G.R. No.

199802
Congressman Mandanas, et. al., Petitioners
Vs.
Executive Secretary Ochoa, et. al., Respondents

FACTS:

One of the key features of the 1987 Constitution is its push towards
decentralization of government and local autonomy wherein the latter has two
facets, the administrative and the fiscal. It is the Congress who implements the
constitutional mandate for decentralization and local autonomy through
enacting R.A. No. 7160, otherwise known as the Local Government Code (LGC),
in order to guarantee the fiscal autonomy of the Local Government Units
(LGUs). Share of the LGUs has been regularly released as the Internal Revenue
Allotment (IRA). The implementing rules and regulations (IRR) of the LGC, the
IRA is determined on the basis of actual collections of the National Internal
Revenue Taxes (NIRTs) as certified by the Bureau of Internal Revenue (BIR).

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

It is being alleged by the petitioners that certain collections of NIRTs by

the Bureau of Customs (BOC) have not been included in the computation of the
IRA. Albeit collection by the BOC of taxes such as excise taxes, value added
taxes (VATs) and document stamp taxes (DSTs), should form part of the base
from which the IRA should be computed because they constitute NIRTs.

THE CASE:

This case 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.

ISSUE:

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

RULING OF THE COURT:

The 1987 Constitution limits Congress’ control over the LGUs by

ordaining in Section 25 of its Article II that: “The sate shall ensure the
autonomy of local governments.” The constitutional mandate to ensure local
autonomy refers to decentralization wherein it should be instituted through the
LGC in order to enable a more responsive and accountable local government
structure. 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 self-reliant
as it has been formalized from Section 128 to Section 133 of the LGC. It further
ensures that each and every LGU will have a just share in national taxes as
enacted by the Congress through Section 284 to Section 288 of the LGC as well
in the development of the national wealth through the enactment of Section
289 to Section 294 of the LGC. Indeed, the requirement for the automatic
release to the LGUs of their just share in the national taxes is but a
consequence of the constitutional mandate for fiscal decentralization.

Therefore, the court ordered the Secretary of Department of Finance;

the Secretary of the Department of Budget Management; the Commissioner of
Internal Revenue; the Commissioner of Customs; and the National Treasurer to
include all collections of national taxes in the computation of the base of the
just share of the Local Government Units according to the ratio provided in the
now-modified Section 284 of R.A. No. 7160 (Local Government Code) except
those accruing to special purpose funds and special allotments for the
utilization and development of the national wealth.

DOCTRINES/PRINCIPLES:

Sec. 6, Art. X, 1987 Constitution.

Local government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.

Sec. 284, Local Government Code. 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
Gscal year as follows:
•xxx

Sec. 21, National Internal Revenue Code, as amended. 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 stamp taxes; and
g) Such other taxes as are or hereafter may be imposed and collected by the
Bureau of Internal Revenue.

Section 286, Local Government Code. 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