MANDANAS VS. EXECUTIVE HONORABLE ROZZANO RUFINO B.

SECRETARY BIAZON, COMMISSIONER, BUREAU

OF CUSTOMS, RESPONDENTS.
BERSAMIN, J. • BERSAMIN, J. • G.R.
No. 199802 DECISION
July 03, 2018
EN BANC BERSAMIN, J.:

G.R. No. 199802, July 03, 2018 The petitioners hereby challenge
the manner in which the just
CONGRESSMAN HERMILANDO I. share in the national taxes of the
MANDANAS; MAYOR EFREN B. local government units (LGUs) has
DIONA; MAYOR ANTONINO A. been computed.
AURELIO; KAGAWAD MARIO ILAGAN;
BARANGAY CHAIR PERLITO MANALO; Antecedents
BARANGAY CHAIR MEDEL
MEDRANO; BARANGAY KAGAWAD One of the key features of the 1987
CRIS RAMOS; BARANGAY KAGAWAD Constitution is its push towards
ELISA D. BALBAGO, AND ATTY. JOSE decentralization of government and
MALVAR VILLEGAS, PETITIONERS, V. local autonomy. Local autonomy has
EXECUTIVE SECRETARY PAQUITO N. two facets, the administrative and
OCHOA, JR.; SECRETARY CESAR the fiscal. Fiscal autonomy means
PURISIMA, DEPARTMENT OF that local governments have the
FINANCE; SECRETARY FLORENCIO H. power to create their own sources of
ABAD, DEPARTMENT OF BUDGET revenue in addition to their
AND MANAGEMENT; COMMISSIONER equitable share in the national taxes
KIM JACINTO-HENARES, BUREAU OF released by the National
INTERNAL REVENUE; AND NATIONAL Government, as well as the power to
TREASURER ROBERTO TAN, BUREAU allocate their resources in
OF THE TREASURY, RESPONDENTS. accordance with their own priorities.
[1] Such autonomy is as
[G.R. No. 208488, July 3, 2018] indispensable to the viability of the
policy of decentralization as the
HONORABLE ENRIQUE T. GARCIA, other.
JR., IN HIS PERSONAL AND OFFICIAL
CAPACITY AS REPRESENTATIVE OF Implementing the constitutional
THE 2ND DISTRICT OF THE mandate for decentralization and
PROVINCE OF BATAAN, PETITIONER, local autonomy, Congress enacted
V. HONORABLE [PAQUITO] N. Republic Act No. 7160, otherwise
OCHOA, JR., EXECUTIVE SECRETARY; known as the Local Government
HONORABLE CESAR V. PURISIMA, Code (LGC), in order to guarantee
SECRETARY, DEPARTMENT OF the fiscal autonomy of the LGUs by
FINANCE; HONORABLE FLORENCIO specifically providing that:
H. ABAD, SECRETARY, DEPARTMENT
SECTION 284. Allotment of Internal
OF BUDGET AND MANAGEMENT;
Revenue Taxes. — Local
HONORABLE KIM S. JACINTO-
government units shall have a share
HENARES, COMMISSIONER, BUREAU
in the national internal revenue
OF INTERNAL REVENUE; AND
taxes based on the collection of the Allotment (IRA), has been regularly
third fiscal year preceding the released to the LGUs. According to
current fiscal year as follows: the implementing rules and
regulations of the LGC, the IRA is
(a) On the first year of the determined on the basis of the
effectivity of this Code, thirty actual collections of the National
percent (30%); Internal Revenue Taxes (NIRTs) as
certified by the Bureau of Internal
(b) On the second year, thirty-five Revenue (BIR).[2]
percent (35%); and
G.R. No. 199802 (Mandanas, et al.)
(c) On the third year and thereafter, is a special civil action
forty percent (40%). for Certiorari, prohibition
and Mandamus assailing the manner
Provided, That in the event that the the General Appropriations Act
National Government incurs an (GAA) for FY 2012 computed the IRA
unmanageable public sector deficit, for the LGUs.
the President of the Philippines is
hereby authorized, upon the Mandanas, et al. allege herein that
recommendation of Secretary of certain collections of NIRTs by the
Finance, Secretary of Interior and Bureau of Customs (BOC) —
Local Government, and Secretary of specifically: excise taxes, value
Budget and Management, and added taxes (VATs) and
subject to consultation with the documentary stamp taxes (DSTs) —
presiding officers of both Houses of have not been included in the base
Congress and the presidents of the amounts for the computation of the
"liga", to make the necessary IRA; that such taxes, albeit collected
adjustments in the internal revenue by the BOC, should form part of the
allotment of local government units base from which the IRA should be
but in no case shall the allotment be computed because they constituted
less than thirty percent (30%) of the NIRTs; that, consequently, the
collection of national internal release of the additional amount of
revenue taxes of the third fiscal P60,750,000,000.00 to the LGUs as
year preceding the current fiscal their IRA for FY 2012 should be
year: Provided, further, That in the ordered; and that for the same
first year of the effectivity of this reason the LGUs should also be
Code, the local government units released their unpaid IRA for FY
shall, in addition to the thirty 1992 to FY 2011, inclusive, totaling
percent (30%) internal revenue P438,103,906,675.73.
allotment which shall include the
In G.R. No. 208488, Congressman
cost of devolved functions for
Enrique Garcia, Jr., the lone
essential public services, be entitled
petitioner, seeks the writ
to receive the amount equivalent to
of Mandamus to compel the
the cost of devolved personal
respondents thereat to compute the
services.
just share of the LGUs on the basis
of all national taxes. His petition
The share of the LGUs, heretofore
insists on a literal reading of Section
known as the Internal Revenue
6, Article X of the 1987 Constitution. (OSG), urged the dismissal of the
He avers that the insertion by petitions upon procedural and
Congress of the words internal substantive considerations.
revenue in the phrase national
taxes found in Section 284 of the Anent the procedural
LGC caused the diminution of the considerations, the OSG argues that
base for determining the just the petitions are procedurally
share of the LGUs, and should be defective because,
declared unconstitutional; that, firstly, Mandamus does not lie in order
moreover, the exclusion of certain to achieve the reliefs sought
taxes and accounts pursuant to or in because Congress may not be
accordance with special laws was compelled to appropriate the sums
similarly constitutionally untenable; allegedly illegally withheld for to do
that the VATs and excise taxes so will violate the doctrine of
collected by the BOC should be separation of powers; and,
included in the computation of the secondly, Mandamus does not also lie
IRA; and that the respondents to compel the DBM to release the
should compute the IRA on the basis amounts to the LGUs because such
of all national tax collections, and disbursements will be contrary to
thereafter distribute any shortfall to the purposes specified in the GAA;
the LGUs. that Garcia has no clear legal right
to sustain his suit for Mandamus; that
It is noted that named as common the filing of Garcia's suit violates the
respondents were the then doctrine of Hierarchy of Courts; and
incumbent Executive Secretary, that Garcia's petition
Secretary of Finance, the Secretary seeks Declaratory Relief but the
of the Department of Budget and Court cannot grant such relief in the
Management (DBM), and the exercise of its original Jurisdiction.
Commissioner of Internal Revenue.
In addition, Mandanas, et al. On the substantive considerations,
impleaded the National Treasurer, the OSG avers that Article 284 of
while Garcia added the the LGC is consistent with the
Commissioner of Customs. mandate of Section 6, Article X of
the 1987 Constitution to the effect
The cases were consolidated on that the LGUs shall have a just
October 22, 2013.[3] In the share in the national taxes; that the
meanwhile, Congressman Garcia, Jr. determination of the just share is
passed away. Jose Enrique Garcia III, within the discretion of Congress;
who was subsequently elected to that the limitation under the LGC of
the same congressional post, was the basis for the just share in the
substituted for Congressman Garcia, NIRTs was within the powers
Jr. as the petitioner in G.R. No. granted to Congress by the 1987
208488 under the resolution Constitution; that the LGUs have
promulgated on August 23, 2016.[4] been receiving their just share in
the national taxes based on the
In response to the petitions, the correct base amount; that Congress
several respondents, represented by has the authority to exclude certain
the Office of the Solicitor General taxes from the base amount in
computing the IRA; that there is a IV.
distinction between the VATs, excise
taxes and DSTs collected by the BIR, Whether or not the petitioners are
on one hand, and the VATs, excise entitled to the reliefs prayed for.
taxes and DSTs collected by the
BOC, on the other, thereby Simply stated, the petitioners raise
warranting their different treatment; the novel question of whether or not
and that Development Budget the exclusion of certain national
Coordination Committee (DBCC) taxes from the base amount for the
Resolution No. 2003-02 dated computation of the just share of the
September 4, 2003 has limited the LGUs in the national taxes is
base amount for the computation of constitutional.
the IRA to the "cash collections
based on the BIR data as reconciled Ruling of the Court
with the Bureau of Treasury;" and
that the collection of such national The petitions are partly meritorious.
taxes by the BOC should be
excluded. I
Mandamus is an improper remedy
Issues
Mandanas, et al. seek the writs
The issues for resolution are limited of Certiorari, prohibition
to the following, namely: and Mandamus, while Garcia prays for
the writ of Mandamus. Both groups of
I. petitioners impugn the validity of
Section 284 of the LGC.
Whether or not Mandamus is the
proper vehicle to assail the The remedy of Mandamus is defined in
constitutionality of the relevant Section 3, Rule 65 of the Rules of
provisions of the GAA and the LGC; Court, which provides:

Section 3. Petition for Mandamus. —

II.
When any tribunal, Corporation,
board, officer or person unlawfully
Whether or not Section 284 of the
neglects the performance of an act
LGC is unconstitutional for being
which the law specifically enjoins as
repugnant to Section 6, Article X of
a duty resulting from an
the 1987 Constitution;
office, Trust, or station, or unlawfully
excludes another from the use and
III.
enjoyment of a right or office to
which such other is entitled, and
Whether or not the existing shares there is no other plain, speedy and
given to the LGUs by virtue of the adequate remedy in the ordinary
GAA is consistent with the course of law, the person aggrieved
constitutional mandate to give LGUs thereby may file a verified petition
a "just share" to national taxes in the proper court, alleging the
following Article X, Section 6 of the facts with certainty and praying that
1987 Constitution; judgment be rendered commanding
the respondent, immediately or at
some other time to be specified by dismissal of the Garcia petition in
the court, to do the act required to G.R. No. 208488, but we do not
be done to protect the rights of the dismiss it. Garcia has attributed the
petitioner, and to pay the damages non-release of some portions of
sustained by the petitioner by their IRA balances to an alleged
reason of the wrongful acts of the congressional indiscretion — the
respondent. diminution of the base amount for
computing the LGU's just share. He
The petition shall also contain a has asserted that Congress altered
sworn certification of non- Forum the constitutional base not only by
Shopping as provided in the third limiting the base to the NIRTs
paragraph of section 3, Rule 46. instead of including therein all
national taxes, but also by excluding
For the writ of Mandamus to issue, the some national taxes and revenues
petitioner must show that the act that only benefitted a few LGUs to
sought to be performed or the detriment of the rest of the
compelled is ministerial on the part LGUs.
of the respondent. An act is
ministerial when it does not require Garcia's petition, while dubbed as a
the exercise of judgment and the petition for Mandamus, is also a
act is performed pursuant to a legal petition for Certiorari because it
mandate. The Burden of Proof is on alleges that Congress thereby
the Mandamus petitioner to show that committed Grave abuse of
he is entitled to the performance of discretion amounting to lack or
a legal right, and that the excess of Jurisdiction. It is worth
respondent has a corresponding reminding that the actual nature of
duty to perform the act. The writ every action is determined by the
of Mandamus may not issue to compel allegations in the body of the
an official to do anything that is not pleading or the Complaint itself, not
his duty to do, or that is his duty not by the nomenclature used to
to do, or to obtain for the petitioner designate the same.[6] Moreover,
anything to which he is not entitled neither should the prayer for relief
by law.[5] be controlling; hence, the courts
may still grant the proper relief as
Considering that its determination the facts alleged in
of what constitutes the just share of the Pleadings and
the LGUs in the national taxes under the Evidence introduced may warrant
the 1987 Constitution is an entirely even without a prayer for specific
discretionary power, Congress remedy.[7]
cannot be compelled by writ
of Mandamus to act either way. The In this regard, Garcia's allegation of
discretion of Congress thereon, the unconstitutionality of the
being exclusive, is not subject to insertion by Congress of the words
external direction; otherwise, the internal revenue in the
delicate balance underlying our phrase national taxes justifies
system of government may be treating his petition as one
unduly disturbed. This conclusion for Certiorari. It becomes our duty,
should at once then demand the then, to assume Jurisdiction over
his petition. In Araullo v. Aquino III, the autonomy granted to the LGUs
[8] the Court has emphatically by the 1987 Constitution.
opined that the
Court's Certiorari Jurisdiction under Municipal corporations are now
the expanded judicial power as commonly known as local
stated in the second paragraph of governments. They are the bodies
Section 1, Article VIII of the politic established by law partly as
Constitution can be asserted: agencies of the State to assist in the
civil governance of the country.
xxxx to set right and undo any act Their chief purpose has been to
of Grave abuse of regulate and administer the local
discretion amounting to lack or and internal affairs of the cities,
excess of Jurisdiction by any branch municipalities or districts. They are
or instrumentality of the legal institutions formed by charters
Government, the Court is not at all from the sovereign power, whereby
precluded from making the inquiry the populations within communities
provided the challenge was properly living within prescribed areas have
brought by interested or affected formed themselves into bodies
parties. The Court has been thereby politic and corporate, and assumed
entrusted expressly or by necessary their corporate names with the right
implication with both the duty and of continuous succession and for the
the obligation of determining, in purposes and with the authority of
appropriate cases, the validity of subordinate self-government and
any assailed legislative or executive improvement and the local
action. This entrustment is administration of the affairs of the
consistent with the republican State.[10]
system of checks and balances.[9]
Municipal corporations, being the
Further, observing that one of the mere creatures of the State, are
reliefs being sought by Garcia is subject to the will of Congress, their
identical to the main relief sought creator. Their continued existence
by Mandanas, et al., the Court and the grant of their powers are
should rightly dwell on the dependent on the discretion of
substantive arguments posited by Congress. On this matter, Judge
Garcia to the extent that they are John F. Dillon of the State of Iowa in
relevant to the ultimate resolution the United States of America
of these consolidated suits. enunciated in Merriam v. Moody's
Executors[11] the rule of statutory
II. construction that came to be oft-
Municipal corporations and mentioned as Dillon's Rule, to wit:
their relationship with Congress
[A] municipal Corporation possesses
The correct resolution and fair and can exercise the following
disposition of the issues interposed powers and no others: First, those
for our consideration require a granted in express words; second,
review of the basic principles those necessarily implied or
underlying our system of local necessarily incident to the powers
governments, and of the extent of expressly granted; third, those
absolutely essential to the declared the contrary, we find that the
objects and purposes of ordinances violate P.D. 1869, which
the Corporation-not simply has the character and force of a
convenient but indispensible; fourth, statute, as well as the public policy
any fair doubt as to the existence of expressed in the decree allowing
a power is resolved by the courts the playing of certain games of
against the Corporation-against the chance despite the prohibition of
existence of the powers.[12] gambling in general.

The formulation of Dillon's Rule has The rationale of the requirement

since undergone slight that the ordinances should not
modifications. Judge Dillon himself contravene a statute is
introduced some of the obvious. Municipal governments
modifications through his post- are only agents of the national
Merriam writings with the objective government. Local councils
of alleviating the original exercise only delegated
formulation's harshness. The legislative powers conferred on
word fairly was added to the second them by Congress as the
proviso; the word absolutely was national lawmaking body. The
deleted from the third proviso; and delegate cannot be superior to
the the principal or exercise powers
words reasonable and substantial w higher than those of the latter.
ere added to the fourth proviso, It is a heresy to suggest that
thusly: the local government units can
undo the acts of Congress, from
x x x second, those necessarily which they have derived their
or fairly implied in or incident to the power in the first place, and
powers expressly granted; third, negate by mere ordinance the
those essential to x x x. Any fair, mandate of the statute.
reasonable, doubt.[13]
Municipal corporations owe
The modified Dillon's Rule has been their origin to, and derive their
followed in this Jurisdiction, and has powers and rights wholly from
remained despite both the 1973 the legislature. It breathes into
Constitution and the 1987 them the breath of life, without
Constitution mandating autonomy which they cannot exist. As it
for local governments. This has creates, so it may destroy. As it
been made evident in several may destroy, it may abridge and
rulings of the Court, one of which control. Unless there is some
was that handed down in Magtajas constitutional limitation on the
v. Pryce Properties Corporation, Inc.: right, the legislature might, by a
[14] single act, and if we can
suppose it capable of so great a
In light of all the above folly and so great a wrong,
considerations, we see no way of sweep from existence all of the
arriving at the conclusion urged on municipal corporations in the
us by the petitioners that the State, and the Corporation could
ordinances in question are valid. On not prevent it. We know of no
limitation on the right so far as Philippines by providing a norm of
to the Corporation themselves are interpretation in favor of the LGUs in
concerned. They are, so to its Section 5(a), to wit:
phrase it, the mere tenants at
will of the legislature. xxxx

This basic relationship between Any provision on a power of a local

the national legislature and the government unit shall be liberally
local government units has not interpreted in its favor, and in case of
been enfeebled by the new doubt, any question thereon shall be
provisions in the Constitution resolved in favor of devolution of powers
strengthening the policy of local
(a
and of the local government unit. Any
autonomy. Without meaning to )
fair and reasonable doubt as to the
detract from that policy, we existence of the power shall be
here confirm that Congress interpreted in favor of the local
retains control of the local government unit concerned; [Bold
government units although in underscoring supplied for emphasis]
significantly reduced degree xxxx
now than under our previous
Constitutions. The power to III.
create still includes the power The extent of local autonomy in
to destroy. The power to grant the Philippines
still includes the power to
withhold or recall. True, there Regardless, there remains no
are certain notable innovations question that Congress possesses
in the Constitution, like the and wields plenary power to control
direct conferment on the local and direct the destiny of the LGUs,
government units of the power subject only to the Constitution
to tax, which cannot now be itself, for Congress, just like any
withdrawn by mere statute. By branch of the Government, should
and large, however, the national bow down to the majesty of the
legislature is still the principal Constitution, which is always
of the local government units, supreme.
which cannot defy its will or
modify or violate it. [Bold The 1987 Constitution limits
underscoring supplied for emphasis] Cong.ress' control over the LGUs by
ordaining in Section 25 of its Article
Also, in the earlier ruling in Ganzon II that: "The State shall ensure the
v. Court of Appeals,[15] the Court autonomy of local governments."
has pointed out that the 1987 The autonomy of the LGUs as
Constitution, in mandating thereby ensured does not
autonomy for the LGUs, did not contemplate the fragmentation of
intend to deprive Congress of its the Philippines into a collection of
authority and prerogatives over the mini-states,[16] or the creation
LGUs. of imperium in imperio.[17] The
grant of autonomy simply means
Nonetheless, the LGC has tempered that Congress will allow the LGUs to
the application of Dillon's Rule in the perform certain functions and
exercise certain powers in order not concentrate on national concerns.
for them to be overly dependent on [21]
the National Government subject to
the limitations that the 1987 Two groups of LGUs enjoy
Constitution or Congress may decentralization in distinct ways.
impose.[18] Local autonomy The decentralization of power has
recognizes the wholeness of the been given to the regional units
Philippine society in its (namely, the Autonomous Region for
ethnolinguistic, cultural, and even Muslim Mindanao [ARMM] and the
religious diversities.[19] constitutionally-mandated Cordillera
Autonomous Region [CAR]). The
The constitutional mandate to other group of LGUs (i.e., provinces,
ensure local autonomy refers to cities, municipalities and barangays)
decentralization.[20] In its broad or enjoy the decentralization of
general sense, decentralization has administration.[22] The distinction
two forms in the Philippine setting, can be reasonably understood. The
namely: the decentralization of provinces, cities, municipalities and
power and the decentralization of barangays are given decentralized
administration. The decentralization administration to make governance
of power involves the abdication of at the local levels more directly
political power in favor of the responsive and effective. In turn,
autonomous LGUs as to grant them the economic, political and social
the freedom to chart their own developments of the smaller
destinies and to shape their futures political units are expected to propel
with minimum intervention from the social and economic growth and
central government. This amounts development.[23] In contrast, the
to self-immolation because the regional autonomy of the ARMM and
autonomous LGUs thereby become the CAR aims to permit determinate
accountable not to the central groups with common traditions and
authorities but to their shared social-cultural characteristics
constituencies. On the other hand, to freely develop their ways of life
the decentralization of and heritage, to exercise their
administration occurs when the rights, and to be in charge of their
central government delegates own affairs through the
administrative powers to the LGUs establishment of a special
as the means of broadening the governance regime for certain
base of governmental powers and of member communities who choose
making the LGUs more responsive their own authorities from within
and accountable in the process, and themselves, and exercise the
thereby ensure their fullest jurisdictional authority legally
development as self-reliant accorded to them to decide their
communities and more effective internal community affairs.[24]
partners in the pursuit of the goals
of national development and social It is to be underscored, however,
progress. This form of that the decentralization of power in
decentralization further relieves the favor of the regional units is not
central government of the burden of unlimited but involves only the
managing local affairs so that it can powers enumerated by Section 20,
Article X of the 1987 Constitution create legislative districts and
and by the acts of Congress. For, national offices.[27]
with various powers being devolved
to the regional units, the grant and The 1987 Constitution has surely
exercise of such powers should encouraged decentralization by
always be consistent with and mandating that a system of
limited by the 1987 Constitution and decentralization be instituted
the national laws.[25] In other through the LGC in order to enable a
words, the powers are guardedly, more responsive and accountable
not absolutely, abdicated by the local government structure.[28] It
National Government. has also delegated the power to tax
to the LGUs by authorizing them to
Illustrative of the limitation is what create their own sources of income
transpired in Sema v. Commission that would make them self-reliant.
on Elections,[26] where the Court [29] It further ensures that each and
struck down Section 19, Article VI of every LGU will have a just share in
Republic Act No. 9054 (An Act to national taxes as well in the
Strengthen and Expand the Organic development of the national wealth.
Act for the Autonomous Region in [30]
Muslim Mindanao, Amending for the
Purpose Republic Act No. 6734, The LGC has further delineated in its
entitled "An Act Providing for the Section 3 the different operative
Autonomous Region in Muslim principles of decentralization to be
Mindanao, " as Amended) insofar as adhered to consistently with the
the provision granted to the ARMM constitutional policy on local
the power to create provinces and autonomy, viz.:
cities, and consequently declared as
void Muslim Mindanao Autonomy Sec. 3. Operative Principles of
Act No. 201 creating the Province of Decentralization —
Shariff Kabunsuan for being
contrary to Section 5, Article VI and The formulation and implementation
Section 20, Article X of the 1987 of policies and measures on local
Constitution, as well as Section 3 of autonomy shall be guided by the
the Ordinance appended to the following operative principles:
1987 Constitution. The Court
clarified therein that only Congress (a) There shall be an effective
could create provinces and cities. allocation among the different local
This was because the creation of government units of their respective
provinces and cities necessarily powers, functions, responsibilities,
entailed the creation of legislative and resources;
districts, a power that only Congress
could exercise pursuant to Section (b) There shall be established in
5, Article VI of the 1987 Constitution every local government unit an
and Section 3 of the Ordinance accountable, efficient, and dynamic
appended to the Constitution; as organizational structure and
such, the ARMM would be thereby operating mechanism that will meet
usurping the power of Congress to the priority needs and service
requirements of its communities;
(c) Subject to civil service law, rules (h) There shall be a continuing
and regulations, local officials and mechanism to enhance local
employees paid wholly or mainly autonomy not only by legislative
from local funds shall be appointed enabling acts but also by
or removed, according to merit and administrative and organizational
fitness, by the appropriate reforms;
appointing authority;
(i) Local government units shall
(d) The vesting of duty, share with the national government
responsibility, and accountability in the responsibility in the
local government units shall be management and maintenance of
accompanied with provision for ecological balance within their
reasonably adequate resources to territorial Jurisdiction, subject to
discharge their powers and the provisions of this Code and
effectively carry out their functions: national policies;
hence, they shall have the power to
create and broaden their own (j) Effective mechanisms for
sources of revenue and the right to ensuring the accountability of local
a just share in national taxes and an government units to their respective
equitable share in the proceeds of constituents shall be strengthened
the utilization and development of in order to upgrade continually the
the national wealth within their quality of local leadership;
respective areas;
(k) The realization of local autonomy
(e) Provinces with respect to shall be facilitated through
component cities and municipalities, improved coordination of national
and cities and municipalities with government policies and programs
respect to component barangays, an extension of adequate technical
shall ensure that the acts of their and material assistance to less
component units are within the developed and deserving local
scope of their prescribed powers government units;
and functions;
(l) The participation of the private
(f) Local government units may sector in local governance,
group themselves, consolidate or particularly in the delivery of basic
coordinate their efforts, services, services, shall be encouraged to
and resources commonly beneficial ensure the viability of local
to them; autonomy as an alternative strategy
for sustainable development; and
(g) The capabilities of local
government units, especially the (m) The national government shall
municipalities and barangays, shall ensure that decentralization
be enhanced by providing them with contributes to the continuing
opportunities to participate actively improvement of the performance of
in the implementation of national local government units and the
programs and projects; quality of community life.
Based on the foregoing delineation, greater autonomy to the LGUs in
decentralization can be considered cognizance of their right to self-
as the decision by the central government, to make them self-
government to empower its reliant, and to improve their
subordinates, whether administrative and technical
geographically or functionally capabilities.[34] It is an act by which
constituted, to exercise authority in the National Government confers
certain areas. It involves decision- power and authority upon the
making by subnational units, and is various LGUs to perform specific
typically a delegated power, functions and responsibilities.[35] It
whereby a larger government encompasses reforms to open sub-
chooses to delegate authority to national representation and policies
more local governments.[31] It is to "devolve political authority or
also a process, being the set of electoral capacities to subnational
policies, electoral or constitutional actors."[36] Section 16 to Section
reforms that transfer 19 of the LGC characterize political
responsibilities, resources or decentralization in the LGC as
authority from the higher to the different LGUs empowered to
lower levels of government.[32] It is address the different needs of their
often viewed as a shift of authority constituents. In contrast, devolution
towards local governments and in favor of the regional units is more
away from the central government, expansive because they are given
with total government authority the authority to regulate a wider
over society and economy imagined array of subjects, including
as fixed.[33] personal, family and property
relations.
As a system of transferring authority
and power from the National Administrative decentralization or
Government to the LGUs, deconcentration involves the
decentralization in the Philippines transfer of functions or the
may be categorized into four, delegation of authority and
namely: (1) political decentralization responsibility from the national
or devolution; (2) administrative office to the regional and local
decentralization or deconcentration; offices.[37] Consistent with this
(3) fiscal decentralization; and (4) concept, the LGC has created the
policy or decision-making Local School Boards,[38] the Local
decentralization. Health Boards[39] and the Local
Development Councils,[40] and has
Political decentralization or transferred some of the authority
devolution occurs when there is a from the agencies of the National
transfer of powers, responsibilities, Government, like the Department of
and resources from the central Education and the Department of
government to the LGUs for the Health, to such bodies to better
performance of certain functions. It cope up with the needs of particular
is a more liberal form of localities.
decentralization because there is an
actual transfer of powers and Fiscal decentralization means that
responsibilities. It aims to grant the LGUs have the power to create
their own sources of revenue in consequence of the constitutional
addition to their just share in the mandate for fiscal decentralization.
national taxes released by the [45]
National Government. It includes
the power to allocate their For sure, fiscal decentralization does
resources in accordance with their not signify the absolute freedom of
own priorities. It thus extends to the the LGUs to create their own
preparation of their budgets, so that sources of revenue and to spend
the local officials have to work their revenues unrestrictedly or
within the constraints of their upon their individual whims and
budgets. The budgets are not caprices. Congress has subjected
formulated at the national level and the LGUs' power to tax to the
imposed on local governments, guidelines set in Section 130 of the
without regard as to whether or not LGC and to the limitations stated in
they are relevant to local needs and Section 133 of the LGC. The concept
resources. Hence, the necessity of a of local fiscal autonomy does not
balancing of viewpoints and the exclude any manner of intervention
harmonization of proposals from by the National Government in the
both local and national officials, who form of supervision if only to ensure
in any case are partners in the that the local programs, fiscal and
attainment of national goals, is otherwise, are consistent with the
recognized and addressed.[41] national goals.[46]

