MANDANAS -

GARCIA
RULING
HERMILANDO I. MANDANAS
GOVERNOR
PROVINCE OF BATANGAS
1987 PHILIPPINE CONSTITUTION

Section 6 of Article X
Local government units shall have a
just share, as determined by law, in
the national taxes which shall be
automatically released to them.
1987 PHILIPPINE CONSTITUTION

Section 25 of Article II

The state shall ensure the autonomy of

local governments.
SC Decision 03 July 2018
Mandanas et al. v. Ochoa
And
Garcia v. Ochoa
 THE CASE

“Determination of the manner in

which the JUST SHARE in the
NATIONAL TAXES of the LOCAL
GOVERNMENT UNITS (LGUs)
has been computed.”
 TWO CASES FILED
1) demand that the share of each LGU should be
automatically released, without need of any further
action, and shall not be subject to any lien or holdback
that may be imposed by the National Government for
whatever purpose (Mandanas et al), and

2) demand for new interpretation of Constitutional provision

that the share of the LGUs should be based on the
collection of national taxes, and not only on the collection
of National Internal Revenue Taxes (NIRT) as provided
for in the LGC (Garcia).
 MANDANAS CASE

Mandanas et al. petition was for the release to the

LGUs of the amounts illegally withheld by the
National Government, through the issuance of budget
circulars, rules and regulations that excluded around
20% to 25% of the NIRT, such as NIRT collected by
the Bureau of Customs and other authorized agents
of the Bureau of Internal Revenue, as base in the
computation of IRA.
 GARCIA CASE

The base in computing the share of the LGUs

should be all national taxes collected, and
not only what was provided for in the LGC
(Sec 284), which was NIRT, as defined by the
NIRC.
 SUPREME COURT DECISION

The SC partially granted the petitions of

Mandanas et al. and Garcia. However, the
increase in share of the LGUs due to new
interpretation of the existing constitutional
provision was ordered to have prospective
effect, with the increase to be released
starting only in 2022.
 INTERPRETATION

It is explicit from the 2019 SC Decision on the

Mandanas- Garcia Ruling that the execution of
amendment by the SC Decision that is based on ‘new
interpretation’ of provision of law that had been
prevailing should be prospective. With the Garcia
Ruling, the basis of the computation of the just share
of the LGUs should be collection of all national taxes,
and not only collection of National Internal Revenue
Taxes.
 INTERPRETATION
However, the favorable SC ruling on the Mandanas
petition was not based on ‘new interpretation’ of an
existing law, but simply on order to comply with
existing laws, and therefore Retroactive from the
effectivity of the provisions of law violated, in this
case Sections 284 and 286 of the 1991 Local
Government Code (RA 7160). Moreover, there is a
precedent that the legal share of LGUs withheld was
reimbursed retroactively, in compliance with 2004 SC
decision on the first Mandanas Ruling.
 2004 MANDANAS CASE

Supreme Court Decision in the case of “THE PROVINCE OF BATANGAS,

represented by its Governor, HERMILANDO I. MANDANAS vs. HON.
ALBERTO G. ROMULO” (May 27, 2004):

• Highlighted the automatic release of shares of Local Government

Units in the national taxes as provided under the Constitution and the
Local Government Code
• The Supreme Court stated that “Indeed, the value of local governments
as institutions of democracy is measured by the degree of autonomy
that they enjoy.”
 INTERPRETATION

The former President Gloria Macapagal Arroyo

dutifully recognized the retroactive amount of a little
over P60 Billion 2004, and paid the amount over a
period of seven (7) years.
 INTERPRETATION

Therefore, when the present Administration complies

with the SC decision, there will be no decrease in the
2023 share of the LGUs in the collection of national
taxes compared to the amount received in 2022, even
if the legal amount retroactively due to the LGUs is
amortized over a period of 20 or even 30 years.
 LEGAL BASIS

To withhold any part of the share of the

LGUs in the collection of NIRT is strictly
prohibited by Section 286 of the LGC.
And any rules or regulations
promulgated contrary to this provision
of no withholding is null and void.
 SUPREME COURT DECISION
(Mandanas and Garcia Case)

“The 1987 Constitution is forthright and unequivocal in

ordering that the just share of the LGUs in the national
taxes shall be automatically released to them. With
Congress having established the just share through the
LGC, it seems to be beyond debate that the inclusion of
the just share of the LGUs in the annual GAAs is
unnecessary, if not superfluous. Hence, the just share
of the LGUs in the national taxes shall be released
to them without need of yearly appropriation.”
 The Decision (03 July 2018)
“ORDERS the SECRETARY OF THE DEPARTMENT OF
FINANCE; the SECRETARY OF THE DEPARTMENT OF
BUDGET AND 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 Republic Act No. 7160 (Local Government Code)
except those accruing to special purpose funds and special
allotments for the utilization and development of the
national wealth.”
Amended LGC Provision based on the
SC Decision
SECTION 284. 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 fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty
percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent
(40%).
Amended LGC Provision based on the
SC Decision
(SECTION 284. cont.)

