirty-two and five-tenths

percent (35.5%) --- To finance the
transfer of the AFP military
camps and the construction of new
camps, the self-reliance and
modernization program of the
AFP, the concessional and long-
term housing loan assistance and
livelihood assistance to AFP
officers and enlisted men and their
families, and the rehabilitation and
expansion of the AFP's
medical facilities;
(2) Fifty percent (50%) -- To finance
the conversion and the commercial
uses of the Clark
and Subic military reservations and
their extentions:
(3) Five Percent (5%) - To finance
the concessional and long-term
housing Joan assistance
for the homeless of Metro Manila,
Olongapo City, Angeles City and other
affected municipalities
contiguous to the base areas as
mandated herein; and
(4) The balance shall accrue and be
remitted to the National Treasury to
be appropriated
thereafter by Congress for tlrn sole
purpose of financing programs and
projects vital for the
economic upliftment of the Filipino

people.
Provided, That, in the case of Fort
Bonifacio, two and five tenths percent
(2.5%) of the
proceeds thereof in equal shares
shall each go to the Municipalities of
Makati, Taguig and
Pateros: Provided, further, That in
no case shall farmers affected be
denied due
compensation.
With respect to the military
reservations and their extensions, the
President upon
recommendation of the Conversion
Authority or the Subic Authority when
it concerns the Subic
Special Economic Zone shall
likewise be authorized to sell or
dispose those portions of lands
which the Conversion Authority or
the Subic Authority may find essential
for the development of
their projects. (Bold emphasis
supplied)
Section 12. Subic Special Economic
Zone. -- Subject to the concurrence by
resolution of the
sangguniang panlungsod of the
City of Olongapo and the sangguniang
bayan of the
Municipalities of Subic, Morong

and Hermosa, there is hereby created
a Special Economic and
Free-port Zone consisting of the
City of Olongapo and the Municipality
of Subic, Province of
Zambales, the lands occupied by
the Subic Naval Base and its
contiguous extensions as embraced,
covered, and defined by the 194 7
Military Bases Agreement between
the Philippines and the
United States of America as
amended, and within the territorial
jurisdiction of the Municipalities
of Morong and Hennosa, Province
of Bataan, hereinafter referred to as
the Subic Special
Economic Zone whose metes and
bounds shall be delineated in a
proclamation to be issued by the
President of the Philippines.
Within thirty (30) days after the
approval of this Act, each local
government unit shall submit its
resolution of concurrence to join the
Subic Special Economic
Zone to the office of the President.
Thereafter, the President of the
Philippines shall issue a
proclamation defining the metes
and bounds of the Zone as provided
herein.
The abovementioned zone shall be
subject to the following policies:
xx xx
(c) The provisions of existing laws,
rules and regulations to the contrary
notwithstanding, no
taxes, local and national, shall be
imposed within the Subic Special
Economic Zone. In lieu of
paying taxes, three percent (3%) of
the gross income earned by all
businesses and enterprises
within the Subic Special Economic:
Zone shall be remitted to the National
Government, one
percent (1 %) each to the local
government units affected by the
declaration of the zone in
proportion to their population area,
and other factors. In addition, there is
hereby established a
development fund of one percent (l
%) of the gross income earned by all
businesses and
enterprises within the Subic
Special Economic Zone to be utilized
for the development of
municipalities outside the City of
Olongapo and the Municipality of
Subic, and other
municipalities contiguous to the

base areas.
In case of conflict between national
and local laws with respect to tax
exemption privileges in
the Subic Special Economic Zone,
the same shall be resolved in favor of
the latter; (Bold emphasis
supplied)
xx xx
~
208488
(6) The shares of different LGUs in
the excise taxes imposed on locally
manufactured Virginia tobacco
products as provided in Section 3 of
R.A. No. 7171 (An Act to Promote
the Development of the Farmers in
the Virginia Tobacco Producing
Provinces), and as now provided in
Section 289 of the NIRC;63
(7) The shares of different LGUs in
the incremental revenues from Burley
and native tobacco products under
Section 8 of R.A. No. 8240 (An Act
Amending Sections 138, 140 and
142 of the National Internal Revenue
Code as Amended and for Other
Purposes) and as now provided in
Section 288 of the NIRC;64 and
63 The NIRC provides in Section

289 as follows:
Section 289. Special Financial
Support to Beneficiary Provinces
Producing Virginia
Tobacco. - The financial support
given by the National Government for
the beneficiary
provinces shall be constituted and
collected from the proceeds of fifteen
percent (15%) of the
excise taxes on locally
manufactured Virginia-type of
cigarettes.
The funds allotted shall be divided
among the beneficiary provinces pro-
rata according
to the volume of Virginia tobacco
production.
Provinces producing Virginia
tobacco shall be the beneficiary
provinces under Republic Act
No. 7171. Provided, however, that
to qualify as beneficiary under R.A.
No. 7171, a province must
have an average annual production
of Virginia leaf tobacco in an amount
not less than one million
kilos: Provided, further, that the
Management (DBM) shall each year
determine the beneficiary provinces

and their computed share of the funds
under R.A. No. 7171,
referring to the National Tobacco
Administration (NT A) records of
tobacco acceptances, at the
tobacco trading centers for the
immediate past year.
The Secretary of Budget and
Management is hereby directed to
retain annually the said
funds equivalent to fifteen percent
(15%) of excise taxes on locally
manufactured Virginiatype
cigarettes to be remitted to the
beneficiary provinces qualified under
R.A. No. 7171.
The provisions of existing laws to
the contrary notwithstanding, the
fifteen percent
(15%) share from government
revenues mentioned in R.A. No. 7171
and due to the Virginia
tobacco-producing provinces shall
be directly remitted to the provinces
concerned.
Provided, That this Section shall be
implemented in accordance with the
guidelines of
Memorandum Circular No. 61-A
dated November 28, 1993, which
amended Memorandum
Circular No. 61, entitled