Fiscal decentralization emanates Lastly, policy- or decision-making

from a specific constitutional decentralization exists if at least
mandate that is expressed in one sub-national tier of government
several provisions of Article X (Local has exclusive authority to make
Government) of the 1987 decisions on at least one policy
Constitution, specifically: Section 5; issue.[47]
[42] Section 6;[43] and Section 7.
[44] In fine, certain limitations are and
can be imposed by Congress in all
The constitutional authority the forms of decentralization, for
extended to each and every LGU to local autonomy, whether as to
create its own sources of income power or as to administration, is not
and revenue has been formalized absolute. The LGUs remain to be the
from Section 128 to Section 133 of tenants of the will of Congress
the LGC. To implement the LGUs' subject to the guarantees that the
entitlement to the just share in the Constitution itself imposes.
national taxes, Congress has
enacted Section 284 to Section 288 IV.
of the LGC. Congress has further Section 284 of the LGC deviates
enacted Section 289 to Section 294 from
of the LGC to define the share of the the plain language of Section 6
LGUs in the national wealth. Indeed, of Article X of the 1987
the requirement for the automatic Constitution
release to the LGUs of their just
share in the national taxes is but the
Section 6, Article X the 1987 unmanageable public sector deficit,
Constitution textually commands the President of the Philippines is
the allocation to the LGUs of a just hereby authorized, upon the
share in the national taxes, viz.: recommendation of Secretary of
Finance, Secretary of Interior and
Section 6. Local government units Local Government and Secretary of
shall have a just share, as Budget and Management, and
determined by law, in the national subject to consultation with the
taxes which shall be automatically presiding officers of both Houses of
released to them. Congress and the presidents of the
"liga", to make the necessary
Section 6, when parsed, embodies adjustments in the internal revenue
three mandates, namely: (1) the allotment of local government units
LGUs shall have a just share in but in no case shall the allotment be
the national taxes; (2) the just less than thirty percent (30%) of the
share shall be determined by law; collection of national internal
and (3) the just share shall revenue taxes of the third fiscal
be automatically released to the year preceding the current fiscal
LGUs.[48] year: Provided, further, That in the
first year of the effectivity of this
Congress has sought to carry out Code, the local government units
the second mandate of Section 6 by shall, in addition to the thirty
enacting Section 284, Title III percent (30%) internal revenue
(Shares of Local Government Units allotment which shall include the
in the Proceeds of National Taxes), cost of devolved functions for
of the LGC, which is again quoted essential public services, be entitled
for ready reference: to receive the amount equivalent to
the cost of devolved personal
Section 284. Allotment of Internal services.
Revenue Taxes. - Local government
units shall have a share in There is no issue as to what
the national internal revenue constitutes the LGUs' just
taxes based on the collection of the share expressed in percentages of
third fiscal year preceding the the national taxes (i.e., 30%, 35%
current fiscal year as follows: and 40% stipulated in
subparagraphs (a), (b), and (c) of
(a) On the first year of the Section 284). Yet, Section 6, supra,
effectivity of this Code, thirty mentions national taxes as the
percent (30%); source of the just share of the LGUs
while Section 284 ordains that
(b) On the second year, thirty-five the share of the LGUs be taken
percent (35%); and from national internal revenue taxes
instead.
(c) On the third year and thereafter,
forty percent (40%). Has not Congress thereby infringed
the constitutional provision?
Provided, That in the event that the
national government incurs an
Garcia contends that Congress has local taxes are those levied by the
exceeded its constitutional LGUs.[52]
boundary by limiting to the NIRTs
the base from which to compute What the phrase national internal
the just share of the LGUs. revenue taxes as used in Section
284 included are all the taxes
We agree with Garcia's contention. enumerated in Section 21 of the
National Internal Revenue Code
Although the power of Congress to (NIRC), as amended by R.A. No.
make laws is plenary in nature, 8424, viz.:
congressional lawmaking remains
subject to the limitations stated in Section 21. Sources of Revenue. —
the 1987 Constitution.[49] The The following taxes, fees and
phrase national internal revenue charges are deemed to be national
taxes engrafted in Section 284 is internal revenue taxes:
undoubtedly more restrictive than
the term national taxes written in (a) Income tax;
Section 6. As such, Congress has (b) Estate and donor's taxes;
actually departed from the letter of (c) Value-added tax;
the 1987 Constitution stating (d) Other percentage taxes;
that national taxes should be the (e) Excise taxes;
base from which the just share of (f) Documentary stamp taxes; and
the LGU comes. Such departure is (g) Such other taxes as are or
impermissible. Verba legis non est hereafter may be imposed and
recedendum (from the words of a collected by the Bureau of Internal
statute there should be no Revenue.
departure).[50] Equally
impermissible is that Congress has In view of the foregoing
also thereby curtailed the guarantee enumeration of what are the
of fiscal autonomy in favor of the national internal revenue taxes,
LGUs under the 1987 Constitution. Section 284 has effectively deprived
the LGUs from deriving their just
Taxes are the enforced proportional share from other national taxes, like
contributions exacted by the State the customs duties.
from persons and properties
pursuant to its sovereignty in order Strictly speaking, customs duties
to support the Government and to are also taxes because they are
defray all the public needs. Every exactions whose proceeds become
tax has three elements, namely: (a) public funds. According to Garcia v.
it is an enforced proportional Executive Secretary,[53] customs
contribution from persons and duties is the nomenclature given to
properties; (b) it is imposed by the taxes imposed on the importation
State by virtue of its sovereignty; and exportation of commodities and
and (c) it is levied for the support of merchandise to or from a foreign
the Government.[51] Taxes are country. Although customs duties
classified into national and local. have either or both the generation
National taxes are those levied by of revenue and the regulation of
the National Government, while economic or social activity as their
moving purposes, it is often difficult share of LGUs in the national taxes
to say which of the two is the shall be determined by law is
principal objective in a particular tantamount to the unauthorized
instance, for, verily, customs duties, revision of the 1987 Constitution.
much like internal revenue taxes,
are rarely designed to achieve only V.
one policy objective.[54] We further Congress can validly exclude
note that Section 102(oo) of R.A. taxes
No. 10863 (Customs Modernization that will constitute the base
and Tariff Act) expressly includes all amount
fees and charges imposed under the for the computation of the IRA
Act under the blanket term of taxes. only if
a Constitutional provision allows
It is clear from the foregoing such exclusion
clarification that the exclusion
of other national taxes like customs Garcia submits that even assuming
duties from the base for that the present version of Section
determining the just share of the 284 of the LGC is constitutionally
LGUs contravened the express valid, the implementation thereof
constitutional edict in Section 6, has been erroneous because
Article X the 1987 Constitution. Section 284 does not authorize any
exclusion or deduction from the
Still, the OSG posits that Congress collections of the NIRTs for purposes
can manipulate, by law, the base of of the computation of the
the allocation of the just share in allocations to the LGUs. He further
the national taxes of the LGUs. submits that the exclusion of certain
NIRTs diminishes the fiscal
The position of the OSG cannot be autonomy granted to the LGUs. He
sustained. Although it has the claims that the following NIRTs have
primary discretion to determine and been illegally excluded from the
fix the just share of the LGUs in the base for determining the fair share
national taxes (e.g., Section 284 of of the LGUs in the IRA, to wit:
the LGC), Congress cannot disobey
the express mandate of Section 6, NIRTs collected by the cities and
Article X of the 1987 Constitution for provinces and divided exclusively among
the just share of the LGUs to be the LGUs of the Autonomous Region for
derived from the national taxes. The Muslim Mindanao (ARMM), the regional
phrase as determined by law in government and the central government,
Section 6 follows and qualifies the pursuant to Section 15[55] in relation to
phrase just share, and cannot be (1 Section 9,[56] Article IX of R.A. No.
construed as qualifying the ) 9054 (An Act to Strengthen and Expand
succeeding phrase in the national the Organic Act for the Autonomous
taxes. The intent of the people in Region in Muslim Mindanao, amending
respect of Section 6 is really that for the purpose Republic Act No. 6734,
the base for reckoning the just entitled An Act providing for an Organic
share of the LGUs should includes Act for the Autonomous Region in
all national taxes. To read Section 6 Muslim Mindanao);
differently as requiring that the just
 The shares in the excise taxes on mineral NIRC;[64] and
products of the different LGUs, as
(2
provided in Section 287 of the NIRC[57] The share of the Commission of Audit
)
in relation to Section 290 of the LGC; (COA) in the NIRTs as provided in
[58] (8 Section 24(3) of P.D. No. 1445
) (Government Auditing Code of the
The shares of the relevant LGUs in the Philippines)[65] in relation to Section
(3 franchise taxes paid by Manila Jockey 284 of the NIRC.[66]
) Club, Inc.[59] and Philippine Racing Garcia insists that the foregoing
Club, Inc.;[60] taxes and revenues should have
been included by Congress and, by
The shares of various municipalities in extension, the BIR in the base for
VAT collections under R.A. No. 7643 computing the IRA on the strength
(An Act to Empower the Commissioner of of the cited provisions; that the LGC
Internal Revenue to Require the Payment did not authorize such exclusion;
(4 of the Value Added Tax Every Month and and that the continued exclusion
) to Allow Local Government Units to has undermined the fiscal autonomy
Share in VAT Revenue, Amending for this guaranteed by the 1987
Purpose Certain Sections of the National Constitution.
Internal Revenue Code) as embodied in
The insistence of Garcia is valid to
Section 283 of the NIRC;[61]
an extent.
The shares of relevant LGUs in the An examination of the above-
proceeds of the sale and conversion of enumerated laws confirms that the
(5
former military bases in accordance with following have been excluded from
)
R.A. No. 7227 (Bases Conversion and the base for reckoning the just
Development Act of 1992);[62] share of the LGUs as required by
Section 6, Article X of the 1987
The shares of different LGUs in the Constitution, namely:
excise taxes imposed on locally
manufactured Virginia tobacco products The share of the affected LGUs in the
as provided in Section 3 of R.A. No. proceeds of the sale and conversion of
(6 (a)
7171 (An Act to Promote the former military bases in accordance with
)
Development of the Farmers in the R.A. No. 7227;
Virginia Tobacco Producing Provinces),
and as now provided in Section 289 of The share of the different LGUs in the
the NIRC;[63] excise taxes imposed on locally
(b manufactured Virginia tobacco products
(7 The shares of different LGUs in the ) as provided for in Section 3, R.A. No.
) incremental revenues from Burley and 7171, and as now provided in Section
native tobacco products under Section 8 289of the NIRC;
of R.A. No. 8240 (An Act Amending
Sections 138, 140 and 142 of the (c)The share of the different LGUs in
National Internal Revenue Code as incremental revenues from Burley and
Amended and for Other Purposes) and as native tobacco products under Section 8
now provided in Section 288 of the of R.A. No. 8240, and as now provided
 for in Section 288 of the NIRC; the franchise taxes paid by the
Manila Jockey Club, Inc., and
The share of the COA in the NIRTs as Philippine Racing Club, Inc., under
(d provided in Section 24(3) of P.D. No. Section 6 of R.A. No. 6631 and
) 1445[67] in relation to Section 284 of the Section 8 of R.A. No. 6632,
NIRC; respectively, the exclusion is also
justified. Although such shares
The shares of the different LGUs in the involved national taxes as defined
excise taxes on mineral products, as under the NIRC, Congress had the
(e) authority to exclude them by virtue
provided in Section 287 of the NIRC in
relation to Section 290 of the LGC; of their being taxes imposed for
special purposes. A reading of
The NIRTs collected by the cities and Section 288 and Section 289 of the
provinces and divided exclusively among NIRC and Section 24(3) of P.D. No.
1445 in relation to Section 284 of
the LGUs of the ARMM, the regional
the NIRC reveals that all such taxes
(f) government and the central government,
are levied and collected for a special
pursuant to Section 15[68] in relation to
purpose.[70] The same is true for
Section 9,[69] Article IX of R. A. No.
the franchise taxes paid under
9054; and Section 6 of R.A. No. 6631 and
Section 8 of R.A. No. 6632,
The shares of the relevant LGUs in the inasmuch as certain percentages of
(g franchise taxes paid by Manila Jockey the franchise taxes go to different
) Club, Inc., and the Philippine Racing beneficiaries. The exclusion
Club, Inc. conforms to Section 29(3), Article VI
Anent the share of the affected of the 1987 Constitution, which
LGUs in the proceeds of the sale and states:
conversion of the former military
bases pursuant to R.A. No. 7227, Section 29. x x x
the exclusion is warranted for the
reason that such proceeds do not xxxx
come from a tax, fee or exaction
imposed on the sale and conversion. (3) All money collected on any
tax levied for a special purpose
As to the share of the affected LGUs shall be treated as a special
in the excise taxes imposed on fund and paid out for such
locally manufactured Virginia purpose only. If the purpose for
tobacco products under R.A. No. which a special fund was created
7171 (now Section 289 of the NIRC); has been fulfilled or abandoned, the
the share of the affected LGUs in balance, if any, shall be transferred
incremental revenues from Burley to the general funds of the
and native tobacco products under Government. [Bold emphasis
Section 8, R.A. No. 8240 (now supplied]
Section 288 of the NIRC); the share
of the COA in the NIRTs pursuant to The exclusion of the share of the
Section 24(3) of P.D. No. 1445 in different LGUs in the excise taxes
relation to Section 284 of the NIRC; imposed on mineral products
and the share of the host LGUs in pursuant to Section 287 of the NIRC
in relation to Section 290 of the LGC products, royalties, and such
is premised on a different other taxes, fees or charges,
constitutional provision. Section 7, including related surcharges,
Article X of the 1987 Constitution interests or fines, and from its
allows affected LGUs to have an share in any co-production, joint
equitable share in the proceeds of venture or production sharing
the utilization of the nation's agreement in the utilization and
national wealth "within their development of the national
respective areas," to wit: wealth within their
territorial Jurisdiction.
Section 7. Local governments shall
be entitled to an equitable share in (B) Share of the Local Governments
the proceeds of the utilization and from Any Government Agency or
development of the national wealth Government-owned or -
within their respective areas, in the Controlled Corporation. - Local
manner provided by law, including Government Units shall have a
sharing the same with the share, based on the preceding fiscal
inhabitants by way of direct year, from the proceeds derived by
benefits. any government agency or
government owned or
This constitutional provision is controlled Corporation engaged in
implemented by Section 287 of the the utilization and development of
NIRC and Section 290 of the LGC the national wealth based on the
thusly: following formula, whichever will
produce a higher share for the local
SEC. 287. Shares of Local government unit:
Government Units in the Proceeds
from the Development and (1) One percent (1%) of the gross
Utilization of the National Wealth. - sales or receipts of the preceding
Local Government units shall have calendar year, or
an equitable share in the proceeds
derived from the utilization and (2) Forty percent (40%) of the
development of the national wealth, excise taxes on mineral products,
within their respective areas, royalties, and such other taxes, fees
including sharing the same with the or charges, including related
inhabitants by way of direct surcharges, interests or fines the
benefits. government agency or government
owned or -controlled corporations
(A) Amount of Share of Local would have paid if it were not
Government Units. - Local otherwise exempt. [Bold emphasis
government units shall, in supplied]
addition to the internal revenue
allotment, have a share of forty SEC. 290. Amount of Share of Local
percent (40%) of the gross Government Units. - Local
collection derived by the government units shall, in
national government from the addition to the internal revenue
preceding fiscal year from allotment, have a share of forty
excise taxes on mineral percent (40%) of the gross
collection derived by the supply of funding sourced from their
national government from the very own areas. The ARMM will
preceding fiscal year from become self-reliant and dynamic
mining taxes, royalties, forestry consistent with the dictates of the
and fishery charges, and such 1987 Constitution.
other taxes, fees, or charges,
including related surcharges, The shares of the municipalities in
interests, or fines, and from its the VATs collected pursuant to R.A.
share in any co-production, joint No. 7643 should be included in
venture or production sharing determining the base for computing
agreement in the utilization and the just share because such VATs
development of the national wealth are national taxes, and nothing can
within their territorial Jurisdiction. validly justify their exclusion.
[Bold emphasis supplied]
In recapitulation, the national taxes
Lastly, the NIRTs collected by the to be included in the base for
provinces and Cities within the computing the just share the LGUs
ARMM whose portions are shall henceforth be, but shall not be
distributed to the ARMM's provincial, limited to, the following:
city and regional governments are
also properly excluded for such 1. The NIRTs enumerated in
taxes are intended to truly enable a Section 21 of the NIRC, as
sustainable and feasible amended, to be inclusive of
autonomous region as guaranteed the VATs, excise taxes, and
by the 1987 Constitution. The DSTs collected by the BIR and
mandate under Section 15 to the BOC, and their deputized
Section 21, Article X of the 1987 agents;
Constitution is to allow the separate
development of peoples with 2. Tariff and customs duties
distinctive cultures and traditions in collected by the BOC;
the autonomous areas.[71] The
grant of autonomy to the 3. 50% of the VATs collected in
autonomous regions includes the the ARMM, and 30% of all
right of self determination — which other national taxes collected
in turn ensures the right of the in the ARMM; the remaining
peoples residing therein to the 50% of the VATs and 70% of
necessary level of autonomy that the collections of the other
will guarantee the support of their national taxes in the ARMM
own cultural identities, the shall be the exclusive share of
establishment of priorities by their the ARMM pursuant to Section
respective communities' internal 9 and Section 15 of R.A. No.
decision-making processes and the 9054;
management of collective matters
by themselves.[72] As such, the 4. 60% of the national taxes
NIRTs collected by the provinces collected from the
and cities within the ARMM will exploitation and development
ensure local autonomy and their of the national wealth; the
very existence with a continuous remaining 40% will
 exclusively accrue to the host reckoned such just share from all
LGUs pursuant to Section 290 national taxes, on the one hand, and
of the LGC; the share — represented by the IRA
— the LGUs have actually received
5. 85% of the excise taxes since the effectivity of the IRA under
collected from locally the LGC, on the other. This puts the
manufactured Virginia and National Government in arrears as
other tobacco products; the to the just share of the LGUs. A
remaining 15% shall accrue to legislative or executive act declared
the special purpose funds void for being unconstitutional
pursuant created in R.A. No. cannot give rise to any right or
7171 and R.A. No. 7227; obligation.[73]

6. The entire 50% of the national Yet, the Court has conceded
taxes collected under Section in Araullo v. Aquino III[74] that:
106, Section 108 and Section
116 of the NIRC in excess of x x x the generality of the rule
the increase in collections for makes us ponder whether
the immediately preceding rigidly applying the rule may at
year; and times be impracticable or
wasteful. Should we not
7. 5% of the franchise taxes in recognize the need to except
favor of the national from the rigid application of the
government paid by franchise rule the instances in which the
holders in accordance with void law or executive act
Section 6 of R.A. No. 6631 and produced an almost irreversible
Section 8 of R.A. No. 6632. result?

VI. The need is answered by the

Entitlement to the reliefs doctrine of operative fact. The
sought doctrine, definitely not a novel one,
has been exhaustively explained
The petitioners' prayer for the in De Agbayani v. Philippine
payment of the arrears of the National Bank:
LGUs' just share on the theory that
the computation of the base amount The decision now on appeal reflects
had been unconstitutional all along the orthodox view that an
cannot be granted. unconstitutional act, for that matter
an executive order or a municipal
It is true that with our declaration ordinance likewise suffering from
today that the IRA is not in that infirmity, cannot be the source
accordance with the constitutional of any legal rights or duties. Nor can
determination of the just share of it justify any official act taken under
the LGUs in the national taxes, logic it. Its repugnancy to the
demands that the LGUs should fundamental law once judicially
receive the difference between declared results in its being to all
the just share they should have intents and purposes a mere scrap
received had the LGC properly of paper. As the new Civil Code puts
it: 'When the courts declare a law to of judicial review that may lead
be inconsistent with the to a declaration of nullity. It
Constitution, the former shall be would be to deprive the law of
void and the latter shall govern.' its quality of fairness and
Administrative or executive acts, justice then, if there be no
orders and regulations shall be valid recognition of what had
only when they are not contrary to transpired prior to such
the laws of the Constitution. It is adjudication.
understandable why it should be so,
the Constitution being supreme and In the language of an American
paramount. Any legislative or Supreme Court decision: 'The actual
executive act contrary to its terms existence of a statute, prior to such
cannot survive. a determination [of
unconstitutionality], is an operative
Such a view has support in logic fact and may have consequences
and possesses the merit of which cannot justly be ignored. The
simplicity. It may not however past cannot always be erased by a
be sufficiently realistic. It does new judicial declaration. The effect
not admit of doubt that prior to of the subsequent ruling as to
the declaration of nullity such invalidity may have to be
challenged legislative or considered in various aspects, with
executive act must have been in respect to particular relations,
force and had to be complied individual and corporate, and
with. This is so as until after the particular conduct, private and
judiciary, in an appropriate official.'
case, declares its invalidity, it is
entitled to obedience and The doctrine of operative fact
respect. Parties may have acted recognizes the existence of the
under it and may have changed law or executive act prior to the
their positions. What could be determination of its
more fitting than that in a unconstitutionality as an
subsequent litigation regard be operative fact that produced
had to what has been done consequences that cannot
while such legislative or always be erased, ignored or
executive act was in operation disregarded. In short, it nullifies
and presumed to be valid in all the void law or executive act
respects. It is now accepted as a but sustains its effects. It
doctrine that prior to its being provides an exception to the
nullified, its existence as a fact general rule that a void or
must be reckoned with. This is unconstitutional law produces
merely to reflect awareness that no effect.[75] But its use must be
precisely because the judiciary subjected to great scrutiny and
is the governmental organ circumspection, and it cannot be
which has the final say on invoked to validate an
whether or not a legislative or unconstitutional law or executive
executive measure is valid, a act, but is resorted to only as a
period of time may have elapsed matter of equity and fair play.[76] It
before it can exercise the power applies only to cases where
extraordinary circumstances exist, the legislature below the amount
and only when the extraordinary appropriated for the previous year
circumstances have met the and, after approval, shall be
stringent conditions that will permit automatically and regularly
its application. released.

Conformably with the foregoing Then there is Section 5 of Article

pronouncements in Araullo v. IX(A), which contains the common
Aquino III, the effect of our provision in favor of the
declaration through this decision of Constitutional Commissions:
the unconstitutionality of Section
284 of the LGC and its related laws Section 5. The Commission shall
as far as they limited the source of enjoy fiscal autonomy. Their
the just share of the LGUs to the approved annual appropriations
NIRTs is prospective. It cannot be shall be automatically and regularly
otherwise. released.

VII. Section 14 of Article XI extends to

Automatic release of the LGUs' the Office of the Ombudsman a
just share in the National Taxes similar privilege:

Section 6, Article X of the 1987 Section 14. The Office of the

Constitution commands that the just Ombudsman shall enjoy fiscal
share of the LGUs in national taxes autonomy. Its approved annual
shall be automatically released to appropriations shall be
them. The term automatic connotes automatically and regularly
something mechanical, spontaneous released.
and perfunctory; and, in the context
of this case, the LGUs are not Section 17(4) of Article XIII
required to perform any act or thing replicates the privilege in favour of
in order to receive their just share in the Commission on Human Rights:
the national taxes.[77]
Section 17(4) The approved annual
Before anything, we must highlight appropriations of the Commission
that the 1987 Constitution includes shall be automatically and regularly
several provisions that actually deal released.
with and authorize the automatic
release of funds by the National The foregoing constitutional
Government. provisions share two aspects. The
first relates to the grant of fiscal
To begin with, Section 3 of Article autonomy, and the second concerns
VIII favors the Judiciary with the the automatic release of funds.[78]
automatic and regular release of its The common denominator of the
appropriations: provisions is that the automatic
release of the appropriated amounts
Section 3. The Judiciary shall enjoy is predicated on the approval of the
fiscal autonomy. Appropriations for annual appropriations of the offices
the Judiciary may not be reduced by or agencies concerned.
Directly contrasting with the any Lien or holdback that may be
foregoing provisions is Section 6, imposed by the National
Article X of the 1987 Constitution Government for whatever
because the latter provision purpose. x x x (Bold emphasis
forthrightly ordains that the "(l)ocal supplied)
government units shall have a just
share, as determined by law, in the The 1987 Constitution is forthright
national taxes which shall be and unequivocal in ordering that
automatically released to them." the just share of the LGUs in the
Section 6 does not mention of national taxes shall
appropriation as a condition for the be automatically released to them.
automatic release of the just share With Congress having established
to the LGUs. This is because the just share through the LGC, it
Congress not only already seems to be beyond debate that the
determined the just share through inclusion of the just share of the
the LGC's fixing the percentage of LGUs in the annual GAAs is
the collections of the NIRTs to unnecessary, if not superfluous.
constitute such fair share subject to Hence, the just share of the LGUs in
the power of the President to adjust the national taxes shall be released
the same in order to manage public to them without need of yearly
sector deficits subject to limitations appropriation.
on the adjustments, but also
explicitly authorized such just WHEREFORE, the petitions in G.R.
share to be "automatically released" No. 199802 and G.R. No. 208488
to the LGUs in the proportions and are PARTIALLY GRANTED,
regularity set under Section 285[79] and, ACCORDINGLY, the Court:
of the LGC without need of annual
appropriation. To operationalize the 1. DECLARES the phrase "internal
automatic release without need of revenue" appearing in Section 284
appropriation, Section 286 of the of Republic Act No. 7160 (Local
LGC clearly provides that the Government
automatic release of the just Code) UNCONSTITUTIONAL,
share directly to the provincial, city, and DELETES the phrase from
municipal or barangay treasurer, as Section 284.
the case may be, shall be "without
need of any further action," viz.: Section 284, as hereby modified,
shall henceforth read as follows:
Section 286. Automatic Release
of Shares.— (a) The share of Section 284. Allotment of Taxes. —
each local government unit shall Local government units shall have a
be released, without need of share in the national taxes based on
any further action; directly to the collection of the third fiscal year
the provincial, city, municipal or preceding the current fiscal year as
barangay treasurer, as the case follows:
may be, on a quarterly basis
within five (5) days after the (a) On the first year of the
end of each quarter, and which effectivity of this Code, thirty
shall not be subject to percent (30%);
(b) On the second year, thirty-five local government units in the
percent (35%); and allotment shall be collected in the
following manner:
(c) On the third year and thereafter,
forty percent (40%). (a) Provinces — Twenty-three
percent (23%);
Provided, That in the event that the
national government incurs an (b) Cities — Twenty-three percent
unmanageable public sector deficit, (23%);
the President of the Philippines is
hereby authorized, upon the (c) Municipalities —Thirty-four
recommendation of Secretary of percent (34%); and
Finance, Secretary of Interior and
Local Government and Secretary of (d) Barangays — Twenty percent
Budget and Management, and (20%)
subject to consultation with the
presiding officers of both Houses of Provided, however, That the share
Congress and the presidents of the of each province, city, and
"liga", to make the necessary municipality shall be determined on
adjustments in the allotment of local the basis of the following formula:
government units but in no case
shall the allotment be less than (a) Population — Fifty percent
thirty percent (30%) of the (50%);
collection of national taxes of the
third fiscal year preceding the (b) Land Area — Twenty-five percent
current fiscal year; Provided, (25%); and
further, That in the first year of the
effectivity of this Code, the local (c) Equal sharing — Twenty-five
government units shall, in addition percent (25%)
to the thirty percent (30%)
allotment which shall include the Provided, further, That the share of
cost of devolved functions for each barangay with a population of
essential public services, be entitled not less than one hundred (100)
to receive the amount equivalent to inhabitants shall not be less than
the cost of devolved personal Eighty thousand (P80,000.00) per
services. annum chargeable against the
twenty percent (20%) share of the
The phrase "internal revenue" is barangay from the allotment, and
likewise hereby DELETED from the the balance to be a1located on the
related sections of Republic Act No. basis of the following formula:
7160 (Local Government Code),
specifically Section 285, Section (a) On the first year of the
287, and Section 290, which effectivity of this Code:
provisions shall henceforth read as
follows: (1) Population Forty percent (40%);
and
Section 285. Allocation to Local
Government Units. — The share of
(2) Equal sharing — Sixty percent government from the preceding
(50%) fiscal year from mining taxes,
royalties, forestry and fishery
(b) On the second year: charges, and such other taxes, fees,
or charges, including related
(1) Population — Fifty percent surcharges, interests, or fines, and
(50%); and from its share in any co-production,
joint venture or production sharing
(2) Equal sharing — Fifty percent agreement in the utilization and
(50%) development of the national wealth
within their territorial Jurisdiction.
(c) On the third year and thereafter:
Article 378, Article 379, Article 380,
(1) Population — Sixty percent Article 382, Article 409, Article 461,
(60%); and and related provisions of the
Implementing Rules and Regulations
(2) Equal sharing — Forty percent of R.A. No. 7160 are
(40%). hereby MODIFIED to reflect the
deletion of the phrase "internal
Provided, finally, That the financial revenue" as directed herein.
requirements of barangays created
by local government units after the Henceforth, any mention of "Internal
effectivity of this Code shall be the Revenue Allotment" or "IRA" in
responsibility of the local Republic Act No. 7160 (Local
government unit concerned. Government Code) and its
Implementing Rules and Regulations
xxxx shall be understood as pertaining to
the allotment of the Local
Government Units derived from the
Section 287. Local Development
national taxes;
Projects. — Each local government
unit shall appropriate in its annual
2. ORDERS the SECRETARY OF
budget no less than twenty percent
THE DEPARTMENT OF FINANCE;
(20%) of its annual allotment for
the SECRETARY OF THE
development projects. Copies of the
DEPARTMENT OF BUDGET AND
development plans of local
MANAGEMENT; the
government units shall be furnished
COMMISSIONER OF INTERNAL
the Department of Interior and Local
REVENUE; the COMMISSIONER
Government.
OF CUSTOMS; and the NATIONAL
TREASURER to include ALL
xxxx COLLECTIONS OF NATIONAL
TAXES in the computation of the
Section 290. Amount of Share of base of the just share of the Local
Local Government Units. — Local Government Units according to the
government units shall, in addition ratio provided in the now-modified
to the allotment, have a share of Section 284 of Republic Act No.
forty percent (40%) of the gross 7160 (Local Government Code)
collection derived by the national except those accruing to special
purpose funds and special (e) 85% of the excise taxes
allotments for the utilization and collected from locally manufactured
development of the national wealth. Virginia and other tobacco products.