Provided, That in the event that the national government incurs an unmanageable
public sector deficit, the President of the Philippines is hereby authorized, upon
the recommendation of Secretary of Finance, Secretary of Interior and Local
Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the "liga", to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of national internal revenue taxes of the third
fiscal year preceding the current fiscal year: Provided, further, That in the first year
of the effectivity of this Code, the local government units shall, in addition to the
thirty percent (30%) internal revenue allotment which shall include the cost of
devolved functions for essential public services, be entitled to receive the amount
equivalent to the cost of devolved personal services.
 LOCAL GOVERNMENT CODE
Section 285. Allocation to Local Government Units. -
The share of local government units in the internal revenue allotment shall be
collected in the following manner:
(a) Provinces - Twenty-three percent (23%);
(b) Cities - Twenty-three percent (23%);
(c) Municipalities - Thirty-four percent (34%); and
(d) Barangays - Twenty percent (20%)

Provided, however, That the share of each province, city, and municipality shall be
determined on the basis of the following formula:
(a) Population - Fifty percent (50%);
(b) Land Area - Twenty-five percent (25%); and
(c) Equal sharing - Twenty-five percent (25%)
 LOCAL GOVERNMENT CODE
(Section 285. cont.)
Provided, further, That the share of each barangay with a population of not less than one hundred
(100) inhabitants shall not be less than Eighty thousand (P80,000.00) per annum chargeable against
the twenty percent (20%) share of the barangay from the internal revenue allotment, and the
balance to be allocated on the basis of the following formula:
(a) On the first year of the effectivity of this Code:
(1) Population - Forty percent (40%); and
(2) Equal sharing - Sixty percent (60%)
(b) On the second year:
(1) Population - Fifty percent (50%); and
(2) Equal sharing - Fifty percent (50%)
(c) On the third year and thereafter:
(1) Population - Sixty percent (60%); and
(2) Equal sharing - Forty percent (40%).

Provided, finally, That the financial requirements of barangays created by local government units after
the effectivity of this Code shall be the responsibility of the local government unit concerned.
 LOCAL GOVERNMENT CODE
Section 286. 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.

(b) Nothing in this Chapter shall be understood to diminish the

share of local government units under existing laws.
 SC Decision (03 July 2018)

“COMMANDS the AUTOMATIC RELEASE

WITHOUT NEED OF FURTHER ACTION of
the just shares of the Local Government Units in
the national taxes, through their respective
provincial, city, municipal, or barangay
treasurers, as the case may be, on a quarterly
basis but not beyond five (5) days from the end
of each quarter…”
 SC Decision (03 July 2018)

“The 1987 Constitution is forthright and unequivocal in

ordering that the just share of the LGUs in the national
taxes shall be automatically released to them. With
Congress having established the just share through the
LGC, it seems to be beyond debate that the inclusion of
the just share of the LGUs in the annual GAAs is
unnecessary, if not superfluous. Hence, the just share of
the LGUs in the national taxes shall be released to
them without need of yearly appropriation.”
 SC Resolution (10 April 2019)
“xxx Conformably with the foregoing pronouncements in Araullo v.
Aquino III, the effect of our declaration through this decision of
the unconstitutionality of Section 284 of the LGC and its related laws
as far as they limited the source of the just share of the LGUs to the
NIRTs is prospective. It cannot be otherwise.

As the foregoing excerpts indicate, the Court has expressly mandated

the prospective application of its ruling.
It becomes unavoidable to ask when the adjusted amounts will be
granted in favor of LGUs. The OSG suggests that the adjusted amounts
be given to the LGUs starting with the 2022 budget cycle.
The suggestion of the OSG is well taken.”
 SC Resolution (10 April 2019)
“The ADJUSTED AMOUNTS can be deemed effective
only after this ruling has lapsed into finality, which is
procedurally to be reckoned only from the denial of the
OSG's motion for reconsideration through this resolution.
From then onwards, and as ruled herein, the just share
should be based on all national taxes collected on "the
third fiscal year preceding." In the absence of any
amendment by Congress, the rates fixed in Section 284
of the LGC as herein modified, shall control.”
 LOCAL GOVERNMENT CODE
Section 17. Basic Services and Facilities. -
(a) 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.
(b) Such basic services and facilities include, but are not
limited to, the following:
 LOCAL GOVERNMENT CODE
(1) For Barangay:
(i) Agricultural support services which include planting materials distribution
system and operation of farm produce collection and buying stations;
(ii) Health and social welfare services which include maintenance of
barangay health center and day-care center;
(iii) Services and facilities related to general hygiene and sanitation,
beautification, and solid waste collection;
(iv) Maintenance of katarungang pambarangay;
(v) Maintenance of barangay roads and bridges and water supply systems;
(vi) Infrastructure facilities such as multi-purpose hall, multipurpose
pavement, plaza, sports center, and other similar facilities;
(vii) Information and reading center; and
(viii) Satellite or public market, where viable;
 LOCAL GOVERNMENT CODE
(2) For a Municipality:
(i) Extension and on-site research services and facilities related to agriculture and
fishery activities;
(ii) implementation of community-based forestry projects;
(iii) health services;
(iv) Social welfare services;
(v) Information services which include investments and job placement information
systems, tax and marketing information systems, and maintenance of a public
library;
(vi) Solid waste disposal system or environmental management system and services
or facilities related to general hygiene and sanitation;
(vii) Municipal buildings, cultural centers, public parks including freedom parks,
playgrounds, and other sports facilities and equipment, and other similar facilities;
 LOCAL GOVERNMENT CODE