'Prescribing Guidelines for
Implementing Republic Act No. 717 /',
dated
January 1, 1992.
Provided, further, That in addition
to the local government units
mentioned in the above
circular, the concerned officials in
the province shall be consulted as
regards the identification of
projects to be financed. [Bold
emphasis supplied]
64 Section 288. Disposition of
Incremental Revenues.xx
xx
(B) Incremental Revenues from
Republic Act No. 8240. - Fifteen
percent (15%) of the
incremental revenue collected from
the excise tax on tobacco products
under R. A. No. 8240 shall be
allocated and divided among the
provinces producing burley and native
tobacco in accordance with
the volume of tobacco leaf
production. The fund shall be
exclusively utilized for programs to
promote
economically viable alternatives for
tobacco farmers and workers such as:
(1) Programs that will provide

inputs, training, and other support for
tobacco farmers who shift to
production of agricultural products
other than tobacco including, but not
limited to, high-value crops,
spices, rice, com, sugarcane,
coconut, livestock and fisheries;
(2) Programs that will provide
financial support for tobacco farmers
who are displaced or who cease
to produce tobacco;
(3) Cooperative programs to assist
tobacco farmers in planting
alternative crops or implementing
other
livelihood projects;
(4) Livelihood programs and
projects that will promote, enhance,
and develop the tourism potential of
tobacco-growing provinces;
(5) Infrastructure projects such as
farm to market roads, schools,
hospitals, and rural health facilities;
and
(6) Agro-industrial projects that
will enable tobacco farmers to be
involved in the management and
subsequent ownership of projects,
such as post-harvest and secondary
processing like cigarette
manufacturing and by-product

utilization.
The Department of Budget and
Management, in consultation with the
Department of Agriculture, shall
issue rules and regulations
governing the allocation and
disbursement of this fund, not later
than one
hundred eighty ( 180) days from the
effoctivity of this Act. [Bold emphasis
supplied]
t21
208488
(8) The share of the Commission of
Audit (COA) in the NIRTs as
provided in Section 24p) of P.D. No.
1445 (Government Auditing
Code qfthe Philippines) 5 in
relation to Section 284 of the NIRC.66
Garcia insists that the f-oregoing
taxes and revenues should have been
included by Congress and, by
extension, the BIR in the base for
computing
the IRA on the strength of the cited
provisions; that the LGC did not
authorize such exclusion; and that
the continued exclusion has
undermined
the fiscal autonomy guaranteed by

the 1987 Constitution.
The insistence of Garcia is valid to
an extent.
An examination of the above-
enumerated laws confirms that the
following have been excluded from
the base for reckoning the just share
of
the LGUs as required by Section 6,
Article X of the 1987 Constitution,
namely:
(a) The share of the affected LGUs
in the proceeds of the sale and
conversion of former military bases
in accordance with R.A. No. 7227;
(b) The share of the different LGUs
in the excise taxes imposed on locally
products as provided for in Section 3,
R.A. No. 7171, and as now provided
in Section 289 of the NIRC;
( c) The share of the different LGU
s in incremental revenues from Burley
and native tobacco products under
Section 8 of R.A. No. 8240, and as
now provided for in Section 288 of
the NIRC;
65 Section 24. Appropriations
and.funding.
xx xx
3. A maximum of one-half of one

per-centum (1/2 of 1 %) of the
collections from national internal
revenue taxes not otherwise
accruing to Special funds or Special
Accounts in the General Fund of the
National Government, upon
authority from the Minister
(Secretary) of Finance, shall be
deducted from
such collections and shall be
cover the cost of auditing services
rendered to local government units;
66 SEC. 284. Allotment for the
Commission on Audit. - One-half of
one percent (1
/ 2 of 1 %) of the
collections from the national
internal n:venue tax~s not otherwise
accruing to special accounts in the
general fund of the national
government shall accrue to the
Commission on Audit as a fee for
auditing
services rendered to local
government units, excluding
maintenance, equipment, and other
operating
expenses as provided for in Section
21 of Presidential Decree No. 898.
The Secretary of Finance is hereby

authorized to deduct from the monthly
internal revenue tax
collections an amount equivalent to
the percentage as herein fixed, and to
remit the same directly to the
Commission on Audit under such
rules and regulations as may be
promulgated by the Secretary of
Finance
and the Chairman of the
Commission on Audit.
.~
208488
67
(d) The share of the COA in the
NIRTs as provided in Section 24(3) of
P.D. No. 144567 in relation to
Section 284 of the NIRC;
(e) The shares of the different
LGUs in the excise taxes on mineral
products, as provided in Section
287 of the NIRC in relation to Section
290 of the LGC;
(f) The NIRTs collected by the cities
and provinces and divided
exclusively among the LGUs of the
ARMM, the regional government
and the central government,
pursuant to Section 1568 in relation to
Section 24. Appropriations and