For this purpose, the collections of The remaining 15% shall accrue to
national taxes for inclusion in the the special purpose funds created
base of the just share the Local by Republic Act No. 7171 and
Government Units shall include, but Republic Act No. 7227;
shall not be limited to, the following:
(f) The entire 50% of the national
(a) The national internal revenue taxes collected under Sections 106,
taxes enumerated in Section 21 of 108 and 116 of the NIRC as
the National Internal Revenue Code, provided under Section 283 of the
as amended, collected by the NIRC; and
Bureau of Internal Revenue and the
Bureau of Customs; (g) 5% of the 25% franchise taxes
given to the National Government
(b) Tariff and customs duties under Section 6 of Republic Act No.
collected by the Bureau of Customs; 6631 and Section 8 of Republic Act
No. 6632.
(c) 50% of the value-added taxes
collected in the Autonomous Region 3. DECLARES that:
in Muslim Mindanao, and 30% of all
other national tax collected in the (a) The apportionment of the 25% of
Autonomous Region in Muslim the franchise taxes collected from
Mindanao. the Manila Jockey Club and
Philippine Racing Club, Inc. — that
The remaining 50% of the is, five percent (5%) to the National
collections of value-added taxes and Government; five percent (5%) to
70% of the collections of the other the host municipality or city; seven
national taxes in the Autonomous percent (7%) to the Philippine
Region in Muslim Mindanao shall be Charity Sweepstakes Office; six
the exclusive share of the percent (6%) to the Anti-
Autonomous Region in Muslim Tuberculosis Society; and two
Mindanao pursuant to Section 9 and percent (2%) to the White Cross
Section 15 of Republic Act No. 9054. pursuant to Section 6 of Republic
Act No. 6631 and Section 8 of
(d) 60% of the national taxes Republic Act No. 6632 — is VALID;
collected from the exploitation and
development of the national wealth. (b) Section 8 and Section 12 of
Republic Act No. 7227 are VALID;
The remaining 401% of the national and, ACCORDINGLY, the proceeds
taxes collected from the exploitation from the sale of the former military
and development of the national bases converted to alienable lands
wealth shall exclusively accrue to thereunder are EXCLUDED from the
the host Local Government Units computation of the national tax
pursuant to Section 290 of Republic allocations of the Local Government
Act No. 7160 (Local Government Units; and
Code);
(c) Section 24(3) of Presidential Representatives for their
Decree No. 1445, in relation to information and guidance.
Section 284 of the National Internal
Revenue Code, apportioning one- SO ORDERED.
half of one percent (1/2 of 1%) of
national tax collections as the Carpio, (Acting C.J.) Leonardo-De
auditing fee of the Commission on Castro, Peralta, Del Castillo, Perlas-
Audit is VALID; Bernabe, Martires, Tijam,
and Gesmundo, JJ., concur.
4. DIRECTS the Bureau of Internal Velasco, Jr., concur. Please see
Revenue and the Bureau of Customs separate opinion.
and their deputized collecting Leonen, Gaguioa, and Reyes J.,
agents to certify all national tax JJ., dissent. See separate opinions.
collections, pursuant to Article 378 Jardeleza, J., no part prior OSG
of the Implementing Rules and action.
Regulations of R.A. No. 7160;

5. DISMISSES the claims of the

Local Government Units for the
settlement by the National
Government of arrears in the just
share on the ground that this
decision shall have PROSPECTIVE NOTICE OF JUDGMENT
APPLICATION; and
Sirs/Mesdames:
6. COMMANDS the AUTOMATIC
RELEASE WITHOUT NEED OF Please take notice that on July 3,
FURTHER ACTION of the just 2018 a Decision, copy attached
shares of the Local Government herewith, was rendered by the
Units in the national taxes, through Supreme Court in the above-entitled
their respective provincial, city, case, the original of which was
municipal, or barangay treasurers, received by this Office on July 23,
as the case may be, on a quarterly 2018 at 3:36 p.m.
basis but not beyond five (5) days
Very truly yours,
from the end of each quarter, as
directed in Section 6, Article X of the
EDGAR O. ARICHETA
1987 Constitution and Section 286
Clerk of Court
of Republic Act No. 7160 (Local
Government Code), and By:
operationalized by Article 383 of the
Implementing Rules and Regulations (SGD.) ANNA-LI R. PAPA-GOMBIO
of RA 7160. Deputy Clerk of Court En Banc
Let a copy of this decision be
furnished to the President of the
Republic of the Philippines, the [1] Pimentel, Jr. v. Aguirre, G.R. No.
President of the Senate, and the 132988, July 19, 2000, 336 SCRA
Speaker of the House of 201, 218.
[2] Article 378, Administrative Order [14] G.R. No. 111097, July 20, 1994,
No. 270, Series of 1992. 234 SCRA 255, 272-273, citing The
City of Clinton v. The Cedar Rapids
[3] Rollo (G.R. No. 208488), p. 50. and Missouri River Railroad
Company, 24 Iowa (1868): 455 at
[4] Id. at 310. 475.
[5] In the Matter of Save the [15] G.R. No. 93252, August 5,
Supreme Court Judicial 1991, 200 SCRA 271, 281.
Independence and Fiscal Autonomy
Movement v. Abolition of Judiciary [16] Id. at 281.
Development Fund (JDF) and
Reduction of Fiscal Autonomy, UDK- [17] Land Transportation Office v.
15143, January 21, 2015, 746 SCRA City of Butuan, G.R. No. 131512,
352, 371, citing Uy Kiao Eng v. January 20, 2000, 322 SCRA 805,
Lee, G.R. No. 176831, January 15, 808.
2010, 610 SCRA 211, 217.
[18] See Ganzon v. Court of
[6] Ruby Shelter Builders and Realty Appeals, note 15.
Development Corporation v.
Formaran, III, G.R. No. 175914, [19] Disomangcop v. Datumanong,
February 10, 2009. G.R. No. 149848, November 25,
2004, 444 SCRA 203, 227.
[7] Evangelista v. Santiago, G.R. No.
157447, April 29, 2005, 457 SCRA [20] Basco v. Philippine Amusement
744, 762. and Gaming Corporation, G.R. No.
91649, May 14, 1991, 197 SCRA 52,
[8] G.R. No. 209287, July 1, 2014, 65.
728 SCRA 1.
[21] Limbona v. Mangelin, G.R. No.
[9] Id. at 75. 80391, February 28, 1989, 170
SCRA 786, 795.
[10] Black's Law Dictionary, 6th ed.,
Nolan, J., & Nolan-Haley, J., West [22] In Cordillera Board Coalition v.
Group, St. Paul, Minnesota, 1990, p. Commission on Audit, G.R. No.
1017. 79956, January 29, 1990, 181 SCRA
495, 506, the Court observed that:
[11] 25 Iowa 163 (1868). "It must be clarified that the
constitutional guarantee of local
[12] Id. at 170. autonomy in the Constitution [Art.
X, sec. 2] refers to
[13] 1 J. Dillon, Municipal the administrative autonomy of
Corporations, 89 (3rd Ed. 1881). See local government units or, cast in
Dean, K.D., The Dillon Rule — a more technical language, the
Limit on Local Government Powers, decentralization of government
Missouri Law Review, Vol. 41, Issue authority [Villegas v. Subido, G.R.
4, Fall 1976, p. 547. No. L-31004, January 8, 1971, 37
SCRA 1]. Local autonomy is not
unique to the 1987 Constitution, it
being guaranteed also under the (1) Administrative organization;
1973 Constitution [Art. II, sec. 10]. (2) Creation of sources of revenues;
And while there was no express (3) Ancestral domain and natural
guarantee under the 1935 resources;
Constitution, the Congress enacted (4) Personal, family, and property
the Local Autonomy Act (R.A. No. relations;
2264) and the Decentralization Act (5) Regional urban and rural
(R.A. No. 5185), which ushered the planning development;
irreversible march towards further (6) Economic, social, and tourism
enlargement of local autonomy in development;
the country [Villegas v. (7) Educational policies;
Subido, supra.] (8) Preservation and development of
the cultural heritage; and
On the other hand, the creation of (9) Such other matters as may be
autonomous regions in Muslim authorized by law for the promotion
Mindanao and the Cordilleras, which of the general welfare of the people
is peculiar to the 1987 Constitution, of the region.
contemplates the grant
of political autonomy and not just [26] G.R. No. 177597, July 16, 2008,
administrative autonomy to these 558 SCRA 700, 743-744.
regions. Thus, the provision in the
Constitution for an autonomous [27] Id. at 730-732.
regional government with a basic
structure consisting of an executive [28] See Article X, Section 3.
department and a legislative
assembly and special courts with [29] Id., Section 5.
personal, family and property
law Jurisdiction in each of the [30] Id., Section 5 and Section 6.
autonomous regions [Art. X, sec.
18]" [31] Disomangcop v. Datumanong,
supra note 19, at 233.
[23] Pimentel v. Aguirre, supra note
1, at 217. [32] Does Decentralization Improve
Perceptions of Accountability?
[24] Disomangcop v. Datumanong, Attitudinal Evidence from
supra note 19, at 231. Colombia. Escobar-Lemmon, M. &
Ross, A. Midwest Political Science
[25] Section 20, Article X of the Association, American Journal of
1987 Constitution states: Political Science, Vol, 58, No. 1
(January 2014), p. 176 accessed at
Section 20. Within its http://www.jstor.org/stable/10.1017/
territorial Jurisdiction and subject s0022381612000667 last October 4,
to the provisions of this 2017.
Constitution and national laws,
the organic act of autonomous [33] Comparative Federalism and
regions shall provide for legislative Decentralization: On Meaning and
powers over: Measurement. Rodden, J.
Comprative Politics, Ph.D. Programs
in Political Science, City University
of New York. Comparative politics, determined by law, in the national
Vol. 36, No.4 (July 2004), p. 482. taxes which shall be automatically
Accessed at released to them.
http://www.jstor.org/stable/4150172
last October 6, 2017. [44] Section 7. Local governments
shall be entitled to an equitable
[34] Disomangcop v. Datumanong, share in the proceeds of the
supra note 19, at 234. utilization and development of the
national wealth within their
[35] Section 17, LGC. respective areas, in the manner
provided by law, including sharing
[36] Does Decentralization Improve the same with the inhabitants by
Perceptions of Accountability? way of direct benefits.
Attitudinal Evidence from Colombia.
Escobar-Lemmon, M. & Ross, A. [45] Province of Batangas v.
Midwest Political Science Romulo, G.R. No. 152774, May 27,
Association, American Journal of 2004, 429 SCRA 736, 760.
Political Science, Vol, 58, No. 1
(January 2014), p. 176 accessed at [46] Pimentel, Jr. v. Aguirre, supra
http://www.jstor.org/stable/10.1017/ note 1.
s0022381612000667 last October 4,
2017. [47] Decentralization and Intrastate
Struggles: Chechnya, Punjab, and
[37] Disomangcop v. Datumanong, Quebec. Bakke, K. Cambridge
supra note 19, at 233. University Press, New York, 2015, p.
12.
[38] Section 98, LGC.
[48] Province of Batangas v.
[39] Section 102, LGC. Romulo, supra note 45.

[40] Section 107, LGC. [49] See Marcos v. Manglapus, G.R.

No. 88211, September 15, 1989,
[41] Pimentel, Jr. v. Aguirre, supra 177 SCRA 668, 689.
note 1, at 218.
[50] Chavez v. Judicial and Bar
[42] Section 5. Each local Council, G.R. No. 202242, July 17,
government unit shall have the 2012, 676 SCRA 579, 598.
power to create its own sources of
revenues and to levy taxes, fees, [51] Republic v. COCOFED, G.R. No.
and charges subject to such 147062-64, December 14, 2001,
guidelines and limitations as the 372 SCRA 462, 482.
Congress may provide, consistent
with the basic policy of local [52] Aban, Law of Basic Taxation in
autonomy. Such taxes, fees, and the Philippines, Revised Ed. 2001, p.
charges shall accrue exclusively to 27.
the local governments.
[53] G.R. No. 101273, July 3, 1992,
[43] Section 6. Local government 211 SCRA 219, 227.
units shall have a just share, as
[54] Id. (b) eighty percent (80%) shall
accrue to the Regional Government.
[55] SECTION 15. Collection and
Sharing of Internal Revenue Taxes. In all cases, the Regional
— The share of the central Government shall remit to the local
government or national government units their respective
government of all current year shares within sixty (60) days from
collections of internal revenue the end of each quarter of the
taxes, within the area of current taxable year. The provinces,
autonomy shall, for a period of cities, municipalities, and barangay
five (5) years be allotted for the within the area of autonomy shall
Regional Government in the continue to receive their respective
Annual Appropriations Act. shares in the Internal Revenue
Allotment (IRA), as provided for in
The Bureau of Internal Revenue Section 284 of Republic Act No.
(BIR) or the duly authorized 7160, the Local Government Code of
treasurer of the city or municipality 1991. The five-year (5) period
concerned, as the case may be, herein abovementioned may be
shall continue to collect such taxes extended upon mutual agreement
and remit the share to the Regional of the central government or
Autonomous Government and the national government and the
central government or national Regional Government.
government through duly accredited
depository bank within thirty (30) [56] Section 9. Sharing of Internal
days from the end of each quarter Revenue, Natural Resources Taxes,
of the current year; Fees and Charges. - The collections
of a province or city from national
Fifty percent (50%) of the share internal revenue taxes, fees and
of the central government or charges, and taxes imposed on
national government of the natural resources, shall be
yearly incremental revenue distributed as follows:
from tax collections under
Sections 106 (value-added tax (a) Thirty-five percent (35%) to
on sales of goods or properties), the province or city;
108 (value-added tax on sale of (b) Thirty-five percent (35%) to
services and use or lease of the regional government; and
properties) and 116 (tax on (c) Thirty percent (30%) to the
persons exempt from value- central government or national
added tax) of the National government.
Internal Revenue Code (NIRC)
shall be shared by the Regional The share of the province shall be
Government and the local apportioned as follows: forty-five
government units within the percent (45%) to the province,
area of autonomy as follows: thirty-five percent (35%) to the
municipality and twenty percent
(a) twenty percent (20%) shall (20%) to the barangay.
accrue to the city or municipality
where such taxes are collected; and
The share of the city shall be national government, the Regional
distributed as follows: fifty percent Government and the local
(50%) to the city and fifty percent government units concerned in the
(50%) to the barangay concerned. taxes, fees, and charges mentioned
above may be suspended or
The province or city concerned removed from office by order of the
shall automatically retain its Secretary of Finance in cases
share and remit the shares of involving the share of the central
the Regional Government and government or national government
the central government or or by the Regional Governor in
national government to their cases involving the share of the
respective treasurers who shall, Regional Government and by the
after deducting the share of the proper local government executive
Regional Government as in cases involving the share of local
mentioned in paragraphs (b) government. [Bold emphasis
and (c) of this Section, remit the supplied]
balance to the national
government within the first five [57] SEC. 287. Shares of Local
(5) days of every month after Government Units in the Proceeds
the collections were made. from the Development and
Utilization of the National Wealth. -
The remittance of the shares of the Local Government units shall have
provinces, cities, municipalities, and an equitable share in the proceeds
barangay in the internal revenue derived from the utilization and
taxes, fees, and charges and the development of the national wealth,
taxes, fees, and charges on the use, within their respective areas,
development, and operation of including sharing the same with the
natural resources within the inhabitants by way of direct
autonomous region shall be benefits.
governed by law enacted by the
Regional Assembly. (A) Amount of Share of Local
Government Units. - Local
The remittances of the share of the government units shall, in
central government or national addition to the internal revenue
government of the internal revenue allotment, have a share of forty
taxes, fees, and charges and on the percent (40%) of the gross
taxes, fees, and charges on the use, collection derived by the
development, and operation of the national government from the
natural resources within the preceding fiscal year from
autonomous region shall be excise taxes on mineral
governed by the rules and products, royalties, and such
regulations promulgated by the other taxes, fees or charges,
Department of Finance of the including related surcharges,
central government or national interests or fines, and from its
government. share in any co-production, joint
venture or production sharing
Officials who fail to remit the shares agreement in the utilization and
of the central government or development of the national
wealth within their municipalities or in two (2) or more
territorial Jurisdiction. barangays, their respective shares
shall be computed on the basis of:
(B) Share of the Local Governments (l) Population - seventy percent
from Any Government Agency or (70%); and (2) Land area - thirty
Government-owned or - percent (30%).
Controlled Corporation. - Local
Government Units shall have a (2) Where the natural resources are
share, based on the preceding fiscal located in a highly urbanized or
year, from the proceeds derived by independent component city:
any government agency or (a) City - sixty-five percent (65%);
government-owned or and
controlled Corporation engaged in (b) Barangay - thirty-five percent
the utilization and development of (35%)
the national wealth based on the
following formula, whichever will Provided, however, That where the
produce a higher share for the local natural resources are located in two
government unit: (2) or more Cities, the allocation of
shares shall be based on the
(1) One percent (1%) of the gross formula on population and land area
sales or receipts of the preceding as specified in subsection (C)(1)
calendar year, or hereof. [Bold emphasis supplied]
(2) Forty percent (40%) of the
excise taxes on mineral products, [58] SEC. 290. Amount of Share of
royalties, and such other taxes, fees Local Government Units. - Local
or charges, including related government units shall, in
surcharges, interests or fines the addition to the internal revenue
government agency or government- allotment, have a share of forty
owned or -controlled corporations percent (40%) of the gross
would have paid if it were not collection derived by the
otherwise exempt. national government from the
preceding fiscal year from
(C) Allocation of Shares. - The share mining taxes, royalties, forestry
in the preceding Section shall be and fishery charges, and such
distributed in the following manner: other taxes, fees, or charges,
including related surcharges,
(1) Where the natural resources are interests, or fines, and from its
located in the province: share in any co-production, joint
(a) Province - twenty percent (20%) venture or production sharing
(b) Component city/municipality - agreement in the utilization and
forty-five percent (45%); and development of the national wealth
(c) Barangay - thirty-five percent within their territorial Jurisdiction.
(35%) (Bold emphasis supplied)

Provided, however, That where the [59] Section 6 of R.A. No. 6631 (An
natural resources are located in two Act granting Manila Jockey Club, Inc.
(2) or more provinces, or in two (2) a Franchise to Construct, Operate
or more component cities or and Maintain a Race Track for Horse
Racing in the City of Manila or in the Section 8. In consideration of the
Province of Bulacan) states: franchise and rights herein granted
to the Philippine Racing Club, Inc.,
Section 6. In consideration of the the grantee shall pay into the
franchise and rights herein granted National Treasury a franchise tax
to the Manila Jockey Club, Inc., the equal to twenty-five per centum
grantee shall pay into the national (25%) of its gross earnings from the
Treasury a franchise tax equal to horse races authorized to be held
twenty-five per centum (25%) of its under this franchise which is
gross earnings from the horse races equivalent to the eight and one
authorized to be held under this fourth per centum (8 1/4%) of the
franchise which is equivalent to the total wager funds or gross receipts
eight and one-half per centum (8 ¢ on the sale of betting tickets during
%) of the total wager funds or gross the racing day as mentioned in
receipts on the sale of betting Section six hereof, allotted as
tickets during the racing day as follows: a) National Government,
mentioned in Section four hereof, five per centum (5%); the
allotted as follows: a) National Municipality of Makati, five per
Government, five per centum (5%); centum (5%); b) Philippine Charity
b) the city or municipality where Sweepstakes Office, seven per
the race track is located, five centum (7%); c) Philippine Anti-
per centum (5%); c) Philippine Tuberculosis Society, six per centum
Charity Sweepstakes Office, seven (6%); and d) White Cross, two per
per centum (7%); d) Philippine Anti- centum (2%). The said tax shall be
Tuberculosis Society, six per centum paid monthly and shall be in lieu of
(6%); and e) White Cross, two per any and all taxes, except the
centum (2%). The said tax shall be income tax, of any kind, nature and
paid monthly and shall be in lieu of description levied, established or
any and all taxes, except the collected by any authority whether
income tax of any kind, nature and barrio, municipality, city, provincial
description levied, established or or national, on its properties,
collected by any authority whether whether real or personal, from
barrio, municipality, city, provincial which taxes the grantee is hereby
or national, now or in the future, on expressly exempted. (Bold
its properties, whether real or emphasis supplied)
personal, and profits, from which
taxes the grantee is hereby [61] Disposition of National Internal
expressly excepted. (Bold emphasis Revenue. - National Internal
supplied) revenue collected and not applied
as herein above provided or
[60] Section 8 of Republic Act 6632 otherwise specially disposed of by
(An Act granting the Philippine law shall accrue to the National
Racing Club, Inc., a franchise to Treasury and shall be available for
operate and maintain a race track the general purposes of the
for Horse Racing in the Province of Government, with the exception of
Rizal) provides: the amounts set apart by way of
allotment as provided for under
Republic Act No. 7160, otherwise
known as the Local Government Act, the President shall authorize
Code of 1991. the Conversion Authority to dispose
of certain areas in Fort Bonifacio
In addition to the internal revenue and Villamor as the latter so
allotment as provided for in the determines. The Conversion
preceding paragraph, fifty percent Authority shall provide the President
(50%) of the national taxes a report on any such disposition or
collected under Sections 106, plan for disposition within one (2)
108 and 116 of this Code in month from such disposition or
excess of the increase in preparation of such plan. The
collections for the immediately proceeds from any sale, after
preceding year shall be deducting all expenses related to
distributed as follows: the sale, of portions of Metro Manila
military camps as authorized under
(a) Twenty percent (20%) shall this Act, shall be used for the
accrue to the city or following purposes with their
municipality where such taxes corresponding percent shares of
are collected and shall be proceeds:
allocated in accordance with
Section 150 of Republic Act No. (1) Thirty-two and five-tenths
7160, otherwise known as the percent (35.5%) — To finance the
Local Government Code of 1991; transfer of the AFP military camps
and and the construction of new camps,
(b) Eighty percent (80%) shall the self-reliance and modernization
accrue to the National Government. program of the AFP, the
(Bold emphasis supplied) concessional and long-term housing
loan assistance and livelihood
[62] R.A. No. 7227 (Bases assistance to AFP officers and
Conversion and Development Act of enlisted men and their families, and
1992) states: the rehabilitation and expansion of
the AFP's medical facilities;
Section 8. Funding Scheme. — x x x (2) Fifty percent (50%) — To finance
the conversion and the commercial
The President is hereby authorized uses of the Clark and Subic military
to sell the above lands, in whole or reservations and their extentions;
in part, which are hereby declared (3) Five Percent (5%) — To finance
alienable and disposable pursuant the concessional and long-term
to the provisions of existing laws housing loan assistance for the
and regulations governing sales of homeless of Metro Manila, Olongapo
government properties: Provided, City, Angeles City and other
That no sale or disposition of such affected municipalities contiguous
lands will be undertaken until a to the base areas as mandated
development plan embodying herein; and
projects for conversion shall be (4) The balance shall accrue and be
approved by the President in remitted to the National Treasury to
accordance with paragraph (b), be appropriated thereafter by
Section 4, of this Act. However, six Congress for the sole purpose of
(6) months after approval of this financing programs and projects
vital for the economic upliftment of Hermosa, Province of Bataan,
the Filipino people. hereinafter referred to as the Subic
Special Economic Zone whose
Provided, That, in the case of metes and bounds shall be
Fort Bonifacio, two and five delineated in a proclamation to be
tenths percent (2.5%) of the issued by the President of the
proceeds thereof in equal Philippines. Within thirty (30) days
shares shall each go to the after the approval of this Act, each
Municipalities of Makati, Taguig local government unit shall submit
and Pateros: Provided, further, its resolution of concurrence to join
That in no case shall farmers the Subic Special Economic Zone to
affected be denied due the office of the President.
compensation. Thereafter, the President of the
Philippines shall issue a
With respect to the military proclamation defining the metes
reservations and their extensions, and bounds of the Zone as provided
the President upon recommendation herein.
of the Conversion Authority or the
Subic Authority when it concerns The abovementioned zone shall be
the Subic Special Economic Zone subject to the following policies:
shall likewise be authorized to sell
or dispose those portions of lands xxxx
which the Conversion Authority or
the Subic Authority may find (c) The provisions of existing laws,
essential for the development of rules and regulations to the contrary
their projects. (Bold emphasis notwithstanding, no taxes, local and
supplied) national, shall be imposed within
the Subic Special Economic Zone. In
Section 12. Subic Special Economic lieu of paying taxes, three percent
Zone. — Subject to the concurrence (3%) of the gross income earned by
by resolution of the sangguniang all businesses and enterprises
panlungsod of the City of Olongapo within the Subic Special Economic
and the sangguniang bayan of the Zone shall be remitted to the
Municipalities of Subic, Morong and National Government, one percent
Hermosa, there is hereby created a (1%) each to the local
Special Economic and Free-port government units affected by
Zone consisting of the City of the declaration of the zone in
Olongapo and the Municipality of proportion to their population
Subic, Province of Zambales, the area, and other factors. In
lands occupied by the Subic Naval addition, there is hereby established
Base and its contiguous extensions a development fund of one percent
as embraced, covered, and defined (1%) of the gross income earned by
by the 1947 Military Bases all businesses and enterprises
Agreement between the Philippines within the Subic Special Economic
and the United States of America as Zone to be utilized for the
amended, and within the development of municipalities
territorial Jurisdiction of the outside the City of Olongapo and
Municipalities of Morong and the Municipality of Subic, and other
municipalities contiguous to the funds under R.A. No. 7171, referring
base areas. to the National Tobacco
Administration (NTA) records of
In case of conflict between national tobacco acceptances, at the tobacco
and local laws with respect to tax trading centers for the immediate
exemption privileges in the Subic past year.
Special Economic Zone, the same
shall be resolved in favor of the The Secretary of Budget and
latter; (Bold emphasis supplied) Management is hereby directed
to retain annually the said funds
xxxx equivalent to fifteen percent
(15%) of excise taxes on locally
[63] The NIRC provides in Section manufactured Virginia type
289 as follows: cigarettes to be remitted to the
beneficiary provinces qualified
Section 289. Special Financial under R.A. No. 7171.
Support to Beneficiary
Provinces Producing Virginia The provisions of existing laws
Tobacco. - The financial support to the contrary
given by the National notwithstanding, the fifteen
Government for the beneficiary percent (15%) share from
provinces shall be constituted government revenues
and collected from the proceeds mentioned in R.A. No. 7171 and
of fifteen percent (15%) of the due to the Virginia tobacco-
excise taxes on locally producing provinces shall be
manufactured Virginia-type of directly remitted to the
cigarettes. provinces concerned.

The funds allotted shall be Provided, That this Section shall be

divided among the beneficiary implemented in accordance with the
provinces pro-rata according to guidelines of Memorandum Circular
the volume of Virginia tobacco No. 61-A dated November 28, 1993,
production. which amended Memorandum
Circular No. 61, entitled 'Prescribing
Provinces producing Virginia Guidelines for Implementing
tobacco shall be the beneficiary Republic Act No. 7171', dated
provinces under Republic Act No. January 1, 1992.
7171. Provided, however, that to
qualify as beneficiary under R.A. No. Provided, further, That in addition to
7171, a province must have an the local government units
average annual production of mentioned in the above circular, the
Virginia leaf tobacco in an amount concerned officials in the province
not less than one million kilos: shall be consulted as regards the
Provided, further, that the identification of projects to be
Department of Budget and financed. [Bold emphasis supplied]
Management (DBM) shall each year
determine the beneficiary provinces [64] Section 288. Disposition of
and their computed share of the Incremental Revenues.
xxxx manufacturing and by-product
utilization.
(B) Incremental Revenues from
Republic Act No. 8240. - Fifteen The Department of Budget and
percent (15%) of the Management, in consultation with
incremental revenue collected the Department of Agriculture, shall
from the excise tax on tobacco issue rules and regulations
products under R. A. No. 8240 governing the allocation and
shall be allocated and divided disbursement of this fund, not later
among the provinces producing than one hundred eighty ( 180) days
burley and native tobacco in from the effectivity of this Act. [Bold
accordance with the volume of emphasis supplied]
tobacco leaf production. The
fund shall be exclusively utilized for [65] Section 24. Appropriations
programs to promote economically and funding.
viable alternatives for tobacco
farmers and workers such as: xxxx

(1) Programs that will provide 3. A maximum of one-half of one

inputs, training, and other support per-centum (1/2 of 1%) of the
for tobacco farmers who shift to collections from national internal
production of agricultural products revenue taxes not otherwise
other than tobacco including, but accruing to Special Funds or Special
not limited to, high-value crops, Accounts in the General Fund of the
spices, rice, com, sugarcane, National Government, upon
coconut, livestock and fisheries; authority from the Minister
(2) Programs that will provide (Secretary) of Finance, shall be
financial support for tobacco deducted from such collections and
farmers who are displaced or who shall be remitted to the National
cease to produce tobacco; Treasury to cover the cost of
(3) Cooperative programs to assist auditing services rendered to local
tobacco fanners in planting government units;
alternative crops or implementing
other livelihood projects; [66] SEC. 284. Allotment for the
(4) Livelihood programs and Commission on Audit. - One-half
projects that will promote, enhance, of one percent (1/2 of 1%) of the
and develop the tourism potential of collections from the national
tobacco-growing provinces; internal revenue taxes not
(5) Infrastructure projects such as otherwise accruing to special
farm to market roads, schools, accounts in the general fund of the
hospitals, and rural health facilities; national government shall accrue to
and the Commission on Audit as a fee
(6) Agro-industrial projects that will for auditing services rendered to
enable tobacco farmers to be local government units, excluding
involved in the management and maintenance, equipment, and other
subsequent ownership of projects, operating expenses as provided for
such as post-harvest and secondary in Section 21 of Presidential Decree
processing like cigarette No. 898.
The Secretary of Finance is hereby shall continue to collect such taxes
authorized to deduct from the and remit the share to the Regional
monthly internal revenue tax Autonomous Government and the
collections an amount equivalent to central government or national
the percentage as herein fixed, and government through duly accredited
to remit the same directly to the depository bank within thirty (30)
Commission on Audit under such days from the end of each quarter
rules and regulations as may be of the current year;
promulgated by the Secretary of
Finance and the Chairman of the Fifty percent (50%) of the share
Commission on Audit. of the central government or
national government of the
[67] Section 24. Appropriations yearly incremental revenue
and funding. from tax collections under
Sections 106 (value-added tax
xxxx on sales of goods or properties),
108 (value-added tax on sale of
3. A maximum of one-half of one services and use or lease of
per-centum (1/2 of 1%) of the properties) and 116 (tax on
collections from national internal persons exempt from value-
revenue taxes not otherwise added tax) of the National
accruing to Special Funds or Special Internal Revenue Code (NIRC)
Accounts in the General Fund of the shall be shared by the Regional
National Government, upon Government and the local
authority from the Minister government units within the
(Secretary) of Finance, shall be area of autonomy as follows:
deducted from such collections and
shall be remitted to the National (a) twenty percent (20%) shall
Treasury to cover the cost of accrue to the city or municipality
auditing services rendered to local where such taxes are collected; and
government units; (b) eighty percent (80%) shall
accrue to the Regional Government.
[68] SECTION 15. Collection and
Sharing of Internal Revenue Taxes. In all cases, the Regional
— The share of the central Government shall remit to the local
government or national government units their respective
government of all current year shares within sixty (60) days from
collections of internal revenue the end of each quarter of the
taxes, within the area of current taxable year. The provinces,
autonomy shall, for a period of cities, municipalities, and barangay
five (5) years be allotted for the within the area of autonomy shall
Regional Government in the continue to receive their respective
Annual Appropriations Act. shares in the Internal Revenue
Allotment (IRA), as provided for in
The Bureau Of Internal Revenue Section 284 of Republic Act No.
(BIR) or the duly authorized 7160, the Local Government Code of
treasurer of the city or municipality 1991. The five-year (5) period
concerned, as the case may be, herein abovementioned may be
extended upon mutual agreement (5) days of every month after
of the central government or the collections were made.
national government and the
Regional Government. The remittance of the shares of the
provinces, cities, municipalities, and
[69] Section 9. Sharing of Internal barangay in the internal revenue
Revenue, Natural Resources Taxes, taxes, fees, and charges and the
Fees and Charges. - The collections taxes, fees, and charges on the use,
of a province or city from national development, and operation of
internal revenue taxes, fees and natural resources within the
charges, and taxes imposed on autonomous region shall be
natural resources, shall be governed by law enacted by the
distributed as follows: Regional Assembly.

