Mandanas v. Ochoa (G.R. Nos.

199802, 208488)
July 3, 2018
Hermilando Mandanas, et al., petitioners
Executive Secretary Paquito Ochoa, et al., respondents

FACTS:

The petitioners challenge the manner in which the just share in the national
taxes of the local government units (LGUs) has been computed. G.R. No. 199802
(Mandanas, et al.) is a special civil action for certiorari, prohibition and
mandamus assailing the manner the General Appropriations Act (GAA) for FY
2012 computed the IRA for the LGUs. Mandanas, et al. allege herein that certain
collections of NIRTs by the Bureau of Customs (BOC) – specifically: excise taxes,
value added taxes (VATs) and documentary stamp taxes (DSTs) – have not been
included in the base amounts for the computation of the IRA; that such taxes,
albeit collected by the BOC, should form part of the base from which the IRA
should be computed because they constituted NIRTs.

The fiscal autonomy guaranteed to local governments under Section 6, Article X

of the 1987 Constitution means the power to create their own sources of revenue
in addition to their equitable share in the "national taxes" released by the
National Government, as well as the power to allocate their resources in
accordance with their own priorities.

Pursuant to this Constitutional dictum, Congress enacted Republic Act No. 7160,
otherwise known as the Local Government Code (LGC). Sec. 284 of the LGC
provides that LGUs shall have an allotment equivalent to 40% of the the national
internal revenue taxes.

The share of the LGUs, known as the Internal Revenue Allotment (IRA), has been
regularly released to the LGUs. According to the implementing rules and
regulations of the LGC, the IRA is determined on the basis of the actual
collections of the National Internal Revenue Taxes (NIRTs) as certified by the
Bureau of Internal Revenue (BIR).

Two petitions were filed to challenge the base figure for the computation of the
IRA.

In G.R. No. 199802, Cong. Hermilando Mandanas, et al., alleged that the NIRTs
certified by the BIR excluded the NIRTs collected by the Bureau of Customs,
specifically excise taxes, value added taxes (VATs), and documentary stamp
taxes (DSTs). Such exclusion resulted in LGUs being deprived of
₱60,750,000,000.00 for FY 2012. Further, the petitioners argued that since this
mistake in computation was happening since 1992, then the National
Government has effectively deprived LGUs of ₱438,103,906,675.73 in their IRA.

Meanwhile, in G.R. No. 208488, Cong. Enrique Garcia, Jr. sought the issuance of
the writ of mandamus to compel respondents to compute the just share of the
LGUs on the basis of all national taxes. He argued that the insertion by Congress
of the words "internal revenue" in the phrase "national taxes" found in Section
284 of the LGC caused the diminution of the base for determining the just share
of the LGUs, and should be declared unconstitutional.
ISSUE:

Whether or not Section 284 of the LGC is unconstitutional for being repugnant to
Section 6, Article X of the 1987 Constitution. – YES.

HELD:
the exclusion of other national taxes from the base amount for determining
the just share of the LGUs contravened the express constitutional edict in
Section 6, Article X the 1987 Constitution, mentions "national taxes" as the
source of the just share of the LGUs while Section 284 of the LGC ordains that
the share of the LGUs be taken from "national internal revenue taxes" instead.
Congress thereby infringed the constitutional provision.

Although the power of Congress to make laws is plenary in nature, congressional

lawmaking remains subject to the limitations stated in the 1987 Constitution.

The phrase "national internal revenue taxes" in Section 284 is undoubtedly more
restrictive than the term "national taxes" written in Section 6 of the Constitution.
As such, Congress has actually departed from the letter of the 1987 Constitution
stating that national taxes should be the base from which the just share of the
LGU comes. Such departure is impermissible. Verba legis non est
recedendum (from the words of a statute there should be no departure).

Equally impermissible is that Congress has also thereby curtailed the guarantee
of fiscal autonomy in favor of the LGUs under the 1987 Constitution.

What the phrase "national internal revenue taxes" as used in Section 284 of the
LGC included are all the taxes enumerated in Section 21 of the National Internal
Revenue Code (NIRC), as amended by R.A. No. 8424, namely: income tax, estate
and donor's taxes, VAT, other percentage taxes, excise taxes, documentary
stamp taxes, and such other taxes as may be imposed and collected by the BIR.

In view of the foregoing enumeration of what are the national internal revenue
taxes, Section 284 of the LGC has effectively deprived the LGUs from deriving
their just share from other national taxes, like the customs duties.

Moving forward, the BIR and the BOC are directed certify all national tax
collections. This ruling, also known as the "Mandanas Ruling," is to be applied
prospectively.

The Supreme Court (SC) ruled that the just share of LGUs from the national taxes
is not limited to “national internal revenue taxes” collected by the Bureau of
Internal Revenue (BIR) but includes collections (customs duties) by the Bureau of
Customs (BOC).
The Mandanas-Garcia ruling resulted from the petition made by Batangas
Governor Hermilando Mandanas and former Bataan Governor Enrique Garcia Jr.
before the Supreme Court on local government shares on internal revenue
allotment (IRA).
EO 138 was issued by President Duterte in 2021 to implement the Mandanas
Ruling of the Supreme Court, which states that LGUs should get 40 percent of all
government tax collections, and not just internal revenue, three years prior.