funding.
xx xx
3. A maximum of one-half of one
per-centum (1/2 of 1 %) of the
collections from national internal
revenue taxes not otherwise
accruing to Special Funds or Special
Accounts in the General Fund of the
National Government, upon
authority from the Minister
(Secretary) of Finance, shall be
deducted from
such collections and shall be
cover the cost of auditing services
rendered to local government units;
68 SECTION 15. Collection and
Sharing of Internal Revenue Taxes. -
The share of the central
government or national
government of all current year
collections of internal revenue taxes,
within
the area of autonomy shall, for a
period of five (5) years be allotted for
the Regional Government in
the Annual Appropriations Act.
The Bureau Of Internal Revenue
(BIR) or the duly authorized treasurer
of the city or municipality
concerned, as the case may be, shall

continu~ to collect such taxes and
remit the share to the Regional
Autonomous Government and the
government through duly accredited
depository bank within thirty (30)
days from the end of each quarter of
the current year;
Fifty percent (50%) of the share of
government of the yearly
incremental revenue from tax
collections under Sections 106 (value-
added tax on sales of goods or
properties), 108 (value-added tax
on sale of services and use or lease of
properties) and 116 (tax on
persons exempt from value-added
tax) of the National Internal Revenue
Code (NIRC) shall be
shared by the Regional
Government and the local government
units within the area of autonomy as
follows:
(a) twenty percent (20%) shall
accrue to th" (,ity or municipality
where such taxes are collected; and
(b) eighty percent (80%) shall
accrue to the Regional Government.
In all cases, the Regional
Government shall remit to the local
government units their respective

shares
within sixty (60) days from the end
of each quarter of the current taxable
year. The provinces, cities,
municipalities, and barangay
within the area of autonomy shall
continue to receive their respective
shares
in the Internal Revenue Allotment
(IRA), as provided for in Section 284 of
Republic Act No. 7160, the
Local Government Code of 1991.
The five-year (5) period herein
abovementioned may be extended
upon
mutual agreement of the central
government or national government
and the Regional Government.
""'::>
208488
Section 9,69 Article IX of R. A. No.
9054; and
(g) The shares of the relevant LG
Us in the franchise taxes paid by
Manila
Jockey Club, Inc., and the
Philippine Racing Club, Inc.
Anent the share of the affected LG
Us 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.
As to the share of the affected
LGUs in the excise taxes imposed on
locally manufactured Virginia
tobacco products under R.A. No. 7171
(now
Section 289 of the NIRC); the share
of the affected LGUs in incremental
revenues from Burley and native
tobacco products under Section 8, R.A.
No.
8240 (now Section 288 of the
NIRC); the share of the COA in the
NIRTs
pursuant to Section 24(3) of P.D.
No. 1445 in relation to Section 284 of
the
NIRC; and the share of the host
LGUs in the franchise taxes paid by
the
Manila Jockey Club, Inc., and
Philippine Racing Club, Inc., under
Section 6
of R.A. No. 6631 and Section 8 of
R:A. No. 6632, respectively, the
exclusion is also justified. Although

such shares involved national taxes as
defined under the NIRC, Congress
had the authority to exclude them by
virtue of their being taxes imposed
for special purposes. A reading of
Section 288 and Section 289 of the
NIRC and Section 24(3) of P.D. No.
1445 in relation to Section 284 of
the NIRC reveals that all such taxes
are
69 Section 9. Sharing of Internal
Revenue, Natural Resources Taxes,
Fees and Charges. - The collections
ofa province or city from national
internal revenue taxes, fees and
charges, and taxes imposed on natural
resources, shall be distributed as
follows:
(a) Thirty-five percent (35%) to the
province or city;
(b) Thirty-five percent (35%) to the
regional government; and
(c) Thirty percent (30%) to the
government.
The share of the province shall be
apportioned as follows: forty-five
percent (45%) to the province,
thirty-five percent (35%) to the
municipality and twenty percent
(20%) to the barangay.
The share of the city shall be

distributed as follows: fifty percent
(50%) to the city and fifty percent
(50%) to the barangay concerned.
The province or city concerned shall
automatically retain its share and
remit the shares of the
Regional Government and the
government to their respective
treasurers who shall, after
deducting the share of the Regional
Government as mentioned in
paragraphs (b) and (c) of this
Section, remit the balance to the
national government within the first
five (5) days of every month after
the collections were made.
The remittance of the shares of the
provinces, cities, municipalities, and
barangay in the internal
revenue taxes, fees, and charges
and the taxes, fees, and charges on the
use, development, and operation of
by law enacted by the Regional
Assembly.
The remittances of the share of the
government of the internal revenue
taxes, fees, and charges and on the