(a) Thirty-five percent (35%) to The remittances of the share of the

the province or city; central government or national
(b) Thirty-five percent (35%) to government of the internal revenue
the regional government; and taxes, fees, and charges and on the
(c) Thirty percent (30%) to the taxes, fees, and charges on the use,
central government or national development, and operation of the
government. natural resources within the
autonomous region shall be
The share of the province shall be governed by the rules and
apportioned as follows: forty-five regulations promulgated by the
percent (45%) to the province, Department of Finance of the
thirty-five percent (35%) to the central government or national
municipality and twenty percent government.
(20%) to the barangay.
Officials who fail to remit the shares
The share of the city shall be of the central government or
distributed as follows: fifty percent national government, the Regional
(50%) to the city and fifty percent Government and the local
(50%) to the barangay concerned. government units concerned in the
taxes, fees, and charges mentioned
The province or city concerned above may be suspended or
shall automatically retain its removed from office by order of the
share and remit the shares of Secretary of Finance in cases
the Regional Government and involving the share of the central
the central government or government or national government
national government to their or by the Regional Governor in
respective treasurers who shall, cases involving the share of the
after deducting the share of the Regional Government and by the
Regional Government as proper local government executive
mentioned in paragraphs (b) in cases involving the share of local
and (c) of this Section, remit the government. [Emphasis Supplied]
balance to the national
government within the first five [70] Section 288 of the NIRC
(formerly Section 8 of R.A. No.
8240) imposed an excise tax on [76] Id., citing League of Cities
tobacco products, a percentage of Philippines v. COMELEC, G.R. No.
which is to be allocated and divided 176951, August 24, 2010, 628 SCRA
among the provinces producing 819, 833.
Burley and native tobacco in
accordance with the volume of [77] See Province of Batangas v.
tobacco production. Such share Romulo, supra note 45.
received would then be allocated by
the recipient LGUs for the benefit of [78] Commission on Human Rights
the farmers and workers, through Employees' Association (CHREA) v.
any of the programs set by the law. Commission on Human Rights, G.R.
No. 155336, July 21, 2006, 496
Section 289 of the NIRC gives the SCRA 226, 315-316.
concerned LGUs a share in the
excise taxes imposed on locally [79] Section 285. Allocation to Local
manufactured Virginia tobacco Government Units. - The share of
products. The LGUs consist of the local government units in the
provinces and their subdivisions internal revenue allotment shall be
producing Virginia tobacco. This collected in the following manner:
share is considered by Congress as
the National Government's financial (a) Provinces - Twenty-three percent
support to the beneficiary LGUs (23%);
producing Virginia tobacco. (b) Cities - Twenty-three percent
(23%);
The share of the COA from the NIRT (c) Municipalities - Thirty-four
is an aliquot part of the NIRTs, and percent (34%); and
serves the special purpose of (d) Barangays - Twenty percent
defraying the cost of auditing (20%)
services rendered to the LGUs.
Provided, however, That the share
[71] Disomangcop v. Datumanong, of each province, city, and
supra note 19, at 227. municipality shall be determined on
the basis of the following formula:
[72] Id. at 230.
(a) Population - Fifty percent (50%);
[73] Commissioner of Internal (b) Land Area - Twenty-five percent
Revenue v. San Roque (25%); and
Power Corporation, G.R. Nos. (c) Equal sharing - Twenty-five
187485, 196113 and 197156, percent (25%)
October 8, 2013, 707 SCRA 66, 77.
Provided, further, That the share of
[74] Supra note 8. each barangay with a population of
not less than one hundred (100)
[75] Id., citing Yap v. Thenamaris inhabitants shall not be less than
Ship's Management, G.R. No. Eighty thousand (P80,000.00) per
179532, May 30 2011, 649 SCRA annum chargeable against the
369, 381. twenty percent (20%) share of the
barangay from the internal revenue
allotment, and the balance to be the core, petitioners seek
allocated on the basis of the clarification on whether or not
following formula: respondents had been gravely
abusing their discretion in excluding
(a) On the first year of the certain tax collections in
effectivity of this Code: determining the base amount for
computing the just share in the
(1) Population - Forty percent (40%); national taxes LGUs are entitled to.
and
(2) Equal sharing - Sixty percent The Facts
(60%)
G.R. No. 199802 for Certiorari,
(b) On the second year: Prohibition, and Mandamus, with Prayer
for Preliminary Injunction and/or
(1) Population - Fifty percent (50%); Temporary Restraining Order
and
(2) Equal sharing - Fifty percent Section 284 of Republic Act No. (RA)
(50%) 7160, otherwise known as the Local
Government Code (LGC), allocates
(c) On the third year and thereafter: 40% of national internal revenue tax
collections to LGUs. The provision
(1) Population - Sixty percent (60%); pertinently reads:
and
(2) Equal sharing - Forty percent Section 284. Allotment of Internal
(40%). Revenue Taxes. - Local government
units shall have a share in
the national internal revenue
Provided, finally, That the financial
taxes based on the collection of the
requirements of barangays created
third fiscal year preceding the
by local government units after the
current fiscal year as follows:
effectivity of this Code shall be the
responsibility of the local
government unit concerned. (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,
SEPARATE OPINION forty percent (40%).

VELASCO, JR., J.: Provided, That in the event that the

national government incurs an
Nature of the Case unmanageable public sector deficit,
the President of the Philippines is
In these consolidated cases before hereby authorized, upon the
the Court, petitioners question the recommendation of Secretary of
manner by which budgetary Finance, Secretary of Interior and
appropriations are made in favor of Local Government and Secretary of
local government units (LGUs). At Budget and Management, and
subject to consultation with the attested to the amount of VAT,
presiding officers of both Houses of Excise Tax, and DST collections of
Congress and the presidents of the the BOC from 1989-2009:
"liga", to make the necessary
adjustments in the internal revenue Collection
allotment of local government units
Collection
s in
but in no case shall the allotment be s
Millions
less than thirty percent (30%) of the Yea Excise
collection of national internal VAT DST
r Tax
revenue taxes of the third fiscal
198
year preceding the current fiscal 10,069 174 2,176,550.03
9
year: Provided, further, That in the
first year of the effectivity of this 199
12,854 254 2,002,011.93
Code, the local government units 0
shall, in addition to the thirty 199
11,675 147 2,007,871.48
percent (30%) internal revenue 1
allotment which shall include the 199
13,982 296 1,992,401.92
cost of devolved functions for 2
essential public services, be entitled 199
to receive the amount equivalent to 21,413 299 46,880,825.83
3
the cost of devolved personal 199 179,411,238.6
services. (emphasis added) 21,293 186
4 8
199 210,359,504.1
Petitioners, local elective 28,901 579
5 0
government officials from the
province of Batangas, allege that 199
35,008 1,171 41,328,214.50
the mandated base under Section 6
284 is not being observed as some 199
42,484 1,896 77,856,280.28
tax collections are allegedly being 7
unlawfully withheld by the national 199
31,980 1,193 47,281,003.31
government and excluded from 8
distribution to the LGUs. 199
36,632 1,397 81,496,945.00
9
In particular, petitioners pray that 200
respondents include the (a) Value 42,257 2,277 51,469,598.00
0
Added Tax (VAT), (b) Excise Tax,
and (c) Documentary Stamp Tax 200
47,247 5,691 45,393,853.25
(DST) collections of the Bureau of 1
Customs (BOC) in computing the 200
49,383 9,970 43,413,415.00
base amount. Through letters 2
addressed to petitioner Hermilando 200
52,663 11,753 89,191,480.00
I. Mandanas (Mandanas), then 3
congressman of the second district 200
of Batangas, and dated September 58,883 16,997 45,154,928.00
4
12, 2011[1] and November 18, 200
2011,[2] BOC Commissioners 68,813 14,599 47,440,326.00
5
Angelito A. Alvarez and Rozanno
200 111,869 10,759 48,747,783.00
Rufino B. Biazon, respectively,
6 PRAYER
200
129,023 13,385 48,945,260.00 WHEREFORE, PREMISES
7
CONSIDERED, it is most respectfully
200 prayed of the Honorable Court that:
156,330 15,509 65,646,588.00
8
200 1. Upon filing of this petition, a
133,907 17,917 56,068,698.00
9 temporary restraining order be
Petitioners proffer that these monies issued enjoining the Respondents
were collected by the BOC as an from unlawfully releasing,
agent of the Bureau of Internal disbursing and/or using the amount
Revenue (BIR), pursuant to Section of SIXTY BILLION AND SEVEN
12 of RA 8424, otherwise known as HUNDRED FIFTY MILLION (P60.75)
the National Internal Revenue Code that is included in the capital
(NIRC).[3] As such, these formed outlays of the departments or
part of the national internal revenue agencies of the national
tax collections that ought to have government as that sum belongs to
been shared in by all LGUs. Per the LGUs as a part of their internal
petitioners' calculation, the LGUs revenue shares based on the NIRT
were deprived of their just share in collections of the BOC in 2009 but,
the collections in the amount of to emphasize, has been excluded
P498,854,388,154.93. from the IRAs for the LGUs
appropriated in the 2012 GAA.
Petitioner Mandanas then began
writing to various government 2. After notice & hearing, a
agencies, including the Department preliminary Injunction be issued.
of Finance (DOF), Department of
Budget and Management (DBM), 3. And by way of judgment-
and the BIR, to seek support for his
position that the enumerated BOC a) To set aside as unconstitutional
collections be included in the and illegal the misappropriation,
distribution to LGUs. He likewise misallocation and misuse of P60.75
implored then president Benigno billion belonging to the LGUs but
Simeon Aquino III to include the which is embodied in the new
amount he arrived at as part of the appropriations of the 2012 GAA for
2012 budget. the use of national government
departments and/or agencies;
Unfortunately, all of petitioner
Mandanas' efforts were in vain and
b) Make the
RA 10155 or the 2012 General
preliminary Injunction permanent;
Appropriations Act was signed into
law. The amounts he considered as
arrears of the national government c) Compel the Respondents to cause
to the LGUs were not recognized as the automatic release in of the
valid obligations. Hence, Mandanas LGUs' IRAs as provided in the 2012
and his co-petitioners lodged the GAA, including the SIXTY BILLION
instant recourse praying for the SEVEN HUNDRED FIFTY MILLION
following relief: (P60,750,000,000.00) PESOS from
the 2009 NIRT collections of the the same respondents in G.R. No.
BOC; and 199802, except that Customs
Commissioner Rozanno Rufino B.
d) Compel Respondents to recognize Biazon was impleaded as party
and release the unpaid IRAs due to respondent instead of National
the LGUs from BOC collections of Treasurer Roberto Tan. In his
NIRT from 1992 to 2011, which is petition, Garcia assails what he
placed at FOUR HUNDRED THIRTY perceives as the continuing failure
EIGHT BILLION, ONE HUNDRED of the national government to
THREE MILLION, NINE HUNDRED allocate to the LGUs what is due
SIXTY THOUSAND, SIX HUNDRED them under the Constitution.
SEVENTY FIVE PESOS AND SEVENTY-
THREE CENTAVOS Specifically, Garcia asserts that
(P438,103,960,675.73) which, when Section 284 of RA 7160 is
added to the SIXTY BILLION SEVEN constitutionally infirm since it limits
HUNDRED FIFTY MILLION coming the basis for the computation of the
from 2009 collections of the BOC LGU allocations only to national
referred to in letter (c) above, would internal revenue taxes, contrary to
total FOUR HUNDRED NINETY EIGHT the mandate of Article X, Section 6
BILLION EIGHT HUNDRED FIFTY of the Constitution, viz:
FOUR MILLION, THREE HUDNRED
EIGHTY-EIGHT THOUSAND, ONE SECTION 6. Local government units
HUNDRED FIFTY FOUR PESOS AND shall have a just share, as
NINETY-THREE CENTAVOS determined by law, in the national
(P498,854,388,154.93). This latter taxes which shall be automatically
amount, to repeat, is the total released to them. (emphasis added)
unreleased IRA due to the LGUs
from [1989]-2012. The insertion of the phrase "internal
revenue" in Section 284 of RA 7160,
Other reliefs just and equitable according to Garcia, is patently
under the premises are likewise unconstitutional. As a consequence
prayed for. of this infirmity, the LGUs had been
receiving far less than what the
The case was filed against erstwhile Constitution mandates. Garcia thus
Executive Secretary Paquito N. seeks intervention from the Court to
Ochoa, Secretary of Finance Cesar nullify the phrase "internal revenue"
Purisima, Budget Secretary in the provision. He argues that
Florencio H. Abad, Commissioner of LGUs should share in all forms of
Internal Revenue Kim Jacinto- "national taxes," not just in those
Henares, and National Treasurer enumerated under Section 21 of the
Roberto Tan. NIRC.

G.R. No. 208488 for Mandamus Moreover, Garcia contends that

even assuming arguendo that the
Enrique T. Garcia (Garcia), then phrase "internal revenue" under
congressional representative for the Section 284 of RA 7160 passes the
second district of Bataan, likewise test of constitutionality, the various
filed a petition for Certiorari against deductions and the exclusions
therefrom find no legal basis. On Virginia tobacco products
this point, Garcia directs the Court's
attention to the formula utilized in 7. Section 8 of RA 8240, as now
determining the total internal provided in Section 288 of the
revenue allocation for the LGUs NIRC, on the allocation of
from 2009-2011. He noted that the incremental revenues from
reduced tax base, from "national excise taxes;
taxes" to "national internal revenue
taxes," was further subjected to 8. The share of the Commission
several deductions, namely: on Audit (COA) on the NIRT as
provided for in Section 24(3)
1. Sections 9 and 15, Article IX of Presidential Decree No.
of RA 9054 regarding the 1445 in relation to Section
allocation of internal revenue 284 of the NIRC
taxes collected by cities and
provinces in the Autonomous He additionally insists that all tax
Region in Muslim Mindanao collections of the BOC were
(ARMM); unlawfully excluded in determining
the tax base. Since Section 21 of
2. Section 287 of the NIRC in the NIRC expressly includes VAT and
relation to Section 290[4] of excise taxes in the enumeration of
RA 7160 regarding the share national internal revenue taxes, all
of LGUs in the excise tax collections for these accounts,
collections on mineral regardless of whether it was
products; collected by the BOC or directly by
the BIR, should have been included
3. Section 6 of RA 6631 and in the computation.
Section 8 of RA 6632 on the
franchise taxes from the Garcia therefore prays that
operation of the Manila Jockey respondents be directed to perform
Club and Philippine Racing the following:
Club race tracks;
Compute the IRA of the LGUs on the
4. Remittances of VAT basis of the national tax collections,
a)
collections under RA 7643; including all the tax collections of the BIR
and the BOC;
5. Sections 8 and 12 of RA 7227,
as amended by RA 9400, Desist from deduction from the national
regarding the share of tax collections any tax, item, or amount
affected LGUs on the sale and b)that is not authorized by law to be
conversion of former military deducted for the purpose of computing the
bases; IRA;

6. RA 7171 and Section 289 of Submit a details computation of the IRA

the NIRC on the share of LGUs c) from 1995-2014 and determine therefrom
to the Excise Tax collections the IRA shortfall; and
from the manufacture of
d)Distribute the IRA shortfall to the LGUs.
Respondents' Comments consonance with the NIRC and the
LGC.
Speaking through the Office of the
Solicitor General (OSG), respondents Under Section 283 of the NIRC,
reasoned out that Congress has the which is a later law than the LGC
full and broad discretion to and a special law specifically on the
determine the base and the rate the disposition of national internal
LGUs are entitled to in the national revenue taxes, collections that are
taxes. This is based on the language already earmarked or otherwise
of Article X, Section 6 of the specially disposed of by law
Constitution itself, which states that will not accrue to the National
the just share of the LGUs in the Treasury. The provision reads:
national taxes shall be determined
by law. And in the exercise of its SEC. 283. Disposition of
prerogative, Congress limited the National Internal Revenue. -
base for the allocation to LGUs to National internal revenue collected
"national internal revenue taxes," to and not applied as herein above
the exclusion of customs duties and provided or otherwise specially
taxes from foreign sources. disposed of by law shall accrue to
the National Treasury and shall be
According to respondents, the available for the general purposes of
determination of what constitutes the Government, with the exception
"just share" for the LGUs is a of the amounts set apart by way of
decision reached by the legislative allotment as provided for under
in the collective wisdom of its Republic Act No. 7160, otherwise
members. The Court should then known as the Local Government
observe judicial deference and Code of 1991.
employ an attitude of non-
interference in this case involving Respondents posit that the amounts
policy directions in the exercise of pertaining to the enumeration that
the power of the purse. Otherwise, Garcia coined as unlawful
the Court would be engaging in deductions are examples of those
judicial legislation, forbidden under accounts that do not accrue to the
the principle of separation of National Treasury from where the
powers. shares of the LGUs will be carved
out. The balance of the National
Garcia's enumeration of so-called Treasury, after deducting the shares
deductions from the national of the LGUs, shall be available for
internal revenue taxes is justified, the general purposes of the
so respondents claim. They cite the government.
basic tenet in statutory construction
that when statutes are in pari Respondents also add that
materia, or cover the same specific correlative to the BOC's duty to
or particular subject matter, or have assess and collect taxes on
the same purpose or object, they imported items is its duty to turn
should be construed together. Here, over its collections of the National
the executive branch merely Treasury. For instance, out of every
interpreted the special laws in P265.00 collected by the BOC as
DST, only P15.00 is reported as BIR taxes.
collection, while the remaining
P250.00 is credited to the 2. Whether or not the LGUs are
collections of the BOC. Thus, when entitled to a just share in the
the BIR determines the allocations tariff and customs duties
to the LGUs on the basis of certified collected by the BOC.
data on its own collections, pursuant
to Article 378 of the Implementing 3. Whether or not the
Rules and Regulations of RA 7160, respondents had illegally
[5] only P15.00 of every P265.00 been withholding amounts
DST collection of the BOC would be from the LGUs through the
subject to distribution to the LGUs. special laws enumerated in
There is then a distinction between the Garcia petition.
the VAT, DST, and Excise Tax
collections of the BOC and the BIR, 4. Whether or not the LGUs may
and that not all BOC collections are still collect from the national
reflected on the data of the BIR. government the arrears from
the alleged errors in
Lastly, it is argued computing the national tax
that Mandamus does not lie to compel allocations.
the exercise of the power of the
purse. A judicial writ cannot order Discussion
the appropriation of public funds
since such power is an exclusive I vote to partially grant the
legislative prerogative that cannot petitions.
be interfered with. Likewise, to
award backpay for the allegedly The tax collections of the BOC should be
withheld IRA from prior years, from included in determining the basis for
1989-2012, in the amount of allocation to the LGUs
P498,854,388,154.93 as prayed for
by Mandanas, will effectively The VAT, DST, and Excise Tax collections
a
dislocate the budgets then intended of the BOC are National Internal Revenue
.
for salaries, operational expenses, Taxes
and development programs in the To recall, Mandanas and his cohorts
year of 2012. have no qualm over the
constitutionality of Section 284 of
The Issues RA 7160. They merely seek to
include the VAT, DST, and Excise
The issues in this case can be Tax collections of the BOC in
restated in the following wise: determining the base for the LGUs'
rightful share in the national taxes.
1. Whether or not the VAT, DST,
and Excise Tax collections of I find the contention tenable.
the BOC should form part of
the base amount for Pertinently, Section 21 of the NIRC
computing the just share of reads:
the LGUs in the national
Section 21. Sources of Revenue. - (a) The Commissioner of Customs
The following taxes, fees and and his subordinates with respect to
charges are deemed to be the collection of national internal
national internal revenue taxes: revenue taxes on imported goods;

(a) Income tax; xxxx

(b) Estate and donor's taxes;
(c) Value-added tax; The details of the agency relation
(d) Other percentage taxes; between the BIR, as principal, and
(e) Excise taxes; the BOC, as agent, are explicated in
(f) Documentary stamp the succeeding sections of the NIRC.
taxes; and In concrete, Sections 107[6] and
(g) Such other taxes as are or 129[7] are general provisions on the
hereafter may be imposed and imposition of VAT and Excise Taxes
collected by the Bureau of Internal on imported goods. On the other
Revenue. (emphasis added) hand, Section 131 of the NIRC
specifically directs the taxpayer to
Clear as crystal is that VAT, DSTs, pay his excise tax liabilities on
and Excise Taxes are within the imported goods to the BOC, and
enumeration of national internal Section 4.107-1(B) of Revenue
revenue taxes under Section 21 of Regulation 16-2005 provides that
the NIRC. When Section 284 of the VAT on the imported goods should
LGC then declared that all LGUs be settled before they can be
shall be entitled to 40% of the removed from customs custody, viz:
"national internal revenue taxes,"
collections for these forms of taxes Section 131. Payment of Excise
are necessarily included in the Taxes on Importer Articles. -
computation.
(A) Persons Liable. -Excise taxes on
VAT, DSTs, and Excise Taxes do not imported articles shall be paid by
lose their character as national the owner or importer to the
internal revenue taxes simply Customs Officers, conformably with
because they are not reported as the regulations of the Department of
collections of the BIR, and neither Finance and before the release of
on the ground that they are such articles from the customs
collected by the BOC. This is so house, or by the person who is
since Section 12(A) of the NIRC is found in possession of articles which
categorical that the BOC merely are exempt from excise taxes other
acts as an agent of the BIR in than those legally entitled to
collecting these taxes: exemption.

Section 12. Agents and Deputies xxxx

for Collection of National Internal
Revenue Taxes. - The following are Sec. 4.107-1. VAT on
hereby constituted agents of the Importation of Goods
Commissioner:
xxxx
(b) Applicability and payment - of national income. Neither Article
The rates prescribed under Sec. 107 X, Section 6 of the Constitution nor
(A) of the [NIRC] shall be applicable Section 284 of RA 7160 requires
to all importations withdrawn from that the national collections be
customs custody. credited to the BIR. For what is
controlling is that they accrue to the
The VAT on the importation account of the National Treasury.
shall be paid by the importer
prior to the release of such Section 284 of RA 7160 is unconstitutional
goods from customs b insofar as it limits the allotment base to
custody. (emphasis and words on . national internal revenue taxes; Tariff and
brackets added) Customs duties are national taxes
Anent G.R. No. 208488, I concur
As far as the authority of the BOC to with the argument of petitioner
collect DSTs is concerned, this finds Garcia that abidance with the
legal basis under Section 188 of the constitutional mandate constrains
NIRC: the Court to declare the recurring
phrase "internal revenue" in Section
Section 188. Stamp Tax on 284 of RA 7160 as unconstitutional.
Certificates. - On each certificate of
damages or otherwise, and on every A cardinal rule in statutory
certificate or document issued by construction is that where the words
any customs officer, marine of a statute are clear, plain, and free
surveyor, or other person acting as from ambiguity, it must be given its
such, and on each certificate issued literal meaning and applied without
by a notary public, and on each attempted interpretation.[8] This is
certificate of any description what is known as the plain-meaning
required by law or by rules or rule. It is expressed in the
regulations of a public office, or maxim, index animi sermo, or
which is issued for the purpose of speech is the index of intention.
giving information, or establishing Furthermore, there is the
proof of a fact, and not otherwise maxim verba legis non est
specified herein, there shall be recedendum, or from the words of a
collected a documentary stamp tax statute there should be no
of Fifteen pesos (P15.00). departure.[9]

