10 August 2019

Atty. Dan Angeles

Cebu City
Philippines

Dear Atty Dan,

This legal opinion seeks to discuss positive and negative implications of the ruling of the
Supreme Court on the case of Mandanas vs. Executive Secretary Ochoa to the local and national
governance.
On July 2018, the Supreme Court handed down its landmark decision in the case of
Mandanas vs. Executive Secretary which declared that the shares of the LGUs in taxes are not
limited to internal revenue taxes, but to all national taxes.

The issue revolved more on the constitutional mandate to give LGUs a 'just share"
to national taxes following Article X, Section 6 of the 1987 ConstitutionThe SC ruled that
there was no issue on what constitutes the LGUs’ just share expressed in percentage of the
national taxes such as the 40-percent share provided in the LGC. Yet, section 6 of the
Constitution mentions “national taxes” as the source of the just share of the LGUs while Section
284 of the LGC enacted by Congress states that the share of the LGUs must be taken from
“national internal revenue taxes.”In other words, the base amount of the IRA must be on national
taxes which include all taxes collected by the NG, including customs duties and other taxes
collected by the BOC and all other agencies. So, the LGUs, according to the high court, were
deprived of their just share.
In implementation the ruling of the Supreme Court on the Mandanas case will enable the
LGUs to efficiently and expediently serve the Filipino people and hasten the delivery of much
needed and long delayed basic services.

As Section 17 (a) of RA 7160 also known as the Local Government Code of 1991 provides
that;

“Local government units shall endeavor to be self-reliant and shall continue exercising
the powers and discharging the duties and functions currently vested upon them. They
shall also discharge the functions and responsibilities of national agencies and offices
devolved to them pursuant to this Code. Local government units shall likewise exercise
such other powers and discharge such other functions and responsibilities as are
necessary, appropriate, or incidental to efficient and effective provisions of the basic
services and facilities enumerated herein.

In decentralised government systems, local governments object to unfunded mandates

because they shrink their policy space, limit their expenditure choices and ultimately local
government’s accountability to their electorates. Further, these systems of governance establish a
hierarchy of authority that creates notions of self-rule by national government. Unfunded
mandates reflect systemic weaknesses of decentralised allocation of powers and functions.

In fact Section 7, Article X of 1987 Constitution expressly stated;

“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”.

Although there are principled objections, unfunded mandates remain constitutional.

Given the wide incidence of unfunded mandates the critical question arises as to how in a
decentralised system, one level of government can impose mandates with cost implications on
another.

In addition, Batangas governor was quoted as saying that with increased funds, “the real
needs of the community will be attended by the community. Shifting money from the national
government to the local government will mean devolved services can now be really funded, and
this will also reduce underspending and corruption.” Thus, Implementation of Supreme Court on
Mandanas case would create an advantage to the LGUs enabling them to discharge basic services
and could allocate sufficient funds based on their priorities.

If the vision is to devolve more power to the LGUs in order to empower the grassroots to be the
drivers of the economy, it is but right to equip them with more funds. But it should be coupled
with a corresponding demand for bigger responsibility, accountability and transparency in the
way these are spent.

But realizing the negative impact of the ruling of the Supreme Court, allowing the the LGUs to
short-circuit the process of appropriation of budget by enacting the LGC and appropriating 40
percent of the national internal revenue taxes as the “just share” of the LGUs in the form of IRA
would create an intervention to the valid exercise of power of the purse which is within the
prerogative of the Congress.

I affirm that both national and local governments share the common objective is to ensure
compliance with the Constitutional provision guaranteeing the just share of LGUs in all national
taxes without necessarily disrupting the fiscal and deficit targets of the country and thereby
maintain macroeconomic stability.
Your legal counsel,

Karen A. Refil