taxes, fees, and charges on the use,
development, and operation of the
by the rules and regulations
promulgated
by the Department of Finance of
government.
Officials who fail to remit the
shares of the central government or
national government, the Regional
Government and the local
government units concerned in the
taxes, fees, and charges mentioned
above may
be suspended or removed from
office by order of the Secretary of
Finance in cases involving the share of
government or by the Regional
Governor in cases involving the share
of
the Regional Government and by
the proper local government executive
in cases involving the share of
local government. [Emphasis
Supplied]
~
208488
levied and collected for a special

purpose. 70 The same is true for the
franchise taxes paid under Section
6 of R.A. No. 6631 and Section 8
ofR.A.
No. 6632, inasmuch as certain
percentages of the franchise taxes go
to
different beneficiaries. The
exclusion conforms to Section 29(3),
Article VI
of the 1987 Constitution, which
states:
Section 29. xx x
xx xx
(3) All money collected on any
tax levied for a special purpose
shall be treated as a special
fund and paid out for such
purpose only.
If the purpose for which a special
fund was created has been fulfilled or
abandoned, the balance, if any,
shall be transferred to the general
funds of
the Government. [Bold emphasis
supplied]
The exclusion of the share of the
different LGUs in the excise taxes
imposed on mineral products
pursuant to Section 287 of the NIRC
in relation
to Section 290 of the LGC is

premised on a different constitutional
provision. Section 7, Article X of the
1987 Constitution allows affected
LGUs to have an equitable share in
the proceeds of the utilization of the
nation's national wealth "within
their respective areas," to wit:
Section 7. Local governments shall
be entitled to an equitable
share in the proceeds of the
utilization and development of the
national
wealth within their respective
areas, in the manner provided by law,
including sharing the same with
the inhabitants by way of direct
benefits.
This constitutional provision is
implemented by Section 287 of the
NIRC
and Section 290 of the LGC thusly:
SEC. 287. Shares of Local
Government Units in the Proceeds
from
the Development and Utilization of
the National Wealth. - Local
Government units shall have an
equitable share in the proceeds
derived
from the utilization and
development of the national wealth,
within their
respective areas, including sharing
the same with the inhabitants by way
of
direct benefits.
70 Section 288 of the NIRC
(formerly Section 8 of R.A. No. 8240)
imposed an excise tax on tobacco
products, a. percentage of which is
to be allocated and divided among the
provinces producing Burley and
native tobacco in accordance with
the volume of tobacco production.
Such share received would then be
allocated by the recipient LG Us for
the benefit of the farmers and
workers, through any of the programs
set
by the law.
Section 289 of the NIRC gives the
com:erned LG Us a share in the excise
taxes imposed on locally
products. The LGUs consist of the
provinces and their subdivisions
producing Virginia tobacco. This
share is considered by Congress as the
National Government's financial
support to the beneficiary LG Us
producing Virginia tobacco.
The share of the COA from the
NlRT is an aliquot part of the NIRTs,
and serves the special purpose of

defraying the cost of auditing
services rendered to the LGUs.
~
208488
(A) Amount of Share of Local
have a share of forty percent
(40'Yo) of the gross collection derived
by
preceding fiscal year from excise
taxes on mineral products,
royalties, and such other taxes, fees or
charges, including related
surcharges, interests or fines, and
from its
share in any co-production, joint
(B) Share of _the Local
Governments from Any Government
Agency or Government-owned or -
Controlled Corporation. - Local
Government Units shall have a
share, based on the preceding fiscal
year,
from the proceeds derived by any

government agency or
governmentowned
or controlled corporation engaged
in the utilization and
based on the following formula,
whichever will produce a higher
share for the local government unit:
(1) One percent ( l % ) of the gross
sales or receipts of the
preceding calendar year, or
(2) Forty percent (40%) of the excise
taxes on mineral products,
royalties, and such other taxes, fees
or charges, including related
surcharges, interests or fines the
government agency or
governmentowned
or -controlled corporations would
have paid if it were not
otherwise exempt. [Bold emphasis
supplied]
SEC. 290. Amount of Share of Local
have a share of forty percent ( 40%)
of the gross collection derived by
preceding fiscal year from mining
taxes, royalties, forestry and

fishery charges, and such other taxes,
fees, or charges, including related
surcharges, interests, or fines, and
from
its share in any co-production, joint
within
their territorial jurisdiction. [Bold
emphasis supplied]
Lastly, the NIRTs collected by the
provinces and cities within the
ARMM whose portions are
distributed to the ARMM' s provincial,
city and
regional governments are also
properly excluded for such taxes are
intended
to truly enable a sustainable and
feasible autonomous region as
guaranteed
by the 1987 Constitution. The
mandate under Section 15 to Section
21,
Article X of the 1987 Constitution
is to allow the separate development
of
peoples with distinctive cultures
and traditions in the autonomous
areas.71
The grant of autonomy to the

autonomous regions includes the right
of selfdetermination
- which in tum ensures the right of
the peoples residing
therein to the necessary level of
autonomy that will guarantee the
support of
their own cultural identities, the
establishment of priorities by their
respective communities' internal
decision-making processes and the
management of collective matters
by themselves.72 As such, the NIRTs
72 Id. at 230.
.
~
208488
collected by the provinces and cities
within the ARMM will ensure local
autonomy and their very existence
with a continuous supply of funding
sourced from their very own areas.
The ARMM will become self-reliant
and
dynamic consistent with the
dictates of the 1987 Constitution.
The shares of the municipalities in
the VA Ts collected pursuant to
R.A. No. 7643 should be included in