All these provisions strengthen Here, Article X, Section 6 of the

Mandanas' position that the VAT, 1987 Constitution is clear and
DSTs, and Excise Taxes collected by categorical that Local Government
the BOC partake the nature of Units (LGUs) shall have a share in
national internal revenue taxes the country's national taxes. For
under Section 21 of the NIRC. Congress to grant them anything
Though collected by the BOC, these less would then trench on the
taxes are nevertheless impositions provision. Unfortunately, this is what
under the NIRC that should be Section 284 of RA 7160, as currently
included in the base amount of the worded, accomplishes.
revenue allocation to the LGUs. It
matters not who collects the items
The contested phrase is unduly are rarely, if ever, designed to
restrictive, nay unconstitutional, for achieve one policy objective only.
it limits the share of the LGUs to Most commonly, customs duties,
national internal revenue taxes. It which constitute taxes in the
effectively excludes other forms of sense of exactions the proceeds
national taxes than those specified of which become public funds —
in Section 21 of the NIRC. have either or both the generation
Conspicuously absent in the of revenue and the regulation of
enumeration is the duties imposed economic or social activity as their
on internationally sourced goods moving purposes and frequently, it
under Presidential Decree No. (PD) is very difficult to say which, in a
1464, otherwise known as the Tariff particular instance, is the dominant
and Customs Code of 1978, which or principal objective. In the instant
consolidated and codified the tariff case, since the Philippines in fact
and customs law in the Philippines. produces ten (10) to fifteen percent
[10] There is no cogent reason to (15%) of the crude oil consumed
segregate the tax collections of the here, the imposition of increased
BOC pursuant to the NIRC from tariff rates and a special duty on
those in implementation of other imported crude oil and imported oil
legal edicts. Customs duties form products may be seen to
part of the country's national taxes have some "protective" impact
and should, therefore, be included upon indigenous oil production. For
in the basis for determining the the effective, price of imported
LGU's aliquot share in the pie. crude oil and oil products is
increased. At the same time, it
The concept of customs duties has cannot be gainsaid that substantial
been explicated in the case revenues for the government are
of Garcia v. Executive Secretary, raised by the imposition of such
[11] viz: increased tariff rates or special
duty. (emphasis added)
"[C]ustoms duties" is "the name
given to taxes on the "Tariff" refers to the system or
importation and exportation of principle of imposing duties on the
commodities, the tariff or tax importation of foreign merchandise.
assessed upon merchandise [12] Thus, embodied in the Tariff
imported from, or exported to, a and Customs Code is the list or
foreign country." The levying of schedule of articles on which a duty
customs duties on imported goods is imposed upon their importation,
may have in some measure the with the rates at which they are
effect of protecting local industries taxed. Meanwhile, clear from the
— where such local industries above excerpt is that these customs
actually exist and are duties are taxes levied on imports. It
producingcomparable goods. is collected by the customs
Simultaneously, however, the very authorities of a country not only to
same customs duties inevitably protect domestic industries from
have the effect of producing more efficient or predatory
governmental revenues. Customs competitors abroad, but also to
duties like internal revenue taxes raise state revenues.
All taxes are classifiable as either otherwise provided herein, the
national or local. A tax imposition is exercise of the taxing powers of
considered local if it is levied by an provinces, cities, municipalities,
LGU pursuant to its revenue- and Barangays shall not extend
generating power under Article X, to the levy of the following:
Section 5 of the Constitution and
Section 18 of RA 7160.[13] On the xxxx
other hand, national taxes, by
definition, are imposed by the (d) Customs duties, registration
national government through fees of vessels, wharfage on
congressional enactment. Among wharves, tonnage dues and all other
these tax measures signed into law kinds of customs fees, charges and
is RA No. 10863, otherwise known dues except wharfage on wharves
as the Customs Modernization and constructed and maintained by the
Tariff Act (CMTA), which was signed local government unit concerned;
into law on May 30, 2016, amending
PD 1464. (e) Taxes, fees, charges and
other impositions upon goods
Significantly, while local carried into or out of, or passing
governments were granted by the through, the territorial
Constitution the power to tax, such jurisdictions of local
grant is circumscribed by governments in the guise of
"guidelines and limitations as the charges for wharfage, tolls for
Congress may provide." Article X, bridges or otherwise, or other taxes
Section 5 of the 1987 Constitution in any form whatever upon such
reads: goods or merchandise.
SECTION 5. Each local The limits on local Taxation and thus
government unit shall have the the exclusion therefrom of customs
power to create its own sources duties and tariff was recognized by
of revenues and to levy taxes, the Supreme Court when it ruled
fees, and charges subject to such in Petron Corp. v. Tiangco[14] that:
guidelines and limitations as the
Congress may provide, consistent Congress has the constitutional
with the basic policy of local authority to impose limitations
autonomy. Such taxes, fees, and on the power to tax of local
charges shall accrue exclusively to government units, and Section
the local governments 133 of the LGC is one such
limitation. Indeed, the provision is
In line with this, the LGC expressly the explicit statutory impediment to
excludes from the ambit of the enjoyment of absolute taxing
local Taxation the imposition of tariff power by local government units,
and customs duties. Section 133 of not to mention the reality that such
the LGC pertinently provides: power is a delegated power.
Sec. 133. Common Limitations on In Palma Development Corp. v.
the Taxing Powers of Local Municipality of Malangas,[15] the
Government Units. - Unless Court more particularly said:
Section 133(e) of RA No. 7160 MR. RODRIGO. I ask so because if a
prohibits the imposition, in the guise municipality levies taxes, it is
of wharfage, of fees — as well as all impossible for the province to share
other taxes or charges in any form in those taxes.
whatsoever — on goods or
merchandise. It is therefore MR. NOLLEDO. I am not aware of
irrelevant if the fees imposed are any rule that says so but I know that
actually for police surveillance on even the province has also the
the goods, because any other form power to levy taxes.
of imposition on goods passing
through the MR. RODRIGO. That is correct. But is
territorial Jurisdiction of the it then the purpose of this
municipality is clearly prohibited by amendment that taxes imposed by
Section 133(e). a municipality should be exclusively
for that municipality and that the
In sum, by the principle of exclusion province may not share at all in the
provided by Section 133 of the LGC, taxes? Is that the purpose of the
no customs duties and/or tariffs can amendment?
be considered local taxes; all
customs duties and tariffs can only MR. NOLLEDO. I think the question
be imposed by the Congress and, as should be directed to the proponent.
such, they can only be national
taxes. MR. DAVIDE. Even under the
Committee's wording, it would
Ubi lex non distinguit nec nos clearly appear that if a municipality
distingui redebemus. When the law levies a particular tax, the province
does not distinguish, neither must is not entitled to a share for the
we distinguish.[16] To reiterate, reason that the province itself, as a
Article X, Section 6 of the separate governmental unit, may
Constitution mandates that the collect and levy taxes for itself
LGUs shall share in the national
taxes, without distinction. It can MR. NOLLEDO. Besides, the
even be inferred from the national government shall share
deliberations of the framers that national taxes with the
they intended Article X, Section 6 to province.
be mandatory, viz:[17]
MR. RODRIGO. But if we approve
MR. RODRIGO. I am not an expert
that amendment, the national
on Taxation, so I just want to know.
government may not share in the
Even a municipality levies taxes.
taxes levied by the province?
Does the province have a share?
MR. DAVIDE. The national
MR. SUAREZ. May I state that I have
government may impose its own
the same question, so I would like to
national taxes. The concept
join Commissioner Rodrigo in that
here is that the national
inquiry.
government must share these
national taxes with the other
local government units. That is
the second paragraph of the the legislative when it limited the
original section 9, now section allocation of LGUs to
12, beginning from lines 29-30. national internal revenue taxes.
Regrettably, I cannot join
MR. RODRIGO. Do I get then respondents in their construction of
that if the national government the statute.
imposes taxes, local
government units share in those Article X, Section 6 of the
taxes? Constitution had already been
interpreted in ACORD v. Zamora
MR. DAVIDE. Yes, the local (ACORD)[18] in the following
government shares in the manner:
national taxes.
Moreover, there is merit in the
MR. RODRIGO. But if the local argument of the intervenor Province
government imposes local taxes, of Batangas that, if indeed the
the national government may not framers intended to allow the
share? enactment of statutes making the
release of IRA conditional instead of
MR. DAVIDE. That is correct because automatic, then Article X, Section 6
that is precisely to emphasize the of the Constitution would have been
local autonomy of the unit. worded differently. Instead of
reading Local government units
shall have a just share, as
MR. NOLLEDO. That has been the
determined by law, in the national
practice.
taxes which shall be automatically
released to them (italics supplied), it
For Congress to have excluded, as
would have read as follows, so the
they continue to exclude, certain
Province of Batangas posits:
items of national tax, such as tariff
and customs duties, from the
Local government units shall have a
amount to be distributed to the
just share, as determined by law, in
LGUs is then a glaring contravention
the national taxes which shall be
of our fundamental law. The alleged
[automatically] released to them as
basis for the exclusion, the phrase
provided by law, or,
"internal revenue" under Section
284 of the LGC, should therefore be
declared as unconstitutional. Local government units shall have a
just share in the national taxes
The school of thought adopted by which shall be [automatically]
the respondents is that the phrase released to them as provided by
"as determined by law" appearing in law, or
Article X, Section 6 of the
Constitution authorizes Congress to Local government units shall have a
determine the inclusions and just share, as determined by law, in
exclusions from the national taxes the national taxes which shall be
before determining the amount the automatically released to
LGUs would be entitled to. Thus, it is them subject to exceptions
this authority that was exercised by Congress may provide.
Since, under Article X, Section 6 of determine is the aliquot share that
the Constitution, only the just the LGUs are entitled to. They are
share of local governments is not authorized to modify the base
qualified by the words as amount of the budget to be
determined by law, and not the distributed. To insist that the proper
release thereof, the plain interpretation of the provision is
implication is that Congress is not that "the just share of LGUs in the
authorized by the Constitution to national taxes shall be determined
hinder or impede the automatic by law" is tantamount to a revision
release of the IRA. (emphasis of the Constitution and a blatant
added) disregard to the specific order and
wording of the provision, as crafted
As further held in ACORD, the by its framers.
provision, when parsed, mandates
that (1) the LGUs shall have a just Constitutional considerations on the
share in the national taxes; (2) the allocation to LGUs
just share shall be determined by
law; and (3) the just share shall be The Constitution cannot be
automatically released to the LGUs. supplanted through ordinary
And guilty of reiteration, "under legislative fiat. Any limitation on the
Article X, Section 6 of the allocation of wealth to the LGUs
Constitution, only the just share guaranteed by the fundamental law
of local governments is qualified must likewise be embodied in the
by the words as determined by Constitution itself. Thus, instead of
law."[19] This ruling resulted in the looking to RA 7160 in determining
nullification of appropriation items the scope of the base amount for
XXXVII and LIV Special Provisions 1 allotment, due attention must be
and 4 of the General Appropriations given to Article X, Section 7 and
Act of 2000 insofar as they set Article VI, Section 29(3) of the
a condition sine qua non for the Constitution:
release of Internal Revenue
Allotment to LGUs to the tune of P10 SECTION 7. Local governments shall
Billion. be entitled to an equitable share in
the proceeds of the utilization and
Similarly, we too must be conscious development of the national wealth
here of the phraseology of Article X, within their respective areas, in the
Section 6 of the 1987 Constitution. manner provided by law, including
As couched, the phrase "as sharing the same with the
determined by law" follows and, inhabitants by way of direct
therefore, qualifies ''just share"; it benefits.
cannot be construed as qualifying
the succeeding phrase "in the xxxx
national taxes." Hence,
the ponencia is correct in ruling that SECTION 29. x x x
the determination of what
constitutes ''just share" is within the (3) All money collected on any tax
province of legislative powers. But levied for a special purpose shall be
what Congress is only allowed to treated as a special fund and paid
out for such purpose only. If the national taxes, the LGUs are already
purpose for which a special fund receiving their just share thereon.
was created has been fulfilled or Receiving their just share does not
abandoned, the balance, if any, mean receiving a share that is equal
shall be transferred to the general with everyone else's. This is evident
funds of the Government. from RA 7160 which expressly
provides that the share of an LGU is
With the foregoing in mind, we are dependent on its population and
now poised to gauge whether or not land area—considerations that
the items identified by petitioner prevent any two LGU from sharing
Garcia are in fact unlawful equally from the pie.
deductions or exclusions from the
LGUs' share in the national taxes: To clarify, the determination of what
constitutes an LGU's just share in
1. Sections 9 and 15, Article IX the national taxes is not restricted
of RA 9054[20] regarding the to Section 284 of RA 7160. The 40%
allocation of internal revenue share under the provision merely
taxes collected by cities and sets the general rule. And as will
provinces in the ARMM; later be discussed, exceptions
abound in statutes such as RA 9054.
Section 9 of RA 9054 provides for
the sharing of government taxes Moreover, there is justification for
collected from LGUs in the ARMM in allocating the lion's share in the tax
the following manner: 35% to the collections from the ARMM to LGUs
province or city, 35% to the regional within the region themselves, rather
government, and 30%to the than allowing all LGUs to share
national government. The provision thereon in equal footing.
likewise empowers the province and
The creation of autonomous regions
city concerned to automatically
is in compliance with the
retain its share and remit the shares
constitutional directive under Article
of the regional government and the
X, Sections 18 and 19[21] to
national government to their
address the concerned regions'
respective treasurers. Meanwhile
continuous struggle for self-rule and
Section 15 of RA 9054 allocates 50%
self-determination. The grant to the
of the VAT collections from the
autonomous region of a larger share
ARMM exclusively to the region and
in the collections is simply an
its constituencies.
incident to this grant of autonomy.
The above provisions do not violate To give meaning to their
Section 6, Article X of the autonomous status, their financial
Constitution. Instead, this is a clear and political dependence on the
application of the Constitutional national government is reduced.
provision that empowers Congress Allocating them a larger share of the
to determine the just share that national taxes collected from their
LGUs are entitled to receive. For own territory allows not only for the
while the taxes mentioned in expeditious delivery of-basic
Sections 9 and 15 of the services, but for them to be more
Constitution are in the nature of self-sufficient and selfreliant. In a
way, it can also be considered as a Local taxes shall belong exclusively
special purpose fund. to local governments and they shall
likewise be entitled to share in the
Thus, there is no constitutional proceeds of the exploitation and
violation in allocating 50% of the development of the national wealth
VAT collections from the ARMM to within their respective areas.
the LGUs within the region, leaving
only 50% to the central government Just to cite specific examples. In the
and to the other LGUs. There is case of timberland within the area
nothing illegal in the ARMM's of Jurisdiction of the Province of
retention of 70% of the national Quirino or the Province of Aurora,
taxes collected therein, limiting the we feel that the local governments
amount of national tax to be ought to share in whatever
included in the base amount for revenues are generated from this
distribution to the LGUs to 30%. particular natural resource which is
also considered a national resource
1. Section 287[22] of the NIRC in in a proportion to be determined by
relation to Section 290[23] of Congress. This may mean sharing
RA 7160 regarding the share not with the local government but
of LGUs in the excise tax with the local population. The
collections on mineral geothermal plant in the Macban,
products; Makiling-Banahaw area in Laguna,
the Tiwi Geothermal Plant in Albay,
The questioned provisions grant a there is a sense in which the people
40% share in the tax collections in these areas, hosting the physical
from the exploitation and facility based on the resources
development of national wealth to found under the ground in their area
the LGUs under whose which are considered national
territorial Jurisdiction such wealth, should participate in terms
exploitation and development occur. of reasonable rebates on the cost of
Such preferential allocation, in power that they pay. This is true of
addition to their national tax the Maria Cristina area in Central
allotment, cannot be deemed Mindanao, for example. May I point
violative of Article X, Section 6 of out that in the previous
the Constitution for it IS m government, this has always been a
pursuance of Article X, Section 7 very nettlesome subject of Cabinet
earlier quoted. debates. Are the people in the
locality, where God chose to locate
The exclusion of the other LGUs His bounty, not entitled to some
from sharing in the said 40% had reasonable modest sharing of this
been justified by the Constitutional with the national government? Why
Commission in the following wise: should the national government
claim all the revenues arising from
MR. OPLE. Madam President, the them? And the usual reply of the
issue has to do with Section 8 on technocrats at that time is that
page 2 of Committee Report No. 21: there must be uniform treatment of
all citizens regardless of where
God's gifts are located, whether
below the ground or above the of geothermal and hydrothermal
ground. This, of course, has led to plants in Macban, Makiling-Banahaw
popular disenchantment. In Albay, area in Laguna, in Tiwi, Albay, and
for example, the government then in Iligan City, as well as the
promised a 20-percent rebate in extraction of petroleum and natural
power because of the contributions gasses.
of the Tiwi plant to the Luzon grid.
Although this was ordered, I Respondents did not then err in
remember that the Ministry of setting aside 40% of the gross
Finance, together with the National collection of taxes on utilization and
Power Corporation, refused to development of the national wealth
implement it. There is a bigger to the host LGU. Meanwhile, all
economic principle behind this, the LGUs and the national government
principle of equity. If God chose to shall share in the remaining 60% of
locate the great rivers and sources the tax collections, satisfying the
of hydroelectric power in Iligan, in constitutional mandate that all LGUs
Central Mindanao, for example, or in shall receive their just share in the
the Cordillera, why should the national taxes, albeit at a lesser
national government impose fuel amount.
adjustment taxes in order to cancel
out the comparative advantage 1. Section 6 of RA 6631[25] and
given to the people in these Section 8 of RA 6632[26] on
localities through these resources? the franchise taxes from the
So, it is in that sense that under operation of the Manila Jockey
Section 8, the local populations, if Club and Philippine Racing
not the local governments, should Club race tracks;
have a share of whatever national
proceeds may be realized from this The cited provisions relate to the
natural wealth of the nation located automatic allocation of a 5% share
within their jurisdictions.[24] in the 25% franchise tax—collected
from 8.5% and 8.25% of the wager
As can be gleaned from the funds from the operations of the
discussion, the additional allocation Manila Jockey Club and Philippine
under Article X, Section 7 is granted Racing Club, Inc., respectively—to
by reason of equity. It is given to the city or municipality where the
the host LGUs for bearing the brunt race track is located.
of the exploitation of their territory,
and is also a form of incentivizing This is another example of an
the introduction of developments in allocation by Congress to certain
their locality. And from the language LGUs, on top of their share in the
of Article X, Section 7 itself, it is not 40% of national taxes under Section
limited to tax collections from 284 of RA 7160. Similar to the
mineral products and mining situation of the LGUs in the ARMM,
operations, but extends to taxes, the host cities and municipalities in
fees or charges from all forms of RA 6631 and 6632 enjoy the 5% as
exploitation and development of part and parcel of their just share in
national wealth. This includes the the national taxes. To reiterate, the
cited establishment and operation just share of LGUs, as determined
by law, need not be uniform for all RA 7643 amended Section 282 of
units. It is within the wisdom of the NIRC to read thusly:
Congress to determine the extent of
the shares in the national taxes that SEC. 282. Disposition of national
the LGUs will be accorded internal revenue.- x x x

Anent the remaining 20% of the xxxx

franchise taxes, Sections 6 and 8 of
RA 6631 and 6632, respectively, In addition to the internal revenue
reveals that this had already been allotment as provided for in the
earmarked for special purposes. preceding paragraph, fifty percent
Under the distribution, only 5% of (50%) of the national taxes
the franchise tax shall accrue to the collected under Sections 100, 102,
national government, which will 112, 113, and 114 of this Code in
then be subject to distribution to excess of the increase in collections
LGUs. The rest of the for the immediately preceding year
apportionments of the 25% shall be distributed as follows: (a)
franchise taxes collected under RA Twenty percent (20%) shall accrue
6631 and RA 6632—five percent to the city or municipality where
(5%) to the host municipality, seven such taxes are collected and shall
percent (7%) to the Philippine be allocated in accordance with
Charity Sweepstakes Office, six Section 150 of Republic Act No.
percent (6%) to the Anti- 7160, otherwise known as the Local
Tuberculosis Society, and two Government Code of 1991; and (b)
percent (2%) to the White Cross— Eighty percent (80%) shall accrue to
are special purpose funds, which the National Government.
shall not be distributed to all LGUs.
Notably, the 20%-80% allocation in
It must be noted that RA 6631 and favor of the national government is
6632 had been amended by RA lesser than the 40% allocation under
8407[27] and 7953,[28] Section 284 of the LGC. This does
respectively. The Court hereby not contravene Article X, Section 6
takes Judicial Notice of its salient of the Constitution, however, for it
provisions including the imposition merely sets the just share that LGUs
of Documentary Stamp Taxes at the are entitled to in the particular
rate of ten centavos (PhP 0.10) for account. There being a special
every peso cost of each horse percentage allocation for these
racing ticket,[29] and of the ten incremental taxes, respondents can
percent (10%) taxes on winnings then properly exclude them in
and prizes.[30] These are national computing the base amount for the
taxes included in the emuneration national tax allocations to the LGUs.
of Section 21 of the NIRC. Thus, the
LGUs shall share on the collections
1. Sections 8[31] and 12[32] of
thereon.
RA 7227, as amended by RA
9400, regarding the share of
1. Sharing of VAT collections affected LGUs on the sale and
under RA 7643; conversion of former military
bases;
Section 8 of RA 7227 authorizes the collection from income, though
President, through the Bases governmental revenue, are not in
Conversion Development Authority, the form of tax collections. To be
to sell former military bases. It sure, businesses and enterprises in
likewise mandates that the LGUs of the economic zone are tax
Makati, Taguig, and Pateros shall be exempt and the fees being charged
entitled to a 2.5% share in the the enterprises are in lieu of paying
disposition of converted properties taxes. Section 12(C) categorically
in Fort Bonifacio. states: "x x x no national and local
taxes shall be imposed within the
Meanwhile, Section 12 of RA 7227, Subic Special Economic Zone." As
as amended, imposes a 5% non-tax items, these revenues do
collection on gross income to be not fall within the concept of
paid by all business enterprises national tax within the ambit of
within the Subic Special Economic Article X, Section 6 of the
Zone. Of the imposition, 3% shall be Constitution, and the LGUs cannot
remitted to the National then reasonably claim entitlement
Government. The remaining 2% to a share thereon.
shall be remitted to the SBMA but
will be distributed to the LGUs 1. RA 7171 and Section 289[33]
affected by the declaration of the of the NIRC on the share of
economic zone, namely: the City of LGUs in the Excise Tax
Olongapo and the municipalities of collections from the
Subic, San Antonio, San Marcelino manufacture of Virginia
and Castillejos of the Province of tobacco products;
Zambales; and the municipalities of
Morong, Hermosa and Dinalupihan Petitioner next calls for the inclusion
of the Province of Bataan. The of the 15% collections on the excise
distribution shall be based on taxes from the manufacture of
population (50%), land mass (25%), Virginia tobacco products in
and equal sharing (25%). determining the allocation base.
Under Section 289 of the NIRA, the
Invoking Article X, Section 6 of the 15% being requested currently
Constitution, petitioner Garcia accrues to the Virginia tobacco-
questions the provisos granting producing provinces, pro-rated
special allocations and prays that based on their level of production.
the same be included in the pool of
national taxes to be distributed to This is another exercise by Congress
all LGUs. of its authority to determine the just
share in the national taxes that
The argument lacks merit. LGUs are entitled to. In this case,
the tobacco producing provinces are
To reiterate, Article X, Section 6 of provided incentives for their
the Constitution guarantees that economic contribution, and financial
LGUs shall have a just share, as assistance for the tobacco farmers.
determined by law, in the national
taxes. The proceeds from the sale of Additionally, Excise Tax collections
converted bases and the percentage from the manufacture of Virginia
tobacco products form part of a to advance the self-reliance of the
special fund for special purposes, tobacco farmers through:
within the contemplation of Article
VI, Section 29(3) of the Constitution. Cooperative projects that will enhance
In the same way, the Court better quality of products, increase
in Osmeña v. Orbos[34] held that a.
productivity, guarantee the market and
the oil price stabilization fund was a as a whole increase farmer's income;
special fund segregated from the Livelihood projects particularly the
general fund and placed as it were b
development of alternative farming
in a Trust account. And in Gaston v. .
systems to enhance farmers income;
Republic Planters Bank,[35] We Agro-industrial projects that will enable
ruled that the stabilization fees tobacco farmers in the Virginia tobacco
collected from sugar millers, producing provinces to be involved in
planters, and producers were for a the management and subsequent
special purpose: to finance the c.
ownership of these projects such as
growth and development of the
post-harvest and secondary processing
sugar industry.
like cigarette manufacturing and by-
The special purposes, in this case, product utilization; and
are embodied in Sections 1 and 2 of d Infrastructure projects such as farm-to-
RA 7171 in the following wise: . market roads.(emphasis added)
The Excise Tax collections from the
SECTION 1. Declaration of Policy - It manufacture of Virginia tobacco
is hereby declared to be the policy earmarked for these programs were
of the government to extend special then validly placed in an account
support to the farmers of the separate from the collections for
Virginia tobacco-producing other national tax items. The
provinces inasmuch as these balance shall not be transferrable to
farmers are the nucleus of the the general funds of the
Virginia tobacco industry which government, from where the shares
generates a sizeable income, in of the LGUs are sourced, unless the
terms of excise taxes from locally purposes for which the special fund
manufactured Virginia-type was created have been fulfilled or
cigarettes and customs duties on abandoned. Absent any showing
imported blending tobacco, for the that said special purpose no longer
National Government. For the exists, respondents committed no
reason stated, it is hereby further error in excluding 15% of Excise Tax
declared that the special support collections on Virginia tobacco
for these provinces shall be in products from the distribution of
terms of financial assistance for national wealth to the LGUs.
developmental projects to be
implemented by the local To be sure, RA 10351[36]
governments of the provinces introduced an amendment to
concerned. Section 288 of the NIRC on the
allocation of excise taxes from
SECTION 2. Objective - The special tobacco products, to wit:
support to the Virginia tobacco-
producing provinces shall be utilized
(C) Incremental Revenues from the Section 288. Disposition of
Excise Tax on Alcohol and Tobacco Incremental Revenues. -
Products. —
xxxx
After deducting the allocations
under Republic Act Nos. 7171 (B) Incremental Revenues from
and 8240, eighty percent (80%) of Republic Act No. 8240. - Fifteen
the remaining balance of the percent (15%) of the incremental
incremental revenue derived from revenue collected from the excise
this Act shall be allocated for the tax on tobacco products under RA.
universal health care under the No. 8240 shall be allocated and
National Health Insurance Program, divided among the provinces
the attainment of the millennium producing burley and native tobacco
development goals and health in accordance with the volume of
awareness programs; and twenty tobacco leaf production. The fund
percent (20%) shall be allocated shall be exclusively utilized for
nationwide, based on political programs in pursuit of the
and district subdivisions, for following objectives:
medical assistance and health
enhancement facilities program, (1) Cooperative projects that will
the annual requirements of enhance better quality of
which shall be determined by agricultural products and
the Department of Health increase income and
(DOH). productivity of farmers;

Thus, only 20% of the balance, after (2) Livelihood projects,

deducting the 15% of incremental particularly the development of
excise tax allocation to the Virginia alternative farming system to
tobacco growers, shall form part of enhance farmer's income; and
the base amount for determining
the LGUs' share under Section 284 (3) Agro-industrial projects that
of the LGC, the 80% having been will enable tobacco farmers to
specially allocated for a special be involved in the management
purpose. and subsequent ownership of
projects, such as post-harvest
1. Section 8 of RA 8240,[37] as and secondary processing like
now provided in Section 288 cigarette manufacturing and by-
of the NIRC; product utilization.

Section 288 of the NIRC, on the The directive that the funds be
allocation of the incremental exclusively utilized for the
revenue from excise tax collections enumerated programs places the
on tobacco products, deserves the provision on par with Section 289 of
same treatment as the earlier- the NIRC, in relation to RA 7171, as
discussed Excise Tax collections discussed in the preceding section.
from the manufacture of Virginia Both partake of special purpose
tobacco. The pertinent provision funds that cannot be disbursed for
reads: any obligation other than those for
which they are intended. of the COA's right to fiscal
Respondents then likewise correctly autonomy under Article IX-A,
excluded from the computation Section 5 of the Constitution.[38]
base this 15% incremental excise Thus, there is no clash nor conflict
tax collections for a special purpose between the 40% allocation to LGUs
account. But just like the case of the under RA 7160 and the ¢ of 1%
Excise Taxes on Virginia tobacco allocation to COA under Section
products, 80% of the remainder will 285.
accrue to a special purpose fund,
leaving only 20% of the remainder In sum, only (a) 50% of the VAT
for distribution to the LGUs. This is collections from the ARMM, (b) 30%
in view of the amendment of all other national tax collections
introduced by RA 10351. from the ARMM, (c) 60% of the
national tax collections from the
1. The share of the Commission exploitation and development of
on Audit (COA) on the NIRT as national wealth, (d) 5% of the 25%
provided for in Section 24(3) franchise taxes from the 8.5% and
of Presidential Decree No. 8.25% of the total wager funds of
1445 in relation to Section the Manila Jockey Club and
284 of the NIRC; Philippine Racing Club, Inc., and (e)
20% of the 85% of the incremental
Section 284 of the NIRC reads: revenue from excise taxes on
Virginia, burley and native tobacco
Section 284. Allotment for the products shall be included in the
Commission on Audit. - One-half of computation of the base amount of
one percent (1/2 of 1%) of the the 40% allotment. The remainders
collections from the national are allocated to beneficiary LGUs
internal revenue taxes not determined by law as part of their
otherwise accruing to special just share in the national taxes.
accounts in the general fund of the Other special purpose funds shall
national government shall accrue likewise be excluded.
to the Commission on Audit as a
fee for auditing services Further, incremental taxes shall be
rendered to local government disposed of in consonance with
units, excluding maintenance, Section 282 of the NIRC, as
equipment, and other operating amended. The sales proceeds from
expenses as provided for in Section the disposition of former military
21 of Presidential Decree No. 898. bases pursuant to RA 7227, on the
(emphasis added) other hand, are excluded since
these are non-tax items to which
Evidently, the provision does not LGUs are not constitutionally
diminish the base amount of entitled to a share. There is also no
national taxes that LGUs are to impropriety in allocating ¢ of 1% of
share from. It merely apportions half tax collections to the COA as
of 1% of national tax collections to compensation for auditing fees.
the COA as compensation for its
auditing services. This is not an The 40% share of the LGUs in the
illegal exclusion, but a recognition national taxes must be released upon
proper appropriation; the allocation the LGUs, so long as the LGUs
cannot be reduced without first amending remain to share in all national taxes.
Section 284 of the LGC But lest it be forgotten, the
percentage allocation to the LGUs
Pursuant to Article VI, Section 29 of need not be uniform across all forms
the Constitution, "No money shall be of national taxes. Thus, while
paid out of the Treasury except in Section 284 of RA 7160 establishes
pursuance of an appropriation made a 40% share of the LGUs in the
by law." This highlights the national taxes, this is only the
requirement of an appropriation general rule that is subject to
law, the annual General exceptions, as explicated in the
Appropriations Act (GAA), despite preceding discussion.
the "automatic release" clause
under Article X, Section 6, and Absent any law amending Section
places LGUs on par with 284 of the LGC, the 40% general
Constitutional Commissions and allotment to the LGUs can only be
agencies that are granted fiscal reduced under the following
autonomy. circumstance:

Guilty of reiteration, Article X, x x x That in the event that the

Section 6 of the Constitution national government incurs an
declared that the LGUs are entitled unmanageable public sector deficit,
to their just share in the national the President of the Philippines is
taxes, without distinction as to the hereby authorized, upon the
type of national tax being collected. recommendation of Secretary of
Thus, while Congress has the Finance, Secretary of Interior and
exclusive power of the purse, it Local Government and Secretary of
cannot validly exclude from its Budget and Management, and
appropriation to the LGUs the subject to consultation with the
national tax collections of the BOC presiding officers of both Houses of
that are remitted to the national Congress and the presidents of the
coffers. Otherwise stated, the base "liga", to make the necessary
for national tax allotments is not adjustments in the internal revenue
limited to national internal revenue allotment of local government units
taxes under Section 21 of the NIRC, but in no case shall the allotment be
as amended, collected by the BIR, less than thirty percent (30%) x x x
but also includes the Tariff and
Customs Duties collected by the The yearly enactment of a general
BOC, including the VAT, Excise appropriations law cannot be
Taxes and DST collected thereon. deemed as the amendatory statutes
that would permit Congress to
The national government could have lower, disregard, and circumvent
misconstrued the application of the 40% threshold. For though an
Section 6, Article X of the appropriation act is a piece of
Constitution in not giving to the legislature, it cannot modify Section
LGUs what is due the latter. True, 284 of the LGC, which is a
Congress may enact statutes to set substantive law, by simply
what constitutes the just share of appropriating to the LGUs an
amount lower than 40%. The decreasing allocations as a form of
appropriation of a lower amount discipline.
should not be understood as the
creation of an exception to Section This would run contrary to the
284 of the LGC, but should be constitutional provision on local
considered as an inappropriate autonomy, and the spirit of the LGC.
provision. Perhaps the reason there is clamor
for federalism is precisely because
Article VI, Section 25(2) of the the allocations to LGUs had not
Constitution[39] deems a provision been sufficient to finance basic
inappropriate if it does not relate services to local communities, which
specifically to some particular item predicament might be addressed by
of appropriation. The concept, broadening the allocation base up to
however, was expanded what the Constitution provides.
in PHILCONSA v. Enriquez,[40] Therefore, the Court should uphold
wherein the Court taught that the lofty idea behind the LGC—that
"included in the category of of empowering the LGUs and
'inappropriate provisions' are making them self-reliant by
unconstitutional provisions and ensuring that they receive what is
provisions which are intended to due them, amounting to 40% of
amend other laws, because clearly national tax collections.
these kind of laws have no place in
an appropriations bill. " Thus The computation of the 40%
Congress cannot introduce arbitrary allocation base shall be based on
figures as the budgetary allocation the collections from the third fiscal
to the LGUs in the guise of year preceding the current fiscal
amending the 40% threshold in year, as certified by the BIR and the
Section 284 of the LGC. BOC to the DBM as remittances to
the National Treasury. The DBM
To hold otherwise would bestow shall then use said amount certified
Congress unbridled license to enact by the BIR and the BOC in
in the GAA any manner of allocation determining the base amount which
to the LGUs that it wants, rendering shall be incorporated in the budget
illusory the 40% statutory proposal for submission to
percentage under Section 284. It Congress. Upon enactment of the
would allow for no fixed expectation appropriations act, the national tax
on the part of the LGUs as to the allotment the LGUs are entitled to
share they will receive, for it could shall be automatically released to
range from .01-100%, depending on them by the DBM within 5 days after
either the whim or wisdom of the end of each quarter, in
Congress. Under this setup, accordance with Section 286 of RA
Congress might dangle the 7160.[41]
modification of the percentage
share as a stick or carrot before the The Operative Fact Doctrine prevents the
LGUs for the latter to toe the line. In LGUs from collecting the arrears sought
turn, this would provide basis to fear after; the Court's ruling herein can only
that LGUs would be beholden to be prospectively applied
Congress by increasing or
Notwithstanding the postulation that However, this entitlement to a share
the phrase ''internal revenue" in in the tariff collections would have
Section 284 of the LGC and, been further compounded by the
consequently, its embodiment in the LGU's alleged P500-billion share,
appropriation laws are more or less, in the VAT, Excise Tax,
unconstitutional, it is respectfully and DST collections of the BOC.
submitted that the prayer for the These arrears would be too
award of arrears should cumbersome for the government to
nevertheless be denied. shoulder, which only had a budget
of P1.8 Trillion in 2012.[46] Thus,
Article 7 of the Civil Code states that while petitioners request that the
"When the courts declared a law to LGU's can still recover the arrears of
be inconsistent with the the national, it is submitted that this
Constitution, the former shall be is no longer feasible. This would
void and the latter shall govern. " prove too much for the
The provision sets the general rule government's strained budget to
that an unconstitutional law is void meet, unless paid out on installment
and therefore produces no rights, or in a staggered basis.
imposes no duties and affords no
protection.[42] The operative fact doctrine allows
for the prospective application of
However, the doctrine of operative the outcome of this case and
fact is a recognized exception. justifies the denial of petitioners'
Under the doctrine, the law is claim for arrears. As held
declared as unconstitutional but the in Commissioner of Internal
effects of the unconstitutional law, Revenue v. San Roque
prior to its declaration of nullity, Power Corporation[47] that:
may be left undisturbed as a matter
of equity and fair play.[43] The x x x for the operative fact doctrine
Court acknowledges that an to apply, there must be a
unconstitutional law may have "legislative or executive measure,"
consequences which cannot always meaning a law or executive
be ignored and that the past cannot issuance, that is invalidated by the
always be erased by a new judicial court. From the passage of such law
declaration.[44] The doctrine is or promulgation of such executive
applicable when a declaration of issuance until its invalidation by the
unconstitutionality will impose an court, the effects of the law or
undue burden on those who have executive issuance, when relied
relied on the invalid law.[45] upon by the public in good faith,
may have to be recognized as
In this case, the proposed valid. (emphasis added)
nullification of the phrase "internal
revenue" in Section 284 of RA 7160 This was echoed in Araullo v. Aquino
would have served as the basis for (Araullo)[48] wherein the Court held
the recovery of the LGUs' just share that the operative fact doctrine can
in the tariff and customs duties be applied to government programs,
collected by the BOC that were activities, and projects that can no
illegally withheld from 1991-2012. longer be undone, and whose
beneficiaries relied in good faith on seemingly allowed limiting the share
the validity of the disbursement of the LGUs to the national internal
acceleration program (DAP). In that revenue taxes under Section 21 of
case, the Court also agreed to the NIRC.
extend to the proponents and
implementors of the DAP the benefit Moreover, it is imprecise to state
of the doctrine of operative fact that respondents illegally withheld
because they had nothing to do at monies from the LGUs. For the
all with the Adoption of the invalid monies that should have been
acts and practices. To quote: shared with the LGUs were
nevertheless disbursed via the
As a general rule, the nullification of pertinent appropriation laws.
an unconstitutional law or act Applying the presumption of
carries with it the illegality of its regularity accorded to government
effects. However, in cases where officials, it may be presumed that
nullification of the effects will result the amount of P498,854,388,154.93
in inequity and injustice, the being claimed was utilized to
operative fact doctrine may apply. finance government projects just
In so ruling, the Court has the same, and ended up redounding
essentially recognized the impact on not to the benefit of a particular
the beneficiaries and the country as LGU, but to the public-at-large. No
a whole if its ruling would pave the badge of bad faith therefore
way for the nullification of the obtained in the actuations of
P144.378 Billions worth of respondents. Consequently, the
infrastructure projects, social and operative fact doctrine can properly
economic services funded through be applied.
the DAP. Bearing in mind the
disastrous impact of nullifying these Increased national tax allotments may
projects by virtue alone of the cure economic imbalance
invalidation of certain acts and
practices under the DAP, the Court As a final word, it cannot be
has upheld the efficacy of such DAP- gainsaid that this ruling of the Court
funded projects by applying the granting a bigger piece of the
operative fact doctrine. For this national taxes to the LGUs will
reason, we cannot sustain undoubtedly be an effective
the Motion for Partial strategy and positive approach in
Reconsideration of the petitioners in addressing the sad plight of poor or
G.R. No. 209442. underdeveloped LGUs that yearn to
loosen the ostensible grip of
Taking our cue from Araullo, it is imperial Manila over its supposed
then beyond quibbling that no co-equals, imperium in imperio.
amount of bad faith can be
attributed to the respondents This ruling is timely since we are
herein. They merely followed now in the midst of amending or
established practice in government, revising the 1987 Constitution, with
which in turn was based on the plain the avowed goal to "address the
reading of how Section 284 of the economic imbalance" through
LGC. As couched, the provision "transfer or sharing of the powers
and resources of the and removal, term, salaries, powers
government."[49] Encapsulated in and functions and duties of local
the proposed Constitution is the officials, and all other matters
"bayanihan federalism" anchored on relating to the organization and
the principles of "working together" operation of the local units.
and "Cooperative competition or
coopetition."[50] Our own brand of By constitutional fiat, Congress has
federalism may just work given its within its arsenal ample mandate to
presidential-federal form of enact laws to grant and allocate
government that is "uniquely among the different LGUs more
Filipino" that is tailor-fit to the powers, responsibilities and
Filipino nation. The well-crafted resources through the amendment
proposal will undergo exhaustive of RA 7160 or the Local Government
scrutiny and intense debate both in Code of 1991. And increasing the
and out of the halls of Congress. wealth and resources of the
Whatever may be the outcome of component LGUs is but one of the
the debates and the decision of veritable measures to concretize the
Congress and the Filipino people will concept of local autonomy under
hopefully be for the betterment of Article X of the 1987 Constitution
the country. possibly without resorting to radical
changes in our political frameworks.
In the meantime, we must continue
to explore readily available means If it is the sincere goal of the
to address the imbalance suffered national government to provide
by the LGUs. Indeed, there is ample financial resources to the
sufficient room in our Constitution to LGUs, then it can consider
expand the authority of the LGUs, amending Section 284 of RA 7160
there being no constitutional and even increase the national tax
proscription against further allotment (formerly IRA) to more
devolving powers and decentralizing than 40% of national taxes. Scrutiny
governance in their favor. On the should be made, however, of the
contrary, this is what our laws percentage by which the national
prescribe. Article X, Section 3 of the tax allotment is being distributed to
Constitution state: among the different LGUs. For
instance, Congress may consider
Section 3. The Congress shall balancing Section 285 of RA 7160
enact a local government by adjusting the 23% share of the
code which shall provide for a more 145 cities vis-a-vis the percentage
responsive and accountable local allocation of 1,478 municipalities
government structure instituted now pegged at 34%. There are
through a system of currently too few cities taking up
decentralization with effective too much share. This
mechanisms of recall, initiative, and notwithstanding that cities, unlike
referendum, allocate among the many of the underperforming
different local government units municipalities, are more progressive
their powers, responsibilities, and financially viable because of the
and resources, and provide for the higher taxes they collect from
qualifications, election, appointment
people and business activities in issuance of executive or
their respective territories. administrative that tend to
decentralize or devolve certain
Congress may also decentralize and powers and functions belonging to
devolve more powers and duties to the executive departments,
the LGUs or deregulate some bureaus, and offices to the LGUs,
activities or processes to entitle said unless otherwise provided by law.
LGUs more elbow room to
successfully attain their programs The President may also order the
and projects in harmony with DBM to review and evaluate the
national development programs. It current formula for computation of
has the supremacy in the the national tax allotment. At
enactment of laws that will define present, DBM relies mainly on two
any aspect of organization and (2) factors in determining the
operation of the LGUs to make it allotments of provinces,
more efficient and financially stable municipalities and cities—50%
with special focus on the percent based on population, 25%
amplification of the taxing powers of for land area and 25o/o for equal
said government units. Ergo, if sharing. For barangays, it is 60%
Congress is so minded to reinforce based on population and 40% for
the powers of the LGUs, it can, equal sharing. A view has been
within the confines of the present advanced that the shares of a
Constitution, transfer or share any province, city or municipality should
power of the national government to be based on the classification of
said local governments. LGUs under Executive Order No. 249
dated July 25, 1987 determined
Moreover, Article VII, Section 17 of from the average annual income of
the Constitution makes the the LGU and not mainly on
President the Chief of the Executive population and land area which are
branch of Government, thus: not accurate factors. It was put
forward that the shares of LGUs in
Section 17. The President shall the NTA shall be in inverse
have control of all the executive proportion to their classification. A
departments, bureaus and offices. bigger share shall be granted to the
He shall ensure that laws be 6th class municipality and a lower
faithfully executed. share to a 1st class municipality. At
present, Senate Bill No. 2664 is
In the same token, Section 1, pending which intends to rationalize
Chapter III of the Administrative the income classification of LGUs.
Code of 1987 provides that the We leave it to Congress or the
executive power shall be vested in President to resolve this issue,
the President of the Philippines. The hopefully for a fairer sharing
President is the head of the scheme that fully benefit the poor
executive branch of government and disadvantaged provinces and
having full control of all executive municipalities.
departments, bureaus and offices.
[51] Part and parcel of the Lastly, the President has the power
President's ordinance power is the of general supervision over local
governments under Article X, government units. After all, the
Section 4 of the Constitution, viz: present constitution may be ample
enough to straighten out the
Section 4. The President of "economic imbalance" and does not
the Philippines shall exercise require fixing.
general supervision over local
governments. Provinces with I, therefore, vote to PARTIALLY
respect to component cities and GRANT the instant petitions. In
municipalities, and cities and particular, I concur with the
municipalities with respect to following dispositions:
component barangays, shall ensure
that the acts of their component 1. The phrase "internal revenue"
units are within the scope of their appearing in Section 284 of
prescribed powers and functions. RA 7160 is
(emphasis added) declared UNCONSTITUTION
AL and is hereby DELETED.
He can, therefore, support, guide, or
even hand-hold the LGUs that are The Section 284, as modified, shall read as
financially distressed or politically a.
follows:
ineffective via the regional and
provincial officials of the executive Section 284. Allotment of Internal
departments or bureaus. In short, Revenue Taxes. - Local government units
the President can transfer or share shall have a share in the national internal
executive powers through revenue taxes based on the collection of
decentralization or devolution the third fiscal year preceding the current
without need of a fresh mandate fiscal year as follows:
under a new constitution.
(a) On the first year of the effectivity of
From the foregoing, the perceived
this Code, thirty percent (30%);
ills brought about by a unitary
system of government may after all
be readily remediable through (b) On the second year, thirty-five percent
congressional and executive (35%); and
interventions through the concepts
of decentralization and devolution of (c) On the third year and thereafter, forty
powers to the LGUs. In the percent (40%).
meantime that the leaders of the
public and private sectors are busy Provided, That in the event that the
dissecting and analyzing the national government incurs an
proposed Bayanihan Federalism or, unmanageable public sector deficit, the
more importantly, resolving the President of the Philippines is hereby
issue of whether a charter authorized, upon the recommendation of
amendment is indeed necessary, it Secretary of Finance, Secretary of Interior
may be prudent to consider whether and Local Government and Secretary of
the government can make do of its Budget and Management, and subject to
present powers and mandate to consultation with the presiding officers of
attain the goal of bringing progress both Houses of Congress and the
to our poor and depressed local presidents of the "liga", to make the
 necessary adjustments in the internal one hundred (100) inhabitants shall not be
revenue allotment of local government less than Eighty thousand (P80,000.00) per
units but in no case shall the allotment be annum chargeable against the twenty
less than thirty percent (30%) of the percent (20%) share of the barangay from
collection of national internal revenue the internal revenue allotment, and the
taxes of the third fiscal year preceding the balance to be allocated on the basis of the
current fiscal year: Provided, further, That following formula:
in the first year of the effectivity of this
Code, the local government units shall, in (a) On the first year of the effectivity of
addition to the thirty percent (30%) this Code:
internal revenue allotment which shall
include the cost of devolved functions for (1) Population- Forty percent (40%); and
essential public services, be entitled to (2) Equal sharing- Sixty percent (60%)
receive the amount equivalent to the cost
of devolved personal services. (b) On the second year:
The phrase "internal revenue" shall
likewise be DELETED from the related (1) Population- Fifty percent (50%); and
sections of RA 7160, particularly Sections (2) Equal sharing- Fifty percent (50%)
285, 287, and 290, which shall now read:
(c) On the third year and thereafter:
Section 285. Allocation to Local
Government Units. - The share of local (1) Population- Sixty percent (60%); and
government units in the internal revenue (2) Equal sharing- Forty percent (40%).
allotment shall be collected in the
following manner: Provided, finally, That the financial
requirements of barangays created by local
(a) Provinces- Twenty-three percent government units after the effectivity of
(23%); this Code shall be the responsibility of the
(b) Cities- Twenty-three percent (23%); local government unit concerned.
(c) Municipalities- Thirty-four percent
b.(34%); and xxxx
(d) Barangays- Twenty percent (20%)
Section 287. Local Development Projects.
Provided, however, That the share of each - Each local government unit shall
province, city, and municipality shall be appropriate in its annual budget no less
determined on the basis of the following than twenty percent (20%) of its annual
formula: internal revenue allotment for
development projects. Copies of the
(a) Population- Fifty percent (50%); development plans of local government
(b) Land Area- Twenty-five percent units shall be furnished the Department of
(25%); and Interior and Local Government.
(c) Equal sharing- Twenty-five percent
(25%) xxxx

Provided, further, That the share of each Section 290. Amount of Share of Local
barangay with a population of not less than Government Units. - Local government
 units shall, in addition to the internal the Bureau of Internal Revenue and its
revenue allotment, have a share of forty deputized agents, including Value-Added
percent (40%) of the gross collection Taxes, Excise Taxes, and Documentary
derived by the national government from Stamp Taxes collected by the Bureau of
the preceding fiscal year from mining Customs;
taxes, royalties, forestry and fishery
charges, and such other taxes, fees, or Tariff and Customs Duties collected by the
b.
charges, including related surcharges, Bureau of Customs;
interests, or fines, and from its share in
any co-production, joint venture or Fifty percent (50%) of the Value-Added
production sharing agreement in the Tax collections from the Autonomous
utilization and development of the national c. Region in Muslim Mindanao (ARMM),
wealth within their and thirty percent (30%) of all other
territorial Jurisdiction. national tax collections from the ARMM.

Articles 378, 379, 380, 382, 409, 461, and The remaining fifty percent (50%) of the
other related provisions in the Value-Added Taxes and seventy (70%) of
Implementing Rules and Regulations of the other national taxes collected in the
c.
RA 7160 are hereby ARMM shall be the exclusive share of the
likewise MODIFIED to reflect deletion of region pursuant to Sections 9 and 15 of
the phrase "internal revenue." RA 9054;

Henceforth, any mention of "IRA" in RA Sixty percent (60%) of the national tax
7160 and its Implementing Rules and d.collections from the exploitation and
d.Regulations shall hereinafter be development of national wealth.
understood as pertaining to the national
tax allotment of a local government unit; The remaining forty (40%) will validly
exclusively accrue to the host Local
1. Respondents are Government Unit pursuant to Section 290
hereby DIRECTED to include of RA 7160;
all forms of national tax
collections, other than those Five percent (5%) of the twenty-five
accruing to special purpose percent (25%) franchise taxes collected
funds and special allotments from eight and a half percent (8.5%) and
for the utilization and eight and one fourth percent (8.25%) of
development of national e.
the total wager funds of the Manila Jockey
wealth, in the subsequent Club and Philippine Racing Club, Inc.
computations for the base pursuant to Sections 6 and 8 of RA 6631
amount of just share the Local and 6632, respectively.
Government Units are entitled
to. The base for national tax The remaining twenty percent (20%) shall
allotments shall include, but be divided as follows (5%) to the host
shall not be limited to:
municipality, seven percent (7%) to the
Philippine Charity Sweepstakes Office, six
a.National Internal Revenue Taxes under percent (6%) to the Anti-Tuberculosis
Section 21 of the National Internal Society, and two percent (2%) to the
Revenue Code, as amended, collected by
 White Cross; computation of the national tax allotment
base.
Twenty percent (20%) of the eighty-five
(85%) of the Excise Tax collections from 1. The Bureau of Internal
f.
Virginia, burley, and native tobacco Revenue and Bureau of
products. Customs are
hereby ORDERED to certify to
The fist fifteen percent (15%) shall accrue the Department of Budget and
to the tobacco producing units pursuant to Management all their
RA No. 7171 and 8240. Eighty percent collections and remittances of
(80%) of the remainder shall be segregated National Taxes;
as special purpose funds under RA 10351;
2. The Court's formula in this
1. In addition, the Court case for determining the base
further DECLARES that: amount for computing the
share of the Local
The apportionment of incremental taxes - Government Units shall
twenty percent (20%) to the city or have PROSPECTIVE
APPLICATION from finality of
municipality where the tax is collected and
this decision in view of the
eighty percent (80%) to the national
operative fact doctrine. Thus,
a. government of fifty percent (50%) of
petitioners' claims of arrears
incremental tax collections - under Section
from the national government
282 of the National Internal Revenue for the unlawful exclusions
Code, as amended by Republic Act No. from the base amount are
7643, is VALID and shall be observed; hereby DENIED.
Sections 8 and 12 of RA 7227 are hereby 3. Finally, once the General
declared VALID. The proceeds from the Appropriations Act for the
sale of military bases converted to succeeding year is enacted,
alienable lands thereunder the national tax allotments of
b.
are EXCLUDED from the computation of the Local Government Units
the national tax allocations of the Local shall AUTOMATICALLY and D
Government Units since these are sales IRECTLY be released, without
proceeds, not tax collections; need of any further action, to
the provincial, city, municipal,
The one-half of one percent (1/2%) of or barangay treasurer, as the
national tax collections as the auditing fee case may be, on a quarterly
of the Commission on Audit under Section basis but not beyond five (5)
24(3) of Presidential Decree No. 1445 days after the end of each
c.
shall not be deducted prior to the quarter. The Department of
computation of the forty percent (40%) Budget and Management is
share of the Local Government Units in hereby ORDERED to strictly
the national taxes; and comply with Article X, Section
6 of the Constitution and
d.Other special purpose funds are Section 286 of the Local
likewise EXCLUDED from the Government Code,
operationalized by Article 383
 of the Implementing Rules added tax equivalent to ten percent
and Regulations of RA 7160. (10%) based on the total value used
by the Bureau of Customs in
determining tariff and customs
duties plus customs duties, excise
taxes, if any, and other charges,
[1] Rollo, p. 46. such tax to be paid by the importer
prior to the release of such goods
[2] Id. at 48. from customs custody: Provided,
That where the customs duties are
[3] Now amended by Republic Act determined on the basis of the
No. 10963 or the Tax Reform for quantity or volume of the goods, the
Acceleration and Inclusion Law. value-added tax shall be based on
the landed cost plus excise taxes, if
[4] Section 290. Amount of Share any.
of Local Government Units. - Local
government units shall, in addition xxxx
to the internal revenue allotment,
have a share of forty percent (40%) [7] Section 129. Goods subject to
of the gross collection derived by Excise Taxes. - Excise taxes apply to
the national government from the goods manufactured or produced in
preceding fiscal year from mining the Philippines for domestic sales or
taxes, royalties, forestry and fishery consumption or for any other
charges, and such other taxes, fees, disposition and to things imported.
or charges, including related The excise tax imposed herein shall
surcharges, interests, or fines, and be in addition to the value-added
from its share in any co-production, tax imposed under Title IV.
joint venture or production sharing
agreement in the utilization and xxxx
development of the national wealth
within their territorial Jurisdiction. [8] Bolos v. Bolos, G.R. No. 186400,
October 20, 2010.
[5] Article 378. Allotment of Internal
Revenue Taxes. The total annual [9] Id.
internal revenue allotments (IRAs)
due the LGUs shall be determined [10] See also RA 8752 or the Anti-
on the basis of collections from Dumping Act of 1999, which
national internal revenue taxes provides the rules for "AntiDumping
actually realized as certified by the Duties"; RA 8800, or the "Safeguard
BIR during the third fiscal year Measures Act," which provides the
preceding the current fiscal year:x x rules on Safeguard Duties; RA 8751
x on Countervailing Duty.

[6] Section 107. Value-Added Tax [11] G.R. No. 101273 July 3, 1992.
on Importation of Goods. -
[12] <
(A) In General. - There shall be https://thelawdictionary.org/tariff/ >
levied, assessed and collected on last accessed May 16, 2018.
every importation of goods a value-
[13] Sec. 18. Power to Generate and [20] Section 9. Sharing of Internal
Apply Resources. Local government Revenue, Natural Resources Taxes,
units shall have the power and Fees and Charges. - The collections
authority to establish an of a province or city from national
organization that shall be internal revenue taxes, fees and
responsible for the efficient and charges, and taxes imposed on
effective implementation of their natural resources, shall be
development plans, program distributed as follows:
objectives and priorities; to create
their own sources of revenue and to (a)Thirty-five percent (35%) to the
levy taxes, fees, and charges which province or city;
shall accrue exclusively for their use (b)Thirty-five percent (35%) to the
and disposition and which shall be regional government; and
retained by them; to have a just (c)Thirty percent (30%) to the
share in national taxes which shall central government or national
be automatically and directly government.
released to them without need of xxxx
further action;
SECTION 15. Collection and
[14] 574 Phil. 620, 639 (2008); See Sharing of Internal Revenue Taxes.
also Palma Development Corp. v. xxxx
Municipality of Malangas, 459 Phil.
1042 (2003); Batangas City v. Fifty percent (50%) of the share of
Pilipinas Shell Petroleum Corp., G.R the central government or national
No. 187631, July 8, 2015; First government of the yearly
Philippine Industrial Corp. v. Court incremental revenue from tax
of Appeals, 360 Phil. 852 collections under sections 106
(1998); City of Davao v. Regional (value-added tax on sales of goods
Trial Court, 504 Phil. 543 or properties), 108 (value-added tax
(2005); Manila International Airport on sale of services and use or lease
Authority v. Court of Appeals, 528 of properties) and 116 (tax on
Phil. 181 (2006); Philippine Fisheries persons exempt from value-added
Development Authority v. Central tax) of the National Internal
Board of Assessment Appeals, 653 Revenue Code (NIRC) shall be
Phil. 328 (2010). shared by the Regional Government
and the local government units
[15] 459 Phil. 1042 (2003). within the area of autonomy as
follows:
[16] Amores v. HRET, G.R. No.
189600, June 29, 2010. xxxx
[17] Record of the Constitutional
[21] Section 18. The Congress shall
Commission, Vol. III, pp. 478-479.
enact an organic act for each
[18] G.R. No. 144256, June 8, 2005. autonomous region with the
assistance and participation of the
[19] Id. regional consultative commission
composed of representatives
appointed by the President from a
list of nominees from multisectoral government units shall, in addition
bodies. The organic act shall define to the internal revenue allotment,
the basic structure of government have a share of forty percent (40%)
for the region consisting of the of the gross collection derived by
executive department and the national government from the
legislative assembly, both of which preceding fiscal year from excise
shall be elective and representative taxes on mineral products, royalties,
of the constituent political units. The and such other taxes, fees or
organic acts shall likewise provide charges, including related
for special courts with personal, surcharges, interests or fines, and
family, and property from its share in any co-production,
law Jurisdiction consistent with the joint venture or production sharing
provisions of this Constitution and agreement in the utilization and
national laws. development of the national wealth
within their territorial Jurisdiction.
The creation of the autonomous
region shall be effective when (B) Share of the Local Governments
approved by majority of the votes from Any Government Agency or
cast by the constituent units in a Government-owned or -
plebiscite called for the purpose, Controlled Corporation.- Local
provided that only provinces, cities, Government Units shall have a
and geographic areas voting share, based on the preceding fiscal
favorably in such plebiscite shall be year, from the proceeds derived by
included in the autonomous region. any government agency or
government-owned or
Section 19. The first Congress controlled Corporation engaged in
elected under this Constitution shall, the utilization and development of
within eighteen months from the the national wealth based on the
time of organization of both Houses, following formula, whichever will
pass the organic acts for the produce a higher share for the local
autonomous regions in Muslim government unit:
Mindanao and the Cordilleras.
(1) One percent (1%) of the gross
[22] SEC. 287. Shares of Local sales or receipts of the preceding
Government Units in the calendar year, or
Proceeds from the Development (2) Forty percent (40%) of the
and Utilization of the National excise taxes on mineral products,
Wealth. - Local Government units royalties, and such other taxes, fees
shall have an equitable share in the or charges, including related
proceeds derived from the surcharges, interests or fines the
utilization and development of the government agency or government
national wealth, within their owned or -controlled corporations
respective areas, including sharing would have paid if it were not
the same with the inhabitants by otherwise exempt.
way of direct benefits.
[23] Section 290. Amount of Share
(A) Amount of Share of Local qf Local Government Units. - Local
Government Units. - Local government units shall, in addition
to the internal revenue allotment, municipality, city, provincial or
have a share of forty percent (40%) national, now or in the future, on its
of the gross collection derived by properties, whether real or personal,
the national government from the and profits, from which taxes the
preceding fiscal year from mining grantee is hereby expressly
taxes, royalties, forestry and fishery excepted.
charges, and such other taxes, fees,
or charges, including related [26] SECTION 8. In consideration of
surcharges, interests, or fines, and the franchise and rights herein
from its share in any co-production, granted to the Philippine Racing
joint venture or production sharing Club, Inc., the grantee shall pay into
agreement in the utilization and the National Treasury a franchise
development of the national wealth tax equal to twenty-five per centum
within their territorial Jurisdiction. (25%) of its gross earnings from the
horse races authorized to be held
[24] Record of the Constitutional under this franchise which is
Committee, Vol. 3, p. 178. equivalent to the eight and one
fourth per centum (8 &‌#188;%) of
[25] SECTION 6. In consideration of the total wager funds or gross
the franchise and rights herein receipts on the sale of betting
granted to the Manila Jockey Club, tickets during the racing day as
Inc., the grantee shall pay into the mentioned in Section six hereof,
national Treasury a franchise tax allotted as follows: a) National
equal to twenty-five per centum Government, five per centum (5%);
(25%) of its gross earnings from the the Municipality of Makati, five per
horse races authorized to be held centum (5%); b) Philippine Charity
under this franchise which is Sweepstakes Office, seven per
equivalent to the eight and one-half centum (7%); c) Philippine Anti-
per centum (8 ¢%) of the total Tuberculosis Society, six per centum
wager funds or gross receipts on the (6%); and d) White Cross, two per
sale of betting tickets during the centum (2%). The said tax shall be
racing day as mentioned in Section paid monthly and shall be in lieu of
four hereof, allotted as follows: a) any and all taxes, except the
National Government, five per income tax, of any kind, nature and
centum (5%); b) the city or description levied, established or
municipality where the race track is collected by any authority whether
located, five per centum (5%); c) barrio, municipality, city, provincial
Philippine Charity Sweepstakes or national, on its properties,
Office, seven per centum (7%); d) whether real or personal, from
Philippine AntiTuberculosis Society, which taxes the grantee is hereby
six per centum (6%); and e) White expressly exempted.
Cross, two per centum (2%). The
said tax shall be paid monthly and [27] AN ACT AMENDING REPUBLIC
shall be in lieu of any and all taxes, ACT NUMBERED SIXTY-SIX
except the income tax of any kind, HUNDRED THIRTYONE ENTITLED
nature and description levied, "AN ACT GRANTING MANILA JOCKEY
established or collected by any CLUB, INC., A FRANCHISE TO
authority whether barrio, CONSTRUCT, OPERATE AND
MAINTAIN A RACETRACK FOR HORSE and the construction of new camps,
RACING IN THE CITY OF MANILA OR the self-reliance and modernization
ANY PLACE WITIDN THE PROVINCES program of the AFP, the
OF BULACAN, CAVITE OR RIZAL" concessional and long-term housing
AND EXTENDING THE SAID loan assistance and livelihood
FRANCHISE BY TWENTY-FIVE YEARS assistance to AFP officers and
(25) FROM THE EXPIRATION OF THE enlisted men and their families, and
TERM THEREOF. the rehabilitation and expansion of
the AFP'S medical facilities;
[28] AN ACT AMENDING REPUBLIC (2) Fifty percent (50%) To finance
ACT NUMBERED SIXTY-SIX the conversion and the commercial
HUNDRED THIRTYTWO ENTITLED uses of the Clark and Subic military
'AN ACT GRANTING THE PHILIPPINE reservations and their extensions;
RACING CLUB, INC., A FRANCHISE (3) Five Percent (5%) To finance the
TO OPERATE AND MAINTAIN A RACE concessional and long-term housing
TRACK FOR HORSE RACING IN THE loan assistance for the homeless of
PROVINCE OF RIZAL', AND Metro Manila, Olongapo City,
EXTENDING THE SAID FRANCHISE Angeles City and other affected
BY TWENTY-FIVE YEARS FROM THE municipalities contiguous to the
EXPIRATION OF THE TERM THEREOF. base areas as mandated herein; and
(4) The balance shall accrue and be
[29] Section 8 of RA 7953, and remitted to the National Treasury to
Section 11 of RA 8407. be appropriated thereafter by
Congress for the sole purpose of
[30] Section 10 of RA 7953, and financing programs and projects
Section 13 of RA 8407. vital for the economic upliftment of
the Filipino people.
[31] Section 8. Funding Scheme:
Provided That in the case of Fort
The President is hereby authorized
Bonifacio, two and five tenths
to sell the above lands, in whole or
percent (2.5%) of the proceeds
in part, which are hereby declared
thereof in equal shares shall each
alienable and disposable pursuant
go to the Municipalities of Makati,
to the provisions of existing laws
Taguig, and Pateros: Provided
and regulations governing sales of
further That in no case shall farmers
government properties x x x The
affected be denied due
proceeds from any sale, after
compensation.
deducting all expenses related to
the sale, of portions of Metro Manila
xxxx
military camps as authorized under
this Act, shall be used for the [32] Section 12. Subic Special
following purposes with their Economic Zone. x x x
corresponding percent shares of
proceeds: xxxx
(1) Thirty-two and five-tenths "(c) The provision of existing laws,
percent (32.5%) To finance the rules and regulations to the contrary
transfer of the AFP military camps notwithstanding, no national and
local taxes shall be imposed within of excise taxes on locally
the Subic Special Economic Zone. In manufactured Virginia type
lieu of said taxes, a five percent cigarettes to be remitted to the
(5%) tax on gross income earned beneficiary provinces qualified
shall be paid by all business under R.A. No. 7171.
enterprises within the Subic Special
Economic Zone and shall be The provision of existing laws to the
remitted as follows: three percent contrary notwithstanding, the fifteen
(3%) to the National Government, percent (15%) share from
and two percent (2%) to the Subic government revenues mentioned in
Bay Metropolitan Authority (SBMA) R.A. No. 7171 and due to the
for distribution to the local Virginia tobacco-producing
government units affected by the provinces shall be directly remitted
declaration of and contiguous to the to the provinces concerned. xxxx
zone, namely: the City of Olongapo
and the municipalities of Subic, San [34] G.R. No. 99886, March 31,
Antonio, San Marcelino and 1993.
Castillejos of the Province of
Zambales; and the municipalities of [35] G.R. No. L-77194, March 15,
Morong, Hermosa and Dinalupihan 1988.
of the Province of Bataan, on the
basis of population (50%), land [36] AN ACT RESTRUCTURING THE
mass (25%), and equal sharing EXCISE TAX ON ALCOHOL AND
(25%). TOBACCO PRODUCTS BY AMENDING
SECTIONS 141, 142, 143, 144, 145,
[33] Section 289. Special Financial 8, 131 AND 288 OF REPUBLIC ACT
Support to Beneficiary Provinces NO. 8424. OTHERWISE KNOWN AS
Producing Virginia Tobacco. The THE NATIONAL INTERNAL REVENUE
financial support given by the CODE OF 1997, AS AMENDED BY
National Government for the REPUBLIC ACT NO. 9334, AND FOR
beneficiary provinces shall be OTHER PURPOSES.
constituted and collected from the
proceeds of fifteen percent (15%) of [37] SEC. 8. Fifteen percent (15%)
the excise taxes on locally of the incremental revenue
manufactured Virginia-type of collected from the excise tax on
cigarettes. tobacco products under this Act
shall be allocated and divided
The funds allotted shall be divided among the provinces producing
among the beneficiary provinces burley and native tobacco in
pro-rata according to the volume of accordance with the volume of
Virginia tobacco production. tobacco leaf production. The fund
shall be exclusively utilized for
xxxx programs in pursuit of the following
objectives:
The Secretary of Budget and
Management is hereby directed to (a) Cooperative projects that will
retain annually the said funds enhance better quality of
equivalent to fifteen percent (15%) agricultural products and increase
income and productivity of farmers; without need of any further action,
(b) Livelihood projects particularly directly to the provincial, city,
the development of alternative municipal or barangay treasurer, as
farming system to enhance farmer's the case may be, on a quarterly
income; basis within five (5) days after the
(c) Agro-industrial projects that will end of each quarter, and which shall
enable tobacco farmers to be not be subject to any Lien or
involved in the management and holdback that may be imposed by
subsequent ownership of projects the national government for
such as post-harvest and secondary whatever purpose.
processing like cigarette (b) Nothing in this Chapter shall be
manufacturing and by-product understood to diminish the share of
utilization. local government units under
existing laws.
The Department of Budget and
Management in consultation with [42] G.R. No. 79732, November 8,
the Oversight Committee created 1993.
hereunder shall issue the
corresponding rules and regulations [43] League of Cities of the
governing the allocation and Philippines v. Commission on
disbursement of this fund. Elections, G.R. No. 176951, August
24, 2010.
[38] SECTION 5. The Commission
shall enjoy fiscal autonomy. Their [44] Planters Products, Inc. v.
approved annual appropriations Fertiphil Corporation, G.R. No.
shall be automatically and regularly 166006, 14 March 2008.
released.
[45] League of Cities of the
[39] Section 25. Philippines v. Commission on
Elections, G.R. No. 176951, August
xxxx 24, 2010.

