In 2018, the Supreme Court (SC) ruled the petitions filed by Congressman Hermilando I. Mandanas, and Congressman Enrique T. Garcia, et al., about the National Government’s manner of computer the Internal Revenue Allotment (IRA) shares of the local government units (LGUs).

The SC decided that the just share of LGUs from the national taxes is not only based on the national internal revenue taxes collected by the Bureau of Internal Revenue (BIR), but also on all national taxes, which became final and executory last April 10, 2019. To carry out the decision of the SC, President Rodrigo Duterte released on June 1, 2021 Executive order (EO) No. 138 mandating the full devolution of basic services from the national government agencies (NGAs) to local government units (LGUs).

The impact of the SC decision significantly increased the tax base on which the share of the LGUs is computed from, and thus, strengthened fiscal decentralization. It clarifies the distinction between “national internal revenue taxes” and “national taxes” as base in the computation of the IRA of LGUs. National internal revenue taxes include only taxes collected by the Bureau of Internal Revenue (BIR) while “National taxes,” consists of all taxes and duties collected by the NG through the BIR, the Bureau of Customs (BOC), and other collecting agencies.