determining the base for computing
the
just share because such VATs are
national taxes, and nothing can
validly
justify their exclusion.
In recapitulation, the national
taxes to be included in the base for
computing the just share the LGUs
shall henceforth be, but shall not be
limited to, the following:
1. The NIRTs enumerated in
Section 21 of the NIRC, as amended,
to be
inclusive of the VA Ts, excise taxes,
and DSTs collected by the BIR
and the BOC, and their deputized
agents;
2. Tariff and customs duties
collected by the BOC;
3. 50% of the VATs collected in the
ARMM, and 30% of all other
national taxes collected in the
ARMM; the remaining 50% of the
VA Ts and 70% of the collections of
the other national taxes in the
ARMM shall be the exclusive share
of the ARMM pursuant to Section
9 and Section 15 of R.A. No. 9054;
4. 60% of the national taxes
collected from the exploitation and
development of the national wealth;

the remaining 40% will
exclusively accrue to the host LGUs
pursuant to Section 290 of the
LGC;
5. 85% of the excise taxes collected
from locally manufactured Virginia
and other tobacco products; the
remaining 15% shall accrue to the
special purpose funds pursuant
created in R.A. No. 7171 and R.A.
No. 7227;
6. The entire 50% of the national
taxes collected under Section 106,
Section 108 and Section 116 of the
NIRC in excess of the increase in
collections for the immediately
preceding year; and
7. 5% of the franchise taxes in favor
of the national government paid by
franchise holders in accordance
with Section 6 of R.A. No. 6631 and
Section 8 of R.A. No. 6632.
q
208488
VI.
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.
It is true that with our declaration
today that the IRA is not in
accordance with the constitutional
determination of the just share of the
LGUs in the national taxes, logic
demands that the LGUs should
receive the
difference between the just share
they should have received had the
LGC
properly reckoned such just share
from all national taxes, on the one
hand,
and the share - represented by the
IRA--· the LGUs have actually
received
since the effectivity of the IRA
under the LGC, on the other. This
puts the
National Government in arrears as
to the just share of the LGUs. A
legislative or executive act declared
void for being unconstitutional cannot
give rise to any right or obligation.
73
Yet, the Court has conceded in
Arau/lo v. Aquino III74 that:
x x x the generality of the rule
makes us ponder whether rigidly
applying the rule may at times be

impracticable or wasteful. Should
we not recognize the need to except
from the rigid application of the
rule the instances in which the void
law or executive act produced an
almost irreversible result?
The need is answered by the
doctrine of operative fact. The
doctrine, definitely not a novel one,
has been exhaustively explained in De
Agbayani v. Philippine National
Bank:
The decision now on appeal reflects
the orthodox view
that an unconstitutional act, for
that matter an executive order
or a municipal ordinance likewise
suffering from that infirmity,
cannot be the source of any legal
rights or duties. Nor can it
justify any official act taken under
it. Its repugnancy to the
fundamental law once judicially
declared results in its being to
all intents and purposes a mere
scrap of paper. As the new
Civil Code puts it: 'When the courts
declare a law to be
inconsistent with the Constitution,
the former shall be void and
the latter shall govern.'

Administrative or executive acts,
orders and regulations shall be
valid only when they are not
contrary to the laws of the
Constitution. It is understandable
why it should be so, the
Constitution being supreme and
paramount. Any iegislativ\! or
executive act contrary to its
terms cannot survive.
73 Commissioner of Internal
Revenue v. San Roque Power
Corporation, G.R. Nos. 187485,
196113 and
197156, October 8, 2013, 707 SCRA
66, 77.
74 Supra note 8.
-&(
208488
Such a view has support in logic
and possesses the
merit of simplicity. It may not
however be sufficiently
realistic. It does not admit of doubt
that prior to the
declaration of nullity such
challenged legislative or
executive act must have been in
force and had to be
complied with. This is so as until

after the judiciary, in an
appropriate case, declares its
invalidity, it is entitled to
obedience and respect. Parties may
have acted under it and
may have changed their positions.
What could be more
fitting than that in a subsequent
litigation regard be had to
what has been done while such
legislative or executive act
was in operation and presumed to
be valid in all respects. It
is now accepted as a doctrine that
prior to its being
nullified, its existence as a fact
must be reckoned with. This
is merely to reflect awareness that
precisely because the
judiciary is the governmental organ
which has the final say
on whether or not a legislative or
executive measure is
valid, a period of time may have
elapsed before it can
exercise the power of judicial
review that may lead to a
declaration of nullity. It would be to
deprive the law of its
quality of fairness and justice then,
if there be no
recognition of what had transpired

