one basic requisite for increasing the financial capacity andstrengthening the fiscal position of local governments.

To generate financial resources and to utilize available andpotentials sources of revenue.

however, it would not be of any use to generate financialresources of the local units are not endowed with adequatetax bases; if the objects of taxation yield very meagerrevenue and/ or available and potential sources revenue arevery limited.

Existence and accessibility of objects totax and source of revenue to tap- businessestablishments.

Local service and activities

Taxable real properties and taxableoperation

• Generation of capital for economic growth

• Efficient allocation of resources for balanced economic growth

• Preservation of economic independence and self sufficiency of the country

local taxation

rentals and charges for the use of public property andresources within local jurisdictions

earnings from local public enterprises and utilities

permits and licenses issued

charges and fees for local government services and activities

establishments and operations within local boundaries

Tax on transfer of real property ownershipTax on business on printing and publicationFranchise taxProfessional taxAmusement taxReal property taxTax on sand, gravel and other quarry resources 30%Annual fix tax for every delivery truck or vanof manufacturers of producers, wholesalers of ,dealers or retailers of certain productsPublic utility charges

Tax from business aside from printing and publication

Tax on retirement of businessTax on the following business:

a. On manufactures, assemblers, repackers, processors, borrowers, distillers, rectifiers and compounders of liquors, distilled spirits and wines or manufacturers of any article of comers of what so ever kind or nature

b. On exporters, and on manufacturers, millers , producers, wholesalers, distributers, dealers or rectifiers of essential commodities like rice, corn, wheat, flour, meat, dairy products, cooking oil and etc.

c. On retailers

d. On contractors and other independent contractors

e. On banks and other financial institutionsf. On peddlers engaged in the sale of any

merchandise or article of commerceCommunity taxReasonable fees and charges on business onoccupation and on the practice of any profession orcalling commensurate with the cost of regulation,inspection and licensingFishery rentals, fees and charges Fees of selling and licensing of weights and measures Public utility chargesReal property tax 40% (Metro Manila 35%)Gravel and other quarry resources 30%

Taxes on stores or retailers with fixed business establishmentService fees or charges for services rendered inconnection with barangay-owned properties andfacilitiesFees and charges on billboards, sign boards,neon signs and outdoor advertisementsBarangay clearanceReal property tax 15% (the other 15 % of thereal property tax is distributed among the otherbarangays within the municipality or city)Gravel and other quarry resources 40%

Note: The Local taxing powers of the Local Unitsunder the New Local Government Code are almostthe same as those vested under the local tax code.

Residence Tax

-formerly a central government levy that hasbeen added to the taxes being imposed bylocal governments

Instead of devolving more taxing powers to localgovernments, the code modifies certain aspectsof the existing system of local taxation in orderto enable the local unit to generate morerevenues.

They are authorized to increase the rates incertain types of levies and are entitled to bigger sharesfrom the collections of certain taxes.

There are also external sources of local revenue,which are created and administered by the nationalgovernment or by agency/ institutions outside theadministrative jurisdiction and responsibility of thelocal governments. These revenues are more or less pre-determined and amounts of which are beyond thecapacity and efforts of local governments to increase.

Internal Revenue Allotment (IRA)

-constitute the greatest external source ofrevenue of local units from the total internalrevenue or national tax collection

Under PD 144 as amended, local governments wereallotted annually a total share of 20 % from thetotal internal revenue collection (total collection ofnational taxes)

50% 50%

20% from the total internal revenue

30% - Provinces

45% - Municipalities

25% - Cities

100% -Barangays

The sharing was computed on the basis of three weighted factors:

-population 70%-land area 20 %-equal sharing 10%

Under the New Code, the IRA for local unitshave been increased by 100% from 20-40% of thetotal internal revenue collection. The 40 % allotmentssharing is to be implemented on a staggered basis:30% in 1992, 35% in 1993, and 40 % in 1994 andyears thereafter.

In accordance with the modified sharing scheme of 40%:

100%

40% from the total internal revenue

23% - Provinces

34% - Municipalities

23% - Cities

20% - Barangays

The sharing was computed on the basis of three weighted factors:

-population 50%-land area 25 %-equal sharing 25%

An efficient and productive revenue collection system is necessary.

Considering that local government in generalrely heavily on shares from internal revenuecollections for their income, there should be somechange in the criteria for allocating an distributingthe internal revenue allotments.

In addition to the IRA, the centralgovernment, upon the discretion of the President,gives financial assistance in the form of grants andaids for special local development projects andservices

What may proposed would be:

*The tradition of revenue collectionperformance as another criterion to the presentthree criteria (population, land area, and equalsharing) to determine the internal revenueallotments of provinces, cities, municipalities andbarangays.

*An additional percentage share on the basisof revenue collection efficiency maybe given, whichcould serve as incentive for the local authorities tointensify their revenue collection effort.

The corollary recommendation would befor the national government to imposejustifiable sanction- like withholding theirinternal revenue allotments – upon localgovernments, which demonstrate consistentlysubstandard revenue collection performance.

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