(2) No provision or enactment shall [46] See Republic Act No. 10155.
be embraced in the general
appropriations bill unless it relates [47] G.R. No. 187485, October 8,
specifically to some particular 2013.
appropriation therein. Any such
provision or enactment shall be [48] G.R. No. 209287, February 3,
limited in its operation to the 2015.
appropriation to which it relates.
[49] Ding Generoso, April 19, 2018,
[40] G.R. No. 113105, August 19, PTV news — AB.
1994.
[50] Id.
[41] Section 286. Automatic
Release of Shares.- [51] Section 17 of Article VII of the
1987 Constitution and section 1,
(a) The share of each local Chapter 1, Title 1, Book III of the
government unit shall be released, Administrative Code.
 empower us, unelected magistrates,
to substitute our political judgment
disguised as a decision of this Court.

DISSENTING OPINION The provisions of the Constitution

may be reasonably read to defer to
LEONEN, J.: the actions of the political branches.
Their interpretation is neither
I dissent. absurd nor odious.
The Constitution only requires that We should stay our hand.
the local government units should
have a "just share" in the national I
taxes. "Just share, as determined by
law"[1] does not refer only to a Mandamus will not lie to achieve the
percentage, but likewise a reliefs sought by the parties.
determination by Congress and the
President as to which national taxes, G.R. No. 199802 (Mandanas'
as well as the percentage of such Petition) is a petition for Certiorari,
classes of national taxes, will be prohibition, and Mandamus to set aside
shared with local governments. The the allocation or appropriation of
phrase "national taxes" is broad to some P60,750,000,000.00 under
give Congress a lot of leeway in Republic Act No. 10155 or the
determining what portion or what General Appropriations Act of 2012,
sources within the national taxes which supposedly should form part
should be "just share." of the 40% internal revenue
allotment of the local government
We should be aware that Congress units. Petitioners contend that the
consists of both the Senate and the General Appropriations Act of 2012
House of Representatives. The is unconstitutional, in so far as it
House of Representatives meantime misallocates some
also includes district P60,750,000,000.00 that represents
representatives. We should assume a part of the local government units'
that in the passage of the Local internal revenue allotment coming
Government Code and the General from the national internal revenue
Appropriations Act, both Senate and taxes specifically the value-added
the House are fully aware of the taxes, excise taxes, and
needs of the local government units documentary stamp taxes collected
and the limitations of the budget. by the Bureau of Customs.[2]

On the other hand, the President, Thus, petitioners seek to enjoin

who is sensitive to the political respondents from releasing the
needs of local governments, P60,750,000,000.00 of the
likewise, would seek the balance P1,816,000,000,000.00
between expenditures and appropriations provided under the
revenues. General Appropriations Act of 2012.
They submit that the
What petitioners seek is to short- P60,750,000,000.00 should be
circuit the process. They will to
deducted from the capital outlay of 4. VAT of various municipalities,
each national department or agency RA No. 7643;
to the extent of their respective pro- 5. ECOZONE, RA No. 7227;
rated share.[3] 6. Excise tax on Locally
Manufactured Virginia
Petitioners further seek to compel Tobacco, RA No. 7171;
respondents to cause the automatic 7. Incremental Revenue from
release of the local government Burley and Native Tobacco,
units' internal revenue allotments RA No. 8240;
for 2012, including the amount of 8. COA share, PD 1445.[6]
P60,750,000,000.00; and to pay the
local government units their past Similar to Mandanas' Petition,
unpaid internal revenue allotments Garcia argues that the value-added
from Bureau of Customs' collections tax and excise taxes collected by
of national internal revenue taxes the Bureau of Customs should be
from 1989 to 2009.[4] included in the scope of national
internal revenue taxes.
On the other hand, G.R. No. 208488
(Garcia's Petition) seeks to declare Specifically, petitioner asks that
as unconstitutional Section 284 of respondents be commanded to:
Republic Act No. 7160 or the Local
Government Code of 1991, in Compute the internal revenue allotment
limiting the basis for the of the local government units on the basis
computation of the local (a) of the national tax collections including
government units' internal revenue tax collections of the Bureau of Customs,
allotment to national internal without any deductions;
revenue taxes instead of national
taxes as ordained in the Submit a detailed computation of the
Constitution.[5] (b
local government units' internal revenue
)
allotments from 1995 to 2014; and
This Petition also seeks a writ
of Mandamus to command respondents
Distribute the internal revenue allotment
to fully and faithfully perform their (c)
shortfall to the local government units.[7]
duties to give the local government
In sum, both Petitions ultimately
units their just share in the national
seek a writ of Mandamus from this
taxes. Petitioner contends that the
Court to compel the Executive
exclusion of the following special
Department to disburse amounts,
taxes and special accounts from the
which allegedly were illegally
basis of the internal revenue
excluded from the local government
allotment is unlawful:
units' Internal Revenue Allotments
for 2012 and previous years,
1. Autonomous Region of Muslim
specifically from 1992 to 2011.
Mindanao, RA No. 9054;
2. Share of LGUs in mining Under Rule 65, Section 3 of the
taxes, RA No. 7160; Rules of Civil Procedure, a petition
3. Share of LGUs in franchise for Mandamus may be filed "[w]hen
taxes, RA No. 6631, RA No. any tribunal, Corporation, board,
6632; officer or person unlawfully neglects
the performance of an act which the Article 378 of Administrative Order
law specifically enjoins as a duty No. 270 or the Rules and
resulting from an office, Trust, or Regulations Implementing the Local
station." It may also be filed "[w]hen Government Code of 1991 (Local
any tribunal, Corporation, board, Government Code Implementing
officer or person . . . unlawfully Rules) mandates that "[t]he total
excludes another from the use and annual internal revenue
enjoyment of a right or office to allotments ... due the [local
which such other is entitled." government units] shall be
determined on the basis of
"Through a writ of Mandamus, the collections from national internal
courts 'compel the performance of a revenue taxes actually realized as
clear legal duty or a ministerial duty certified by the [Bureau of Internal
imposed by law upon the defendant Revenue]." Consistent with this
or respondent' by operation of his or Rule, it was reiterated in
her office, Trust, or station."[8] It is Development Budget Coordination
necessary for petitioner to show Committee Resolution No. 2003-02
both the legal basis for the duty, dated September 4, 2003 that the
and the defendant's or respondent's national internal revenue collections
failure to perform the duty.[9] "It is as defined in Republic Act No. 7160
equally necessary that the shall refer to "cash collections
respondent have the power to based on the [Bureau of Internal
perform the act concerning which Revenue] data as reconciled with
the application for Mandamus is the [Bureau of Treasury]."
made."[10]
Pursuant to the foregoing Article
There was no unlawful neglect on 378 of the Local Government Code
the part of public respondents, Implementing Rules and
particularly the Commissioner of Development Budget Coordination
Internal Revenue, in the Committee Resolution, the Bureau
computation of the internal revenue of Internal Revenue computed the
allotment. Moreover, the act being internal revenue allotment on the
requested of them is not their bases of its actual collections of
ministerial duty; national internal revenue taxes. The
hence, Mandamus does not lie and the value-added tax, excise taxes, and a
Petitions must be dismissed. portion of the documentary stamp
taxes collected by the Bureau of
Respondents' computation of the Customs on imported goods were
internal revenue allotment was not not included in the computation
without legal justification. because "these collections of the
[Bureau of Customs] are remitted
Republic Act No. 7160, Section 284 directly to the [Bureau of
provides that the local government Treasury]"[11] and, as explained by
units shall have a forty percent then Commissioner Jacinto-Henares,
(40%) share in the national internal "are recognized by the Bureau of
revenue taxes based on the Treasury as the collection
collections of the third fiscal year performance of the Bureau of
preceding the current fiscal year. Customs."[12]
Furthermore, the exclusions of Section 29(1) of the Constitution is
certain special taxes from the clear that the expenditure of public
revenue base for the internal funds must be pursuant to an
revenue allotment were made appropriation made by law. Inherent
pursuant to special laws— in Congress' power of appropriation
Presidential Decree No. 1445 and is the power to specify not just the
Republic Act Nos. 6631, 6632, 7160, amount that may be spent but also
7171, 7227, 7643, and 8240—all of the purpose for which it may be
which enjoy the presumption of spent.[15]
constitutionality and validity.
While the disbursement of public
It is basic that laws and funds lies within the mandate of the
implementing rules are presumed to Executive, it is subject to the
be valid unless and until the courts limitations on the amount and
declare the contrary in clear and purpose determined by Congress.
unequivocal terms.[13] Thus, Book VI, Chapter 5, Section 32 of
respondents must be deemed to Executive Order No. 292 directs that
have conducted themselves in good "[a]ll moneys appropriated for
faith and with regularity when they functions, activities, projects and
acted pursuant to the Local programs shall be available solely
Government Code and its for the specific purposes for which
Implementing Rules, the these are appropriated." It is the
Development Budget Coordination ministerial duty of the Department
Committee Resolution, and special of Budget and Management to
laws. desist from disbursing public funds
without the corresponding
At any rate, the issue on the alleged appropriation from Congress. Thus,
"unlawful neglect" of respondents the Department of Budget and
was settled when Congress adopted Management has no power to set
and approved their internal revenue aside fund for purposes outside of
allotment computation in the those mentioned in the
General Appropriations Act of 2012. appropriations law. The proper
remedy of the petitioners is to apply
Mandamus will also not lie to enjoin to Congress for the enactment of a
respondents to withhold the special appropriation law; but it is
P60,750,000,000.00 appropriations still discretionary on the part of
in the General Appropriations Act of Congress to appropriate or not.
2012 for capital outlays of national
agencies and release the same to Thus, on procedural standpoint
the local government units as alone, the Petitions must be
internal revenue allotment. dismissed.

Congress alone, as the II

"appropriating and funding
department of the On the substantive issue, I hold the
Government,"[14] can authorize the view that:
expenditure of public funds through
its power to appropriate. Article VI, 1)Section 284[16] of the Local Government
 Code, limiting the base for the Constitution and statutes. Thus, the
computation of internal revenue allotment Congress and the President are
to national internal revenue taxes is a expressly authorized to determine
proper exercise of the legislative the "just share" of the local
discretion accorded by the government units.
Constitution[17] to determine the "just
share" of the local government units; According to
the ponencia, Mandamus will not lie
The exclusion of certain revenues—value- because "the determination of what
added tax, excise tax, and documentary constitutes the just share of the
local government units in the
stamp taxes collected by the Bureau of
national taxes under the 1987
Customs—from the base for the
2) Constitution is an entirely
computation for the internal revenue
discretionary power"[18] and the
allotment, which was approved in the
discretion of Congress is not subject
General Appropriations Act of 2012, is to external direction. Yet the
not unconstitutional; and disposition on the substantive
issues, in essence, supplants
The deductions to the Bureau of Internal legislative discretion and relegates
3)Revenue's collections made pursuant to it to one that is merely ministerial.
special laws were proper.
III The percentages 30% in the first
year, 35% in the second year, and
We assess the validity of the 40% in the third year, and onwards
internal revenue allotment of the were fixed in Section 284 of the
local government units in light of Local Government Code on the basis
Article X, Section 6 of the 1987 of what Congress determined as the
Constitution, which provides: revenue base, i.e., national internal
revenue taxes. Thus, we cannot
Section 6. Local government units simply declare the phrase "internal
shall have a just share, as revenue" as unconstitutional and
determined by law, in the national strike it from Section 284 of the
taxes which shall be automatically Local Government Code, because
released to them. this would effectively change
Congress' determination of the just
"Just share" does not refer only to a share of the local government units.
percentage, but it can also refer to a By broadening the base for the
determination as to which national computation of the 40% share to
taxes, as well as the percentage of national taxes instead of to national
such classes of national taxes, will internal revenue taxes, we would, in
be shared with local governments. effect, increase the local
There are no constitutional government units' share to an
restrictions on how the share of the amount more than what Congress
local governments should be has determined and intended.
determined other than the
requirement that it be "just." The The limitation provided in Article X,
"just share" is to be determined "by Section 6 of the 1987 Constitution
law," a term which covers both the should be reasonably construed so
as not to unduly hamper the full As aptly observed by respondents,
exercise by the Legislative since 1985, the budget for
Department of its powers. Under the education has tripled to upgrade
Constitution, it is Congress' and improve the facility of the
exclusive power and duty to public school system. The
authorize the budget for the coming compensation of teachers has been
fiscal year. "Implicit in the power to doubled. The amount of
authorize a budget for government P29,740,611,000.00 set aside for
is the necessary function of the Department of Education,
evaluating the past year's spending Culture and Sports under the
performance as well as the General Appropriations Act (R.A. No.
determination of future goals for the 6831), is the highest budgetary
economy."[19] For sure, this Court allocation among all department
has, in the past, acknowledged the budgets. This is a clear compliance
awesome power of Congress to with the aforesaid constitutional
control appropriations. mandate according highest priority
to education.
In Guingona, Jr. v. Carague,[20]
petitioners therein urged that Having faithfully complied
Congress could not give debt therewith, Congress is certainly
service the highest priority in the not without any power, guided
General Appropriations Act of 1990 only by its good judgment, to
because under Article XIV, Section provide an appropriation, that
5(5) of the Constitution, it should be can reasonably service our
education that is entitled to the enormous debt, the greater
highest funding. Rejecting therein portion of which was inherited
petitioners' argument, this Court from the previous
held: administration. It is not only a
matter of honor and to protect the
While it is true that under credit standing of the country. More
Section 5(5), Article XIV of the especially, the very survival of our
Constitution Congress is economy is at stake. Thus, if in
mandated to "assign the highest the process Congress
budgetary priority to appropriated an amount for
education" in order to "insure that debt service bigger than the
teaching will attract and retain its share allocated to education,
rightful share of the best available the Court finds and so holds
talents through adequate that said appropriation cannot
remuneration and other means of be thereby assailed as
job satisfaction and fulfillment," it unconstitutional.[21] (Emphasis
does not thereby follow that the supplied)
hands of Congress are so
hamstrung as to deprive it the Appropriation is not a judicial
power to respond to the function. We do not have the power
imperatives of the national of the purse and rightly so. The
interest and for the attainment power to appropriate public funds
of other state policies or for the maintenance of the
objectives. government and other public needs
distinctively belongs to Congress. President the power to veto any
Behind the Constitutional mandate particular item or items in the
that "[n]o money shall be paid out appropriation bill, without affecting
of the Treasury except in pursuance the other items to which he or she
of an appropriation made by does not object.[27] This function
law"[22] lies the principle that the enables the President to remove
people's money may be spent only any item of appropriation, which in
with their consent. That consent is his or her opinion, is wasteful[28] or
to be expressed either in the unnecessary.
Constitution itself or in valid acts of
the legislature as the direct Considering the entire process, from
representative of the people. budget preparation to legislation,
we can presume that the Executive
Every appropriation is a political act. and Congress have prudently
Allocation of funds for programs, determined the level of
projects, and activities are very expenditures that would be covered
closely related to political decisions. by the anticipated revenues for the
The budget translates the programs government on the basis of
of the government into monetary historical performance and
terms. It is intended as a guide for projections of economic conditions
Congress to follow not only in fixing for the incoming year. The
the amounts of appropriation but determination of just share
also in determining the specific contemplated under Article X,
governmental activities for which Section 6 of the 1987 Constitution is
public funds should be spent. part of this process. Their
interpretation or determination is
The Constitution requires that all not absurd and well within the text
appropriation bills should originate of the Constitution. We should
from the House of Representatives. exercise deference to the
[23] Since the House of interpretation of Congress and of
Representatives, through the district the President of what constitutes
Representatives, is closer to the the "just share" of the local
people and has more interaction government units.
with the local government that is
within their districts than the IV
Senate, it is expected to be more
sensitive to and aware of the local The general appropriations law, like
needs and problems,[24] and thus, any other law, is a product of
have the privilege of taking the deliberations in the legislative body.
initiative in the disposal of the Congress' role in the budgetary
people's money. The Senate, on the process[29] and the procedure for
other hand, may propose the enactment of the appropriations
amendments to the House bill.[25] law has been described in detail as
follows:
The appropriation bill passed by
Congress is submitted to the The Budget Legislation
President for his or her approval. Phase covers the period
[26] The Constitution grants the commencing from the time
Congress receives the President's to the Senate. The Senate version of
Budget, which is inclusive of the the GAB is likewise approved on
[National Expenditure Program] and Third Reading.
the [Budget of Expenditures and
Sources of Financing], up to the The House of Representatives and
President's approval of the GAA. the Senate then constitute a panel
This phase is also known as the each to sit in the Bicameral
Budget Authorization Phase, and Conference Committee for the
involves the significant participation purpose of discussing and
of the Legislative through its harmonizing the conflicting
deliberations. provisions of their versions of the
GAB. The "harmonized" version of
Initially, the President's Budget is the GAB is next presented to the
assigned to the House of President for approval. The
Representatives' Appropriations President reviews the GAB, and
Committee on First Reading. The prepares the Veto Message where
Appropriations Committee and its budget items are subjected to direct
various Sub-Committees schedule veto, or are identified for conditional
and conduct budget hearings to implementation.
examine the PAPs of the
departments and agencies. If, by the end of any fiscal year, the
Thereafter, the House of Congress shall have failed to pass
Representatives drafts the General the GAB for the ensuing fiscal year,
Appropriations Bill (GAB). the GAA for the preceding fiscal
year shall be deemed re-enacted
The GAB is sponsored, presented and shall remain in force and effect
and defended by the House of until the GAB is passed by the
Representatives' Appropriations Congress.[30] (Emphasis in the
Committee and Sub-Committees in original, citations omitted)
plenary session. As with other laws,
the GAB is approved on Third The general appropriations law is a
Reading before the House of special law pertaining specifically to
Representatives' version is appropriations of money from the
transmitted to the Senate. public treasury. The "just share" of
the local government units is
After transmission, the Senate incorporated as the internal revenue
conducts its own committee allotment in the general
hearings on the GAB. To expedite appropriations law. By the very
proceedings, the Senate may essence of how the general
conduct its committee hearings appropriations law is enacted,
simultaneously with the House of particularly for this case the General
Representatives' deliberations. The Appropriations Act of 2012, it can be
Senate's Finance Committee and its presumed that Congress
Sub-Committees may submit the has purposefully, deliberately, and
proposed amendments to the GAB precisely approved the revenue
to the plenary of the Senate only base, including the exclusions, for
after the House of Representatives the internal revenue allotment.
has formally transmitted its version
A basic rule in statutory In that case, the General
construction is that as between a Appropriations Acts of 1999, 2000,
specific and general law, the former and 2001 contained provisos
must prevail since it reveals the earmarking for each corresponding
legislative intent more clearly than year the amount of
a general law does.[31] The specific P5,000,000,000.00 of the local
law should be deemed an exception government units' internal revenue
to the general law.[32] allotment for the Local Government
Service Equalization Fund and
The appropriations law is a special imposing the condition that "such
law, which specifically outlines the amount shall be released to the
share in the national fund of all local government units subject to
branches of the government, the implementing rules and
including the local government regulations, including such
units. On the other hand, the mechanisms and guidelines for the
National Internal Revenue Code is a equitable allocations and
general law on Taxation, generally distribution of said fund among the
applicable to all persons. Being a local government units subject to
specific law on appropriations, the the guidelines that may be
General Appropriations Act should prescribed by the Oversight
be considered an exception to the Committee on Devolution." This
National Internal Revenue Code Court struck down the provisos in
definition of national internal the General Appropriations Acts of
revenue taxes insofar as the 1999, 2000, and 2001 as
internal revenue allotments of the unconstitutional, and the Oversight
local government units are Committee on Devolution
concerned. The General resolutions promulgated pursuant to
Appropriations Act of 2012 is the these provisos. This Court held that
clear and specific expression of the to subject the distribution and
legislative will—that the local release of the Local Government
government units' internal revenue Service Equalization Fund, a portion
allotment is 40% of national internal of the internal revenue allotment, to
revenue taxes excluding tax the rules and guidelines prescribed
collections of the Bureau of Customs by the Oversight Committee on
—and must be given effect. That Devolution makes the
this was the obvious intent can also release not automatic, a flagrant
be gleaned from violation of the constitutional and
Congress' Adoption and approval of statutory mandate that the "just
internal revenue allotments using share" of the local government units
the same revenue base in the "shall be automatically released to
General Appropriations Act from them."
1992 to 2011.
This Court further found that the
The ruling in Province of Batangas allocation of the shares of the
v. Romulo[33] that a General different local government units in
Appropriations Act cannot amend the internal revenue allotment as
substantive law must be read in its provided in Section 285[34] of the
context. Local Government Code was not
followed, as the resolutions of the appropriately dealt with in separate
Oversight Committee on Devolution enactments.
prescribed different sharing
schemes of the Local Government The doctrine of "inappropriate
Service Equalization Fund. This provision" was well elucidated
Court held that the percentage in Henry v. Edwards, ... , thus:
sharing of the local government
units fixed in the Local Government Just as the President may not use
Code are matters of substantive his item-veto to usurp constitutional
law, which could not be modified powers conferred on the legislature,
through appropriations laws or neither can the legislature deprive
General Appropriations Acts. This the Governor of the constitutional
Court explained that Congress powers conferred on him as chief
cannot include in a general executive officer of the state by
appropriation bill matters that including in a general appropriation
should be more properly enacted in bill matters more properly enacted
a separate legislation. in separate legislation. The
Governor's constitutional power to
Province of Batangas cited in turn veto bills of general legislation . . .
this Court's ruling in Philippine cannot be abridged by the careful
Constitution Association placement of such measures in a
(PHILCONSA) v. Enriquez,[35] which general appropriation bill, thereby
defined what were considered forcing the Governor to choose
inappropriate provisions in between approving unacceptable
appropriation laws: substantive legislation or vetoing
'items' of expenditures essential to
As the Constitution is explicit that the operation of government. The
the provision which Congress can legislature cannot by location of a
include in an appropriations bill bill give it immunity from executive
must "relate specifically to some veto. Nor can it circumvent the
particular appropriation therein" and Governor's veto power over
"be limited in its operation to the substantive legislation by artfully
appropriation to which it relates," it drafting general law measures so
follows that any provision which that they appear to be true
does not relate to any particular conditions or limitations on an item
item, or which extends in its of appropriation. ... We are no more
operation beyond an item of willing to allow the legislature to use
appropriation, is considered "an its appropriation power to infringe
inappropriate provision" which can on the Governor's constitutional
be vetoed separately from an item. right to veto matters of substantive
Also to be included in the category legislation than we are to allow the
of "inappropriate provisions" are Governor to encroach on the
unconstitutional provisions and constitutional powers of the
provisions which are intended to legislature. In order to avoid this
amend other laws, because clearly result, we hold that, when the
these kind[s] of laws have no place legislature inserts inappropriate
in an appropriations bill. These are provisions in a general
matters of general legislation more appropriation bill, such provisions
must be treated as 'items' for revenue base, or to define what are
purposes of the Governor's item included in this base, and the rate
veto power over general for the computation of the internal
appropriation bills.[36] (Emphasis in revenue allotment. Absent any clear
the original) and unequivocal breach of the
Constitution, this Court should
In PHILCONSA, this Court upheld the proceed with restraint when a
President's veto of the proviso in the legislative act is challenged in
Special Provision of the item on debt deference to a co-equal branch of
service requiring that "any payment the Government.[38] "If a particular
in excess of the amount herein statute is within the constitutional
appropriated shall be subject to the powers of the Legislature to enact,
approval of the President of the it should be sustained whether the
Philippines with the concurrence of courts agree or not in the wisdom of
the Congress of the Philippines."[37] its enactment."[39]
This Court held that the proviso was
an inappropriate provision because V
it referred to funds other than the
P86,323,438,000.00 appropriated The ponencia further elaborates
for debt service m the General "automatic release" in Section 286
Appropriations Act of 1991. of the Local Government Code as
"without need for a yearly
Province of Batangas referred to a appropriation." This is contrary to
provision m the General the Constitution. A statute cannot
Appropriations Act, which was amend the Constitutional
clearly shown to contravene the requirement.
Constitution,
while PHILCONSA referred to an Section 286 of the Local
inappropriate provision, i.e., a Government Code states:
provision that was clearly
extraneous to any definite item of Section 286. Automatic Release of
appropriation in the General Shares. — (a) The share of each
Appropriations Act, which local government unit shall be
incidentally constituted an implied released, without need of any
amendment of another law. further action, directly to the
provincial, city, municipal or
What is involved here is the internal barangay treasurer, as the case
revenue allotment of the local may be, on a quarterly basis within
government units in the five (5) days after the end of each
Government Appropriations Act of quarter, and which shall not be
2012, the determination of which subject to any Lien or holdback that
was, under the Constitution, left to may be imposed by the National
the sole prerogative of the Government for whatever purpose.
legislature. Congress has full
discretion to determine the "just Appropriation and release refer to
share" of the local government two (2) different actions. "An
units, in which authority necessarily appropriation is the setting apart by
includes the power to fix the law of a certain sum from the public
revenue for a specified Congress in a general appropriation
purpose."[40] It is the Congressional law:
authorization required by the
Constitution for spending.[41] Article VI Section 29 (1) of the 1987
Release, on the other hand, has to Constitution firmly declares that:
do with the actual disbursement or "No money shall be paid out of the
spending of funds. "Appropriations Treasury except in pursuance of an
have been considered 'released' if appropriation made by law." This
there has already been an allotment constitutional edict requires that the
or authorization to incur obligations GAA be purposeful, deliberate, and
and disbursement authority."[42] precise in its provisions and
This is a function pertaining to the stipulations. As such, the
Executive Department, particularly requirement under Section 20 of
the Department of Budget and R.A. No. 8439 that the amounts
Management, in the Execution phase needed to fund the Magna
of the budgetary process.[43] Carta benefits were to be
appropriated by the GAA only meant
Article VI, Section 29(1) of the that such funding must be
Constitution is explicit that: purposefully, deliberately, and
precisely included in the GAA. The
Section 29. (1) No money shall be funding for the Magna
paid out of the Treasury except in Carta benefits would not materialize
pursuance of an appropriation made as a matter of course simply by fiat
by law. of R.A. No. 8439, but must initially
be proposed by the officials of the
In other words, before money can DOST as the concerned agency for
be taken out of the Government submission to and consideration by
Treasury for any purpose, there Congress. That process is what
must first be an appropriation made complies with the constitutional
by law for that specific purpose. edict. R.A. No. 8439 alone could not
Neither of the fiscal officers or any fund the payment of the benefits
other official of the Government is because the GAA did not mirror
authorized to order the expenditure every provision of law that referred
of unappropriated funds. Any other to it as the source of funding. It is
course would give to these officials worthy to note that the DOST itself
a dangerous discretion. acknowledged the absolute need for
the appropriation in the GAA.
This Court has pronounced that to Otherwise, Secretary Uriarte, Jr.
be valid, an appropriation must be would not have needed to request
specific, both in amount and the OP for the express authority to
purpose.[44] In Nazareth v. Villar, use the savings to pay the Magna
[45] this Court held that even if Carta benefits.[46] (Citation
there is a law authorizing the grant omitted)
of Magna Carta benefits for science
and technology personnel, the All government expenditures must
funding for these benefits must be be integrated in the general
"purposefully, deliberately, and appropriations law. This is revealed
precisely" appropriated for by by a closer look into the entire
government budgetary and
appropriation process. Estimated expenditures
and proposed
The first phase in the process is the appropriations
budget preparation. The Executive necessary for the
prepares a National Budget that is support of the
reflective of national objectives, Government for the
strategies, and plans for the (a)
ensuing fiscal year,
following fiscal year. Under including those
Executive Order No. 292 of the financed from
Administrative Code of 1987, the
operating revenues and
national budget is to be "formulated
from domestic and
within the context of a regionalized
foreign borrowings;
government structure and of the
totality of revenues and other
receipts, expenditures and
Estimated receipts
borrowings of all levels of during the ensuing
government and of government- fiscal year under laws
owned or controlled existing at the time the
corporations."[47] budget is transmitted
(b)
and under the revenue
The budget may include the proposals, if any,
following: forming part of the
year's financing
A budget message program;
setting forth in
brief the Actual appropriations,
government's expenditures, and
(c)
budgetary thrusts receipts during the last
for the budget completed fiscal year;
year, including
their impact on Estimated expenditures
(1 development and receipts and actual
) goals, monetary or proposed
(d)
and fiscal appropriations during
objectives, and the fiscal year in
generally on the progress;
implications of
the revenue, (e) Statements of the
expenditure and condition of the
debt proposals; National Treasury at
and the end of the last
completed fiscal year,
the estimated condition
Summary of the Treasury at the
(2 financial end of the fiscal year
) statements setting in progress and the
forth:
 estimated condition of All appropriation proposals must be
the Treasury at the end included in the budget preparation
of the ensuing fiscal process.[51] Congress then
year, taking into "deliberates or acts on the budget
account proposals . . . in the exercise of its
the Adoption of own judgment and wisdom [and]
financial proposals formulates an appropriation
contained in the budget act."[52] The Constitution states
and showing, at the that "Congress may not increase the
same time, the appropriations recommended by the
unencumbered and President for the operation of the
unobligated cash Government as specified in the
resources budget."[53] Furthermore, "all
expenditures for (1)
personnel Retirement premiums,
Essential facts
government service insurance, and
regarding the bonded
other similar fixed expenditures, (2)
and other long-term
principal and interest on public
obligations and
debt, (3) national government
indebtedness of the guarantees of obligations which are
(f)
Government, both drawn upon, are automatically
domestic and foreign, appropriated."[54]
including identification
of recipients of loan Parenthetically, the General
proceeds; and Appropriations Act of 2012 includes
the budgets for entities enjoying
Such other financial fiscal autonomy,[55] and for debt
statements and data as service that is automatically
are deemed necessary appropriated, under the following
or desirable in order to titles:
(g)
make known in
reasonable detail the 1. Title XXIX, the Judiciary;
financial condition of 2. Title XXX, Civil Service
the government.[48] Commission;
The President, in accordance with 3. Title XXXI, Commission on
Article VII, Section 22 of the Audit;
Constitution, submits the budget of 4. Title XXXII, Commission on
expenditures and sources of Elections;
financing, which is also called the 5. Title XXXIII, Office of the
National Expenditure Plan, to Ombudsman;
Congress as the basis of the general 6. Annex A, Automatic
appropriation bill,[49] which will be Appropriations, which include
discussed, debated on, and voted the interest payments for debt
upon by Congress. Also included in service and the internal
the budget submission are the revenue allotment of the local
proposed expenditure levels of the government units; and
Legislative and Judicial Branches, 7. Annex B, Debt Service —
and of Constitutional bodies.[50] Principal Amortizations.[56]
"Automatic appropriation" is not the Batangas and Pimentel v. Aguirre,
same as "automatic release" of [64] ruled that such withholding of
appropriations. As stated earlier, the the internal revenue allotment
power to appropriate belongs to contingent upon whether revenue
Congress, while the responsibility of collections could meet the revenue
releasing appropriations belongs to targets originally submitted by the
the Department of Budget and President contravened the
Management.[57] constitutional mandate on
automatic release.
Items of expenditure that are
automatically appropriated, like The automatic release of the local
debt service, are approved at its government units' shares is a basic
annual levels or on a lump sum by feature of local fiscal autonomy.
Congress upon due deliberations, Nonetheless, as clarified
without necessarily going into the in Pimentel:
details for implementation by the
Executive.[58] However, just Under the Philippine concept of local
because an expenditure is autonomy, the national government
automatically appropriated does not has not completely relinquished all
mean that it is no longer included in its powers over local governments,
the general appropriations law. including autonomous regions. Only
administrative powers over local
On the other hand, the "automatic affairs are delegated to political
release" of approved annual subdivisions. The purpose of the
appropriations requires the full delegation is to make governance
release[59] of appropriations more directly responsive and
without any condition.[60] Thus, "no effective at the local levels. In turn,
report, no release" policies cannot economic, political and social
be enforced against institutions with development at the smaller political
fiscal autonomy. Neither can a units are expected to propel social
"shortfall in revenues" be and economic growth and
considered as valid justification to development. But to enable the
withhold the release of approved country to develop as a whole, the
appropriations.[61] programs and policies effected
locally must be integrated and
With regard to the local government coordinated towards a common
units, the automatic release of national goal. Thus, policy-setting
internal revenue allotments under for the entire country still lies in the
Article X, Section 6 of the President and Congress. As we
Constitution binds both the stated in Magtajas v. Pryce
Legislative and Executive Properties Corp., Inc., municipal
departments.[62] In ACORD, Inc. v. governments are still agents of the
Zamora,[63] the [General national government.[65] (Citation
Appropriations Act 2000] of placed omitted)
P10,000,000,000.00 of the [internal
revenue allotment] under The release of the local government
"unprogrammed funds." This Court, units' share without an
citing Province of appropriation, as what
the ponencia proposes, substantially [10] Alzate v. Aldana, 118 Phil. 220,
amends the Constitution. It also 225 (1963) [Per J. Barrera, En Banc].
gives local governments a level of
fiscal autonomy not enjoyed even [11] Rollo (G.R. No. 199802), p. 198,
by constitutional bodies like the Memorandum of Respondents.
Supreme Court, the Constitutional
Commissions, and the Ombudsman. [12] Id. at 217-218, Memorandum of
It bypasses Congress as mandated Petitioner.
by the Constitution.
[13] See Abakada Guro Party List v.
"Without appropriation" also Purisima, 584 Phil. 246 (2008) [J.
substantially alters the relationship Corona, En Banc].
of the President to local
governments, effectively [14] Dissenting Opinion of J. Padilla
diminishing, if not removing, in Gonzales v. Macaraig, Jr., 269
supervision as mandated by the Phil. 472, 516 (1990) [Per J.
Constitution. Melencio-Herrera, En Banc].