prior to such
adjudication.
In the language of an American
Supreme Court
decision: 'The actual existence of a
statute, prior to such a
determination [of
unconstitutionality], is an operative
fact and
may have consequences which
cannot justly be ignored. The
past cannot always be erased by a
new judicial declaration. The
effect of the subsequent ruling as to
invalidity may have to be
considered in various aspects, with
respect to particular
relations, individual and corporate,
and particular conduct,
private and official.'
The 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. In short, it
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.75 But its use must be subjected
to great scrutiny and
circumspection, and it cannot be
invoked to validate
an unconstitutional law or
executive act, but is resorted to only
as a matter
of equity and fair play. 76 It applies
011iy to cases where extraordinary
circumstances exist, and only when
the extraordinary circumstances have
met the stringent conditions that
will permit its application.
Conformably with the foregoing
pronouncements in Araullo v. Aquino
111, the effect of our declaration
through this decision of the
unconstitutionality of Section 284
of th~ LGC and its related laws as far
as
75 Id., citing Yap v. Thenamaris
Ship's Management, G.R. No. 179532,
May 30 201 l, 649 SCRA 369,
381.
76 ld., citing League of' Cities
Philippi;;es v. COMJ.,'LEC G .R. No.
176951, August 24, 2010, 628 SCRA
819, 833.
~

208488
they limited the source of the just
share of the LGUs to the NIRTs 1s
prospective. It cannot be otherwise.
VII.
Automatic release of the LG Us'
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; and, in the context of
this case, the LGUs are not required
to
perfonn any act or thing in order to
receive their just share in the national
taxes.77
Before anything, we must highlight
that the 1987 Constitution
includes several provisions that
actually deal with and authorize the
automatic release of funds by the
National Government.
To begin with, Section 3 of Article
VIII favors the Judiciary with the
automatic and regular release of its
appropriations:
Section 3. The Judiciary shall enjoy

fiscal autonomy.
Appropriations for the Judiciary
may not be reduced by the legislature
below the amount appropriated for
the previous year and, after approval,
shall be automatically and
regularly released.
Then there is Section 5 of Article
IX(A), which contains the common
provision in favor of the
Constitutional Commissions:
Section 5. The Commission shall
enjoy fiscal autonomy. Their
approved annual appropriations
shall be automatically and regularly
released.
Section 14 of Article XI extends to
the Office of the Ombudsman a
similar privilege:
Section 14. The Office of the
Ombudsman shall enjoy fiscal
autonomy. Its approved annual
appropriations shall be automatically
and
regularly released.
Section 17(4) of Article XIII
replicates the privilege in favour of
the
Commission on Human Rights:
-------·------
77 See Province ofBatangas v.

Rom11!n, supra 1wtc <f'.'.
..q
208488
Section 17(4) The approved annual
appropriations of the
Commission shall be automatically
and regularly released.
The foregoing constitutional
provisions share two aspects. The first
relates to the grant of fiscal
autonomy, and the second concerns
the
automatic release of funds. 78 The
common denominator of the provisions
is
that the automatic release of the
appropriated amounts is predicated on
the
approval of the annual
appropriations of the offices or
agencies concerned.
Directly contrasting with the
foregoing provisions is Section 6,
Article
X of the 1987 Constitution because
the latter provision forthrightly
ordains
that the "(l)ocal government units
shall have a just share, as determined
by
law, in the national taxes which

shall be automatically released to
them."
Section 6 does not mention of
appropriation as a condition for the
automatic
release of the just share to the
LGUs. This is because Congress not
only
already determined the just share
through the LGC's fixing the
percentage
of the collections of the NIRTs to
constitute such fair share subject to
the
power of the President to adjust the
same in order to manage public sector
deficits subject to limitations on the
adjustments, but also explicitly
authorized such just share to be
"automatically released" to the LGUs
in the
proportions and regularity set
under Section 28579 of the LGC
without need
of annual appropriation. To
operationalize the automatic release
without
need of appropriation, Section 286
of the LGC clearly provides that the
automatic release of the just share
directly to the provincial, city,
municipal
or barangay treasurer, as the case
may be, shall be "without need of any
further action," viz.:
78 Commission on Human Rights
Employees' Association (CHREA) v.
Commission on Human Rights,
G.R. No. 155336, July 21, 2006, 496
SCRA 226, .315-316.
79 Section 285. Allocation to Local
Government Units. - The share of local
government units in the
internal revenue allotment shall be
collected in the following manner:
(a) Provinces - Twenty-three
percent (23%):
(b) Cities - Twenty-three percent
(23%);
(c) Municipalities - Thirty-four
percent (3•1%); and
(d) Barangays - Twenty percent
(20%)
Provided, however, That the share
of each province, city, and
municipality shall be detern1ined on
the
basis of the following formula:
(a) Population - Fifty percent (50%);
(b) Land Area - Twenty-five percent
(25%); and
(c) Equal sharing - Twenty-five
percent (25%)
Provided, further, That the share of

each barangay with a population of
not less than one hundred ( 100)
inhabitants shall not be less than
Eighty thousand (P80,000.00) per
annum chargeable against the twenty
percent (20%) share ofthe barangay
from the internal revenue allotment,
and the balance to be allocated on
the basis of the following formula:
effcct1vity of this Code:
(1) Population - Forty percent
(40%); and
(2) Equal sharing - Sixty percent
(60%)
(b) On the second year:
(l) Population - Fifty percent (50%);
and
(2) Equal sharing - Fifty percent
(50%)
thereafter:
(1) Population - Sixty percent
(60%); and
(2) Equal sharing - Forty percent
(40~!>).
Provided, finally, That the financial
requirements of barangays created by
local government units after
the effectivity of this Code shall be
the re~ponsibiliiy of the local
government unit concerned.