(2) For a Municipality:

(viii) Infrastructure facilities;
(ix) Public markets, slaughterhouses and other municipal enterprises;
(x) Public cemetery;
(xi) Tourism facilities and other tourist attractions, including the
acquisition of equipment, regulation and supervision of business
concessions, and security services for such facilities; and
(xii) Sites for police and fire stations and substations and municipal jail;
 LOCAL GOVERNMENT CODE
(3) For a Province:
(i) Agricultural extension and on-site research services and facilities;
(ii) Industrial research and development services, as well as the transfer of
appropriate technology;
(iii) enforcement of forestry laws limited to community-based forestry projects,
pollution control law, small-scale mining law, and other laws on the protection of
the environment; and mini-hydroelectric projects for local purposes;
(iv) health services which include hospitals and other tertiary health services;
(v) Social welfare services which include programs and projects on rebel returnees
and evacuees; relief operations; and population development services;
(vi) Provincial buildings, provincial jails, freedom parks and other public assembly
areas and similar facilities;
 LOCAL GOVERNMENT CODE

(3) For a Province:

(vii) Infrastructure facilities intended to service the needs of the residence
of the province;
(viii) Programs and projects for low-cost housing and other mass
dwellings;
(ix) Investment support services, including access to credit financing;
(x) Upgrading and modernization of tax information and collection
services through the use of computer hardware and software and other
means;
(xi) Inter-municipal telecommunications services, subject to national
policy guidelines; and
(xii) Tourism development and promotion programs;
 LOCAL GOVERNMENT CODE

(4) For a City:

All the services and facilities of the municipality
and province, and in addition thereto, the
following:

(1) Adequate communication and transportation

facilities;
 National Internal Revenue Taxes
(NIRT)
SEC. 21. Sources of R evenue. - 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.
 National Internal Revenue Taxes
(NIRT)
Based on the Supreme Court Decision, NIRT also
includes all collections by the deputized agents of
the BIR:

“National Internal Revenue Taxes under Section 21 of

the National Internal Revenue Code, as amended,
collected by the Bureau of Internal Revenue and its
deputized agents, including Value-Added Taxes,
Excise Taxes, and Documentary Stamp Taxes
collected by the Bureau of Customs”
 With this…

… LGUs can now FUND and

DELIVER the DEVOLVED BASIC
SERVICES mandated by the Local
Government Code as provided in
Section 17.
INTERNAL REVENUE
ALLOTMENT

(Mandanas Ruling
Computation)
 IRA Computation
For Years 2019-2021
LGU BATANGAS PROVINCE

WITH MANDANAS WITH MANDANAS

YEAR ACTUAL IRA ACTUAL IRA
RULING RULING

2019 708,420,000,000.00 575,520,000,000.00 3,558,634,062.00 2,994730,502.00

2020 804,750,000,000.00 648,920,000,000.00 4,441,302,596.00 3,376,672,036.00

2021 956,530,000,000.00 695,490,000,000.00 5,411,986,938.00 3,619,007,594.00

* Estimated IRA Share in collections from BIR, BOC, and BTr Agencies
** Deficient IRA in 2019, prorated to 8 months (SC Decision took effect on
April 2019)
 LGU IRA (Mandanas Ruling vs Actual)
For Years 2019-2021
1,200,000,000,000.00

1,000,000,000,000.00 956,530,000,000.00

804,750,000,000.00
800,000,000,000.00
708,420,000,000.00 695,490,000,000.00
648,920,000,000.00

600,000,000,000.00 575,520,000,000.00

400,000,000,000.00

200,000,000,000.00

0.00
2019 2020 2021
IRA WITH MANDANAS RULING ACTUAL LGU IRA
Batangas Province IRA (Mandanas Ruling vs Actual)
For Years 2019-2021
(Sample Computation)
6,000,000,000.00
5,411,986,938.00

5,000,000,000.00
4,441,302,596.00

4,000,000,000.00
3,558,634,062.00 3,619,007,594.00
3,376,672,036.00
2,994,730,502.00
3,000,000,000.00

2,000,000,000.00

1,000,000,000.00

0.00
2019 2020 2021
IRA WITH MANDANAS RULING ACTUAL LGU IRA
THANK YOU
HERMILANDO I. MANDANAS
GOVERNOR
PROVINCE OF BATANGAS