LOCAL REVENUE GENERATION

AND LGU FORECASTING

DEPARTMENT OF FINANCE
BUREAU OF LOCAL GOVERNMENT FINANCE

Improving Local Finance, Empowering Local Governments

Rationale
Pursuant to Section 4.5 of the Proposed Guidelines on the Preparation of
Devolution Transition Plans of Local Governments in Support of Full
Devolution:

All LGUs should be able to proactively address the projected decrease in their
respective FYs 2023 and 2024 National Tax Allotment (NTA) shares due to
the effects of the Coronavirus Disease 2019 (COVID-19) pandemic through
the identification of possible revenue sources to address potential gaps.

Provinces, cities, and municipalities shall formulate their Local Revenue

Forecast and Resource Mobilization Strategy (FYs 2022-2024) and may seek
guidance and assistance from the Department of Finance – Bureau of Local
Government Finance (DOF-BLGF) for the purpose.
Legal Framework on the Taxing Powers of
LGUs

Sec.129 Power to
Create Sources of Constitution
Revenue
Local
Government Article. X, Sec 5
Code (LGC)

Local
Sec. 132. Local Ordinances
Taxing Authority
Roles of LGU Officials in Local Revenue
Generation
Local Chief Executive Local Sanggunian
▪ Executive Direction & Control ▪ Tax Authority
▪ Licensing and Permits ▪ Enabling ordinance, rules & policies

Local Finance Committee

Licensing and Permits
▪ Income projections
▪ Recommendations on tax/
revenue measures

Income From Local Sources

▪ Tax Revenue
▪ Non-Tax Revenue

Local Treasurer Local Assessor

▪ Collection of all local taxes, fees and ▪ Appraisal and assessment of
charges real property for taxation
▪ Tax information purposes
▪ Examination of books of accounts
▪ Collection by enforcement of remedies
Other Local Officials
Taxing Powers of LGUs
Tax Base Provinces Cities Municipalities Barangays
Business x ✓ ✓ ✓
Real Property; Sand, gravel and other
✓ ✓ Shared Shared
quarry resources
Idle Land; Real Property transfers;
Printing and publication; Delivery vans ✓ ✓ x x
and trucks; Professionals; Franchise
Amusement Places ✓ ✓ Shared
Community Tax x ✓ ✓ Shared

• May impose regulatory fees and user charges

• Largely fixed (with maximum rates/ceilings) and not indexed to inflation
• Tax rates can only be adjusted up to 10% and once every 5 years
• Rates/levies must be legislated through local council
What Type of Resources can LGUs Mobilize?
EXTERNAL INTERNAL

1. Internal Revenue Allotment (IRA)

2. Share from National Wealth 1. Taxes
3. Direct Share from National Taxes 2. Fees
4. Grants & Aids 3. Charges
5. Borrowings 4. Income from local enterprises
6. Public-Private Partnership
Resource Mobilization
Strategy
Resource Mobilization Strategy
An LGU may

1.Move towards computerization

2.Maintain a classified list of good and delinquent taxpayers
3.Use remedies to collect on delinquent taxpayers
4.Set-up a year round collection campaign
5.Conduct intensive tax information and education drive
6.Treasurer examines books of accounts and pertinent records.
 BLGF LGU REVENUE
FORECASTING TOOLS
Revenue Targets and Projections
Annual
Medium-term Cash Flow
Performance
Forecasts Forecasting
Targets

❖ 3 years projection ❖ 1 year projection ❖ 1 year projection

Local Sources: ❖ Locally sourced ❖ Locally ❖ Locally
• Real Property Tax revenues and NTA sourced revenues sourced revenues
• Business Tax
• Fees and Charges
❖ LGUs may use this as ❖ For LGU FSS, ❖ Alternative forecasting
• Receipts from guide in the technique which can
LGFPMS and other
Economic Enterprise preparation of LDIP, LGU financial for LGU's reference –
CDP and DTP performance Growth Rate
measures

❖ To be provided by ❖ To be provided ❖ LGUs can simulate

BLGF to the LGUs by BLGF to the LGUs on their own using
the forecasting
template
BLGF Medium-term Forecast Model
Estimated Medium-term Forecast Data:
FYs 2022 to 2024

Locally-Sourced Income:
Real Property Tax, Business Tax, Fees and Charges and
Receipts from Economic Enterprise

External Source:
National Tax Allotment

Frequency of Updating the Medium-term Forecasts:

Annually, every November

Unit of Measure:
The values are expressed in pesos.
Fiscal Gap

Gap }
Fiscal Fiscal Gap is the gap
between perceived
expenditure needs and
available financial resources

How to close the

fiscal gap?
Expenditure Revenue
Preparation of the Local Revenue Forecast and Resource
Mobilization Strategy
Income Target Increase Strategies Resources Required
FY2020 Responsibl
Local (in %) to Increase Timefram
e Office/ Capacity
Sources (Baseli Local e
Unit Staffing Building Funding
ne) FY 2022 FY 2023 FY 2024 Revenue
Requirements
[1] [2] [3] [4] [5] [6] [7]
Taxes
Real
Property
Tax
Tax on
Business
Regulatory
Fees (Permits
and Licenses)
Service/User
Charges
(Service
Income)
Income from
Economic
Enterprises
(Business
Income
Preparation of the Local Revenue Forecast and Resource
Mobilization Strategy

This section communicates the intention and measures of the LGUs to take stock of
and unlock potential local revenue sources to address possible fiscal gaps in
FYs 2023 and 2024 as a consequence of the following:

• Increased expenditure requirements to support local economic recovery

from the effects of the COVID-19 pandemic;
• LGUs’ full assumption of devolved responsibilities; and
• Anticipated decrease in their national tax allocation in FYs 2023 and 2024
Preparation of the Local Revenue Forecast and Resource
Mobilization Strategy
Target Increase Strategies
Responsi Resources Required
Income (in %) to
Local FY2020 Timefram ble
Increase Capacity
Sources e Office/Uni
(Baseline) FY 2022 FY 2023 FY 2024 Local Staffing Building Funding
t
Revenue Requirements
[1] [2] [3] [4] [5] [6] [7]
Taxes
Real
Property
Tax
Tax on
Business
Regulatory
Fees (Permits
and Licenses)
Service/User
Charges
(Service
Income)
Income from
Economic
Enterprises
(Business
Income
Summary
• The LCEs and the Local Treasurers are the prime movers of local revenue generation.
LCE is charged with “ensuring that all taxes and other revenues are collected” while “all local taxes,
fees, and charges shall be collected by the Local Treasures. Efficient and effective revenue generation
and application of resources will help LGUs attain fullest development as self-reliant communities and
make them more effective partners in the attainment of national development goals

• The BLGF has various revenue forecasting tools. The LGUs could use these tools as guide in
planning and budgeting however, accurate data are needed to be able to come-up with a reliable
forecast.

• Borrowing may not always be the best financing option. It is beneficial for LGUs in good
financial standing, have good repayment record (if they are already a borrower), have the projects
well-planned in their investment plans, and the window being offered has low interest rate and
reasonable tenor.

• Borrowing is not ideal for LGUs with budgetary deficit, have records of past due and default,
have questionable projects or projects not identified in their investment plans and the window being
offered has high interest rate and the tenor exceeds the economic useful life of the project
proposed.

• Preparation of the Local Revenue Forecast and Resource Mobilization Strategy is needed
to have a plan to address the potential risks of fiscal gap in attaining fiscal sustainability by the LGUs.
Thank You!