..Jj
208488
Section 286. Automatic Release of
Shares. - (a) The share of
each local government unit shall be
released, without need of any
further action; directly to the
provincial, city, municipal or barangay
treasurer, as the case may be, on a
quarterly basis within five (5) days
after the end of each quarter, and
which shall not be subject to any
lien or holdback that may be
imposed by the National Government
for whatever purpose. x x x (Bold
emphasis supplied)
The 1987 Constitution is forthright
and unequivocal in ordering that
the just share of the LGUs in the
national taxes shall be automatically
released to them. With Congress
having established the just share
through
the LGC, it seems to be beyond
debate that the inclusion of the just
share of
the LGUs in the annual GAAs is
unnecessary, if not superfluous.
Hence, the
just share of the LGUs in the

national taxes shall be released to
them
without need of yearly
appropriation.
WHEREFORE, the petitions in
G.R. No. 199802 and G.R. No.
208488 are PARTIALLY
GRANTED, and, ACCORDINGLY, the
Court:
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.
Section 284, as hereby modified,
shall henceforth read as follows:
Section 284. Allotment of Taxes. -
Local government units shall
have a share in the national taxes
based on the collection of the third
fiscal
year preceding the current fiscal
year as follows:
(30%);
percent (35%); and

the national government incurs an
Finance,
Government and Secretary of Budget
and
officers of
allotment of local government units
but in no
case shall the allotment be less
than thirty percent (30%) of the
collection
of national taxes of the third fiscal
year preceding the current fiscal year;
Provided, further, That in the first
year of the effectivity of this Code, the
local government units shall, in
addition to the thirty percent (30%)
allotment which shall include the
cost of devolved functions for essential
~

208488
public services, be entitled to
receive the amount equivalent to the
cost of
The phrase "internal revenue" is
likewise hereby DELETED from the
related sections of Republic Act No.
7160 (Local Government Code),
specifically Section 285, Section
287, and Section 290, which provisions
shall henceforth read as follows:
Section 285. Allocation to Local
Government Units. - The share
of local government units in the
allotment shall be collected in the
following manner:
(a) Provinces - Twenty-three
percent (23%);
(b) Cities - Twenty-three percent
(23%);
(c) Municipalities - Thirty-four
percent (34%); and
(d) Barangays -- Twenty percent
(20%)
Provided, ho•vever, That the share
of each province, city, and
municipality shall be detennined on
the basis of the following formula:
(a) Population -- Fifty percent
(50%);
(b) Land Area-· Twenty-five percent

(25%); and
(c) Equal sharing--Twenty-five
percent (25%)
Provided, further. That the share of
each barangay with a
population of not less than one
hundred ( 100) inhabitants shall not
be less
than Eighty thousand (P-80,000.00)
per annum chargeable against the
twenty percent (20%) share of the
barangay from the allotment, and the
balance to be allocated on the basis
of the following formula:
effoctivity of this Code:
( 1) Population - Forty percent (40%
); and
(2) Equal sharing - Sixty percent
(50%)
(b) On the second year:
(1) Population·--· Filly pen.~ent
(50~'o); and
(2) Equal sharing --- Fitly pc:rc0n:
(50%)
( c) On the third year ;rn,l
t:h.:.·;,;after:
(1) Population - Sixty percent
(60<%); and
(2) Equal sharing - Forty percent (
40%).
"'l
208488
Provided, finally, That the financial
requirements of barangays
created by local government units
after the effectivity of this Code shall
be
the responsibility of the local
government unit concerned.
xx xx
Sectfon 287. Local Development
Projects. - Each local
government unit shall appropriate
in its annual budget no less than
twenty
percent (20%) of its annual
allotment for development projects.
Copies of
the development plans of local
government units shall be furnished
the
Department of Interior and Local
Government.
xx xx
Section 290. Amount of Share of
Local Government Units. -
Local government units shall, in
addition to the allotment, have a
share of
forty percent ( 40%) of the gross
collection derived by the national
government from the preceding

fiscal year from mining taxes,
royalties,
forestry and fishery charges, and
such other taxes, fees, or charges,
including related surcharges,
interests, or fines, and from its share
in any
co-production, joint venture or
production sharing agreement in the
national wealth within their
territorial
jurisdiction.
Article 378, Article 379, Article 380,
Article 382, Article 409, Article
461, and related provisions of the
Implementing Rules and Regulations
of
R.A. No. 7160 are hereby
MODIFIED to reflect the deletion of
the phrase
"internal revenue" as directed
herein.
Henceforth, any mention of
"Internal Revenue Allotment" or "IRA"
in Republic Act No. 7160 (Local
Government Code) and its
Implementing
Rules and Regulations shall be
understood as pertaining to the
allotment of
the Local Government Units

derived from the national taxes;
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
nowmodified
Section 284 of Republic Act No.
7160 (Local Government Code)
except those accruing to special
purpose funds and special allotments
for the
national wealth.
For this purpose, the collections of
national taxes for inclusion in the
base of the just share the Local
Government Units shall include, but
shall not
be limited to, the following:
'
(4
208488
(a) The national internal revenue
taxes enumerated in Section 21 of
the National Internal Revenue
Code, as amended, collected by the
Bureau of
Internal Revenue and the Bureau
of Customs;
(b) Tariff and customs duties
collected by the Bureau of Customs;
( c) 50% of the value-added taxes
collected in the Autonomous Region
in Muslim Mindanao, and 30% of
all other national tax collected in the
Autonomous Region in Muslim
Mindanao.
The remaining 50% of the
collections of value-added taxes and
70%
of the collections of the other
national taxes in the Autonomous
Region in
Muslim Mindanao shall be the
exclusive share of the Autonomous
Region in
Muslim Mindanao pursuant to
Section 9 and Section 15 of Republic
Act No.
9054.
( d) 60% of the national taxes

collected from the exploitation and
development of the national wealth.
The remaining 401% of the national
taxes collected from the
exploitation and development of the
national wealth shall exclusively
accrue
to the host Local Government Units
pursuant to Section 290 of Republic
Act No. 7160 (Local Government
Code);
( e) 85% of the excise taxes collected
from locally manufactured
Virginia and other tobacco
products.
The remaining 15% shall accrue to
the special purpose funds created
by Republic Act No. 7171 and
Republic Act No. 7227;
(f) The entire 50% of the national
taxes collected under Sections 106,
108 and 116 of the NIRC as
provided under Section 283 of the
NIRC; and
(g) 5% of the 25% franchise taxes
given to the National Government
under Section 6 of Republic Act No.
6631 and Section 8 of Republic Act
No. 6632.
3. DECLARES that:
(a) The apportionment of the 25o/o

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 (5o/o) to the
host
municipality or city; seven percent
(7o/o) to the Philippine Charity
~
208488
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 (1/2of1%) 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 3 78
of the Implementing Rules and
Regulations ofR.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;
and
6. COMMANDS the
AUTOMATIC RELEASE
WITHOUT
NEED OF FURTHER ACTION of
the just shares of the Local
Government Units in the national
taxes, through their respective
provincial,
city, municipal, or barangay
treasurers, as the case may be, on a
quarterly
basis but not beyond five (5) days
from the end of each quarter, as
directed
in Section 6, Article X of the 1987
Constitution and Section 286 of
Republic
Act No. 7160 (Local Government
Code), and operationalized by Article
383
of the Implementing Rules and
Regulations of RA 7160.
Let a copy of this decision be
furnished to the President of the
Republic of the Philippines, the
President of the Senate, and the
Speaker of
the House of Representatives for
their information and guidance.
SO ORDERED.
Decision
WE CONCUR:
~~.
41 G.R. Nos. 199802 & 208488
oz=-~
ANTONIO T. CARPIO
Acting Chief Justice
~~ ~~~- l~~dv~
ITERO J. vJ!.LASCO, JR.

TERESITA J. LEONARDO-DE
CASTRO
Associate Justice
ESTELA {cf P~-BERNABE
Associate Justice
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l\lAIUANO C. DEL CASTILLO
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Associate Justice
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FRANCIS QI JARDELEZA
ALFREDO B
Associate Justice lfO f."1~
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NOEL G E TIJAM
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ANDRl<'~diYES, Jll.
A;:~clte Justice
208488
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, I certify that
the conclusions in the above

Decision had been reached in
consultation
before the case was assigned to the
writer of the opinion of the Court.
ANTONIO T. CA:
Acting Chief Justice
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Mandanas VS Ochoa

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9/13/22, 9:15 AM Advanced Decisions July 2018

l\.epublic of tbe flbilippine!S

Revenue; and HONORABLE

two facets, the administrative and

government units shall have a

percent (30%) of the collection of

Mandanas, et al. allege herein that

In G.R. No. 208488, Congressman

collections, and thereafter

petitions upon procedural and

collected by the BOC, on the other,

GAA is consistent with the

The remedy of mandamus is

by reason of the wrongful acts of

Considering that its determination

allegations in the body of the

xxxx to set right and undo any act

Formaran, Ill, G.R. No. 175914,

formed by charters from the

[A] municipal corporation possesses

public policy expressed in the

destroy, it may abridge and control.

The power to grant still includes

Also, in the earlier ruling in

17 Land Transportation Office v.

managing local affairs so that it can

On the other hand, the creation of

develop their ways of life and

creation of provinces and cities

(9) Such other matters as may be

29 It further ensures that each and

officials and employees paid wholly

municipalities, and cities and

jurisdiction, subject to the

of local government units and the

to improve their administrative and

36 Does Decentralization Improve

taxes released by the National

The constitutional authority

Congress has subjected the LGUs'

in the manner provided by law,

will of Congress subject to the

Proceeds of National Taxes), of the

unmanageable public sector deficit,

There is no issue as to what

the Gove1nment and to defray all

(g) Such other taxes as arc or

Still, the OSG posits that Congress

national taxes shall be determined

The Bureau Of Internal Revenue

(b) eighty percent (80%) shall

(a) Thirty-five percent (35%) to the

The remittance of the shares of the

Finance in cases involving the share of

(A) Amount of Share of Local

(1) One percent (1 %) of the gross

development of the national wealth

or in the Province of Bulacan)