ACCORDINGLY, I vote [15] See Verceles, Jr. v. Commission

to DISMISS the Petitions. on Audit, G.R. No. 211553,
September 13, 2016 <
http://sc.judiciary.gov.ph/pdf/web/vi
ewer.html?file=/jurisprudenee/
2016/september2016/211553.pdf >
[1] CONST., art. X, sec. 6 [Per J. Brion, En Banc]; Atitiw v.
Zamora, 508 Phil. 321 (2005) [Per J.
[2] Rollo (G.R. No. 199802), pp. 4-5. Tinga, En Banc].

[3] Id. at 24. [16] LOCAL GOVT. CODE, sec. 284

provides:
[4] Id. at 24-25.
Section 284. Allotment of Internal
[5] Rollo (G.R. No. 208488), p. 15. Revenue Taxes.- Local government
units shall have a share in the
[6] Id. at 11. national internal revenue taxes
based on the collection of the third
[7] Id. at 15-16. fiscal year preceding the current
fiscal year as follows:
[8] Bagumbayan-VNP Movement,
Inc. v. Commission on Elections,
(a) on the first year of the effectivity
G.R. No. 222731 (Resolution), March
of this Code, thirty percent (30%);
8, 2016 <
(b) on the second year, thirty-five
http://sc.judiciary.gov.ph/pdf/web/vi
percent (35%); and
ewer.html?file=/jurisprudence/
(c) on the third year and thereafter,
2016/march2016/222731.pdf > 10
forty percent (40%).
[Per J. Leonen, En Banc].

[9] Id. Provided, That in the event that the

national government incurs an
unmanageable public sector deficit,
the President of the Philippines is [22] CONST., art. VI, sec. 29(1).
hereby authorized, upon the
recommendation of Secretary of [23] CONST., art. VI, sec. 24.
Finance, Secretary of Interior and
Local Government, and Secretary of [24] See Tolentino v. Secretary of
Budget and Management, and Finance, 305 Phil. 686 (1994) [Per J.
subject to consultation with the Mendoza, En Banc].
presiding officers of both Houses of
Congress and the presidents of the [25] CONST., art. VI, sec. 24.
"liga", to make the necessary
adjustments in the internal revenue [26] CONST., art. VI, sec. 27(1).
allotment of local government units
[27] CONST., art. VI, sec. 27(2).
but in no case shall the allotment be
less than thirty percent (30%) of the [28] Concurring Opinion of J.
collection of national internal Carpio, Belgica v. Ochoa, 721 Phi1.
revenue taxes of the third fiscal 416, 613-654 (2013) [Per J. Perlas
year preceding the current fiscal Bernabe, En Banc].
year: Provided, further, That in the
first year of the effectivity of this [29] The budgetary process was
Code, the local government units described as consisting of four
shall, in addition to the thirty phases: (1) Budget Preparation; (2)
percent (30%) internal revenue Budget Legislation; (3)
allotment which shall include the Budget Execution; and (4)
cost of devolved functions for Acountability. Congress enters the
essential public services, be entitled picture in the second phase.
to receive the amount equivalent to
the cost of devolved personal [30] Araullo v. Aquino III, 737 Phil.
services. 457, 547-549 (2014) [Per J.
Bersamin, En Banc].
[17] CONST., art. X, sec. 6 states:
[31] See Vinzons-Chato v. Fortune
Section 6. Local government units Tobacco Corp., 552 Phil. 101 (2007)
shall have a just share, as [Per J. Ynares Santiago, Third
determined by law, in the national Division]; De Jesus v. People, 205
taxes which shall be automatically Phil. 663 (1983) [Per J. Escolin, En
released to them. Banc].

[18] Ponencia, p. 6. [32] See Lopez, Jr. v. Civil Service

Commission, 273 Phil. 147 (1991)
[19] Separate Concurring Opinion of [Per J. Sarmiento, En Banc].
J. Leonen in Belgica v. Ochoa, 721
Phil. 41 6, 686 (2013) [Per J. Perlas- [33] 473 Phil. 806 (2004) [Per J.
Bernabe, En Banc]. Callejo, Sr., En Banc].

[20] 273 Phil. 443 (1991) [Per J. [34] LOCAL GOVT. CODE, sec. 285
Gancayco, En Banc]. states:

[21] Id. at 451.

Section 285. Allocation to Local http://sc.judiciary.gov.ph/pdf/web/vi
Government Units. — The share of ewer.html?file=/jurisprudence/
local government units in the 2018/january2018/219683.pdf >
internal revenue allotment shall be [Per J. Bersamin, En Banc] citing
allocated in the following manner: Goh v. Bayron, 748 Phil. 282 (2014)
(a) Provinces - Twenty-three percent [Per J. Carpio, En Banc].
(23%);
(b) Cities - Twenty-three percent [45] 702 Phil. 319 (2013) [Per J.
(23%); Bersamin, En Banc].
(c) Municipalities - Thirty-four
percent (34%); and [46] Id. at 338-339.
(d) Barangays - Twenty percent
(20%). [47] ADM. CODE, Book VI, chap. 2,
sec. 3.
[35] 305 Phil. 546 (1994) [Per J.
[48] ADM. CODE, Book VI, chap. 3,
Quiason, En Banc].
sec. 12.
[36] Id. at 577-578.
[49] CONST., art. VII, sec. 22.
[37] Id. at 573.
[50] ADM. CODE, Book VI, chap. 3,
[38] See Lawyers Against Monopoly sec. 12.
and Poverty v. Secretary of Budget
[51] ADM. CODE, Book VI, chap. 4,
and Management, 686 Phil. 357
sec. 27.
(2012) [Per J. Mendoza, En
Banc]; Estrada v. Sandiganbayan,
[52] Lawyers Against Monopoly and
421 Phil. 290 (2001) [Per J.
Poverty v. Secretary of Budget and
Bellosillo, En Banc].
Management, 686 Phil. 357, 375
(2012) [Per J. Mendoza, En Banc].
[39] Tajanlañgit, et al. v. Peñaranda,
et al., 37 Phil. 155, 160 (1917) (Per
[53] CONST., art. VI, sec. 25(1).
J. Johnson, First Division].
[54] ADM. CODE, Book VI, chap. 4,
[40] Bengzon v. Secretary of Justice,
sec. 26.
62 Phil. 912, 916 (1936) [Per J.
Malcolm, En Banc]. [55] See Commission on Human
Rights Employees' Association v.
[41] Araullo v. Aquino III, 737 Phil.
Commission on Human Rights, 528
457, 571 (2014) (Per J. Bersamin, En
Phil. 658, 678 (2006) [Per J. Chico-
Banc] citing Gonzales v. Raquiza,
Nazario, Special Second Division].
259 Phil. 736 (1989) [Per C.J.
"Fiscal Autonomy shall mean
Fernan, Third Division].
independence or freedom regarding
financial matters from outside
[42] Id.
control and is characterized by self
[43] Id. direction or self determination.... [it]
means more than just the automatic
[44] Dela Cruz v. Ochoa, Jr., G.R. No. and regular release of approved
219683, January 23, 2018 < appropriation, and also
encompasses, among other things: [63] 498 Phil. 615 (2005) [Per J.
(1) budget preparation and Carpio Morales, En Banc].
implementation; (2) flexibility in
fund utilization of approved [64] 391 Phil. 84 (2000) [Per J.
appropriations; and (3) use of Panganiban, En Banc].
savings and disposition of receipts."
[65] Id. at 102.
[56] For 2012 GAA, please look at
SUM2012 (Summary of FY 2012 New
Appropriations) folder. The Annexes
to the 2012 New Appropriations
consist of (1) Automatic
Appropriations, which included the
interest payments for debt service; SEPARATE OPINION
and (2) Debt Service Principal
CAGUIOA, J.:
Amortization. Please refer to the AA
and DSPA folders for the details of Every statute has in its favor the
the automatic appropriations and presumption of constitutionality.
debt service appropriations, This presumption rests on the
respectively. The yearly GAAs can doctrine of separation of powers,
be accessed from the Department of which enjoins the three branches of
Budget and Management website government to encroach upon the
under DBM Publications. duties and powers of another.[1] It
is based on the respect that the
[57] See Civil Service Commission v.
judicial branch accords to the
Department of Budget and
legislature, which is presumed to
Management 517 Phil. 440 (2006)
have passed every law with careful
[Per J. Carpio Morales, En Banc].
scrutiny to ensure that it is in
[58] See Guingona, Jr. v. Carague, accord with the Constitution.[2]
273 Phil. 443 (1991) [Per J. Thus, before a law is declared
Gancayco, En Banc]. unconstitutional, there must be a
clear and unequivocal showing that
[59] Civil Service Commission v. what the Constitution prohibits, the
Department of Budget and statute permits.[3] In other words,
Management, 517 Phil. 440 (2006) laws shall not be declared invalid
[Per J. Carpio Morales, En Banc]. unless the conflict with the
Constitution is clear beyond
[60] Civil Service Commission v. reasonable doubt.[4] To doubt is to
Department of Budget and sustain the constitutionality of the
Management, 502 Phil. 372 (2005) assailed statute.[5]
[Per J. Carpio Morales, En Banc].
In the present case, doubt exists as
[61] Id. to whether Section 284 of the Local
Government Code (LGC) directly
[62] ACORD Inc. v. Zamora, 498 contravenes Section 6, Article X of
Phil. 615 (2005) [Per J. Carpio the 1987 Constitution because the
Morales, En Banc]. latter is susceptible of two
interpretations.
Section 6, Article X of the 1987 determining the "just share" of the
Constitution states: LGUs, which authority necessarily
includes the power to fix the
SECTION 6. Local government units revenue base (i.e., only a portion of
shall have a just share, as "national taxes") and the rate for
determined by law, in the national the computation of the allotment to
taxes which shall be automatically the LGUs.
released to them.
It is a settled rule in the
In Province of Batangas v. Romulo, construction of laws, that "[i]f there
[6] the Court explained that the is doubt or uncertainty as to the
foregoing provision mandates that meaning of the legislature, if the
(1) the local government units words or provisions of the statute
(LGUs) shall have a "just share" in are obscure, or if the enactment is
the national taxes; (2) the "just fairly susceptible of two or more
share" shall be determined by law; constructions, that interpretation
and (3) the "just share" shall be will be adopted which will avoid the
automatically released to the LGUs. effect of unconstitutionality, even
though it may be necessary, for this
The issue now before this Court is purpose, to disregard the more
what constitutes a "just share". usual or apparent import of the
language employed."[7]
The ponencia offers a restrictive
interpretation of the term "just I find the foregoing rule applicable
share" as referring only to a even to the construction of the
percentage or fractional value of the Constitution. Thus, as between
entire pie of national taxes. This the ponencia's restrictive approach
necessarily results in finding Section and Justice Leonen's liberal
284 of the LGC too restrictive as it approach, I submit that the latter
limits the pie to internal revenue should be upheld. The Court's ruling
taxes only. Thus, the ponencia finds in Remman Enterprises, Inc. v.
the words "internal revenue" in Professional Regulatory Board of
Section 284 of the LGC Real Estate Service,[8] lends
constitutionally infirm and deems credence:
the same as not written.
Indeed, "all presumptions are
Justice Leonen, on the other hand, indulged in favor of
provides a liberal interpretation. constitutionality; one who attacks a
According to him the term "just statute, alleging unconstitutionality
share" may refer to the classes of must prove its invalidity beyond a
national taxes as well as to the reasonable doubt; that a law may
percentages of such classes, since work hardship does not render it
other than the term "just", no other unconstitutional; that if any
restrictions on how the share of the reasonable basis may be
LGUs should be determined are conceived which supports the
provided by the Constitution. He statute, it will be upheld, and
posits that the Constitution left the the challenger must negate all
sole discretion to Congress in possible bases; that the courts are
not concerned with the wisdom, infirm, I agree with
justice, policy, or expediency of a the ponencia's position that the
statute; and that a liberal operative fact doctrine should apply
interpretation of the to this case. The doctrine nullifies
constitution in favor of the the effects of an unconstitutional
constitutionality of legislation law or an executive act by
should be adopted."[9] recognizing that the existence of a
statute prior to a determination of
Moreover, I join the position of unconstitutionality is an operative
Justice Leonen that the Constitution fact and may have consequences
gave Congress the absolute that cannot always be ignored. It
authority and discretion to applies when a declaration of
determine the LGUs' "just share" — unconstitutionality will impose an
which include both the classes of undue burden on those who have
national taxes and the percentages relied on the invalid law.[10]
thereof. The exercise of this plenary In Araullo v. Aquino III,[11] the
power vested upon Congress, doctrine was held to apply to
through the latter's enactment of recognize the positive results of the
laws, including the LGC, the implementation of the
National Internal Revenue Code and unconstitutional law or executive
the general appropriations act, is issuance to the economic welfare of
beyond the Court's judicial review the country. Not to apply the
as this pertains to policy and doctrine of operative fact would
wisdom of the legislature. result in most undesirable
wastefulness and would be
I echo Justice Leonen's statement enormously burdensome for the
that appropriation is not a judicial Government.[12]
function. Congress, which holds the
power of the purse, is in the best In the same vein, petitioners cannot
position to determine the "just claim deficiency IRA from previous
share" of the LGUs based on their fiscal years as these funds may
needs and circumstances. Courts have already been used for
cannot provide a new formula for government projects, the undoing of
the Internal Revenue Allotments which would not only be physically
(IRA) or substitute its own impossible but also impractical and
determination of what "just share" burdensome for the Government.
should be, absent a clear showing
that the assailed act of Congress Verily, considering that the
(i.e., Section 284 of the LGC) is decisions of this Court can only be
prohibited by the fundamental law. applied prospectively, I find the
To do so would be to tread the Court's computation of "just share"
dangerous grounds of judicial of no practical value to petitioners
legislation and violate the deeply and other LGUs; because while
rooted doctrine of separation of LGUs, in accordance with the
powers. Court's ruling, are now entitled to
share directly from national taxes,
Finally, even assuming that Section Congress, as they may see fit, can
284 of the LGC is constitutionally simply enact a law lowering the
percentage shares of LGUs [12] Id. at 624-625.
equivalent to the amount initially
granted to them. In fine, and in all
practicality, this case is much ado
over nothing.
DISSENTING OPINION
For the foregoing reasons, I vote
to DISMISS the Petitions. REYES, JR., J.:

At the root of the controversy is the

basis for computing the share of
Local Government Units (LGUs) in
[1] See Cawaling, Jr. v. Commission the national taxes. The petitioners
on Elections, 420 Phil. 524, 530 in these cases argue that certain
(2001). national taxes were excluded from
the amount upon which the Internal
[2] See id.; see also Estrada v. Revenue Allotment (IRA) was based,
Sandiganbayan, 421 Phil. 290 in violation of the constitutional
(2001). mandate under Section 6, Article X
of the 1987 Constitution.[1]
[3] Garcia v. Commission on
Elections, 297 Phil. 1034, 1047 The ponencia agreed with the
(1993). petitioners and declared the term
"internal revenue" in Sections 284
[4] Rama v. Moises, G.R. No. and 285 of the Local Government
197146, August 8, 2017. Code (LGC)[2] of 1991 as
constitutionally infirm. I respectfully
[5] See Garcia v. Commission on dissent from the majority Decision
Elections, supra note 3, at 1047. for unduly encroaching on the
plenary power of Congress to
[6] 473 Phil. 806, 830 (2004). determine the just share of LGUs in
the national taxes.
[7] In re Guariña, 24 Phil. 37, 47
(1913). As exhaustively discussed in the
majority Decision, the 1987
[8] 726 Phil. 104 (2014). Constitution emphasized the thrust
towards local autonomy and
[9] Id. at 126. Emphasis supplied.
decentralization of administration.
[10] Film Development Council of [3] The Constitution also devised
the Phils. v. Colon Heritage Realty ways of expanding the financial
Corp., 760 Phil. 519, 552-553 resources of LGUs, in order to
(2015), citing Yap v. Thenamaris enhance their ability to operate and
Ship's Management, 664 Phil. 614, function.[4] LGUs were granted
627 (2011). broad taxing powers,[5] an
equitable share in the proceeds of
[11] 737 Phil. 457 (2014). the utilization and development of
national wealth,[6] and a just share
in the national taxes.[7]
Yet, despite the recognition to charges shall accrue exclusively to
decentralize the administration for a the local governments.
more efficient delivery of services,
the powers and authorities granted SECTION 6. Local government units
to LGUs remain constitutionally shall have a just share, as
restrained through one branch of determined by law, in the national
the government—Congress. This is taxes which shall be automatically
apparent from the following released to them.
provisions of the 1987 Constitution:
SECTION 7. Local governments shall
Article X be entitled to an equitable share in
Local Government the proceeds of the utilization and
development of the national wealth
General Provisions within their respective areas, in the
manner provided by law,
xxxx including sharing the same with the
inhabitants by way of direct
SECTION 3. The Congress shall benefits. (Emphasis and
enact a local government underscoring Ours)
code which shall provide for a more
responsive and accountable local In line with the mandate to enact a
government structure instituted local government code, Congress
through a system of passed Republic Act (R.A.) No. 7160,
decentralization with effective otherwise known as the LGC of
mechanisms of recall, initiative, and 1991, to serve as the general
referendum, allocate among the framework for LGUs. The LGC of
different local government units 1991 laid down the general powers
their powers, responsibilities, and attributes of LGUs, the
and resources, and provide for the qualifications and election of local
qualifications, election, appointment officials, the power of LGUs to
and removal, term, salaries, powers legislate and create their own
and functions and duties of local sources of revenue, the scope of
officials, and all other matters their taxing powers, and the
relating to the organization and allocated share of LGUs in the
operation of the local units. national taxes, among other things.
xxxx Under Section 6 of the LGC of 1991,
Congress also retained the power to
SECTION 5. Each local government create, divide, merge or abolish a
unit shall have the power to create province, city, municipality, or any
its own sources of revenues and to other political subdivision.[8] Thus,
levy taxes, fees, and LGUs have no inherent powers, and
charges subject to such they only derive their existence and
guidelines and limitations as the authorities from an enabling law
Congress may provide, consistent from Congress. The power of
with the basic policy of local Congress, in turn, is checked by the
autonomy. Such taxes, fees, and relevant provisions of the
Constitution. The Court, in Lina, Jr.
v. Paño,[9] discussed this principle With respect to the share of LGUs in
as follows: the national taxes, Section 6, Article
X of the 1987 Constitution limits the
Nothing in the present constitutional power of Congress in three (3)
provision enhancing local autonomy ways: (a) the share of LGUs must be
dictates a different conclusion. just; (b) the just share in the
national taxes must be determined
The basic relationship between the by law; and (c) the share must
national legislature and the local be automatically released to the
government units has not been LGU.[12] The Constitution, however,
enfeebled by the new provisions in does not prescribe the exact
the Constitution strengthening the percentage share of LGUs in the
policy of local autonomy. Without national taxes. It left Congress with
meaning to detract from that policy, the authority to determine how
we here confirm that Congress much of the national taxes are the
retains control of the local LGUs' rightly entitled to receive.
government units although in
significantly reduced degree now Concomitant with this authority is
than under our previous the mandate granted to Congress to
Constitutions. The power to create allocate these resources among the
still includes the power to destroy. LGUs, in a local government code.
The power to grant still includes the [13] Accordingly, in Section 284 of
power to withhold or recall. True, the LGC of 1991, Congress
there are certain notable established the IRA providing LGUs
innovations in the Constitution, like with a 40% share in "the
the direct conferment on the local national internal revenue taxes
government units of the power to based on the collection of the third
tax (citing Art. X, Sec. 5, fiscal year preceding the current
Constitution), which cannot now be fiscal year."[14] This percentage
withdrawn by mere statute. By and share may not be changed, unless
large, however, the national the National Government incurs an
legislature is still the principal unmanageable public-sector deficit.
of the local government units, The National Government may not
which cannot defy its will or also lower the IRA to less than 30%
modify or violate it.[10] of the national internal revenue
(Emphasis Ours) taxes collected on the third fiscal
year preceding the current fiscal
While the discussion in Lina relates year.[15] The LGC of 1991 further
specifically to the Legislative requires the quarterly release of the
Power of LGUs, the Court has applied IRA, within five (5) days after the
the same principle with respect to end of each quarter, without
the other powers conferred by any Lien or holdback imposed by the
Congress.[11] In other words, national government for whatever
despite the shift towards local purpose. [16]
autonomy, the National
Government, through Congress, In this case, the petitioners
retains control over LGUs— notably do not assail the
albeit, in a lesser degree. percentage share (i.e., 40%) of
LGUs in the national taxes. They (a) R.A. No. 7171,[17] which
instead challenge the base amount grants 15% of the excise taxes on
of the IRA from which the 40% is locally manufactured Virginia type
taken, arguing that all "national cigarettes to provinces producing
taxes" and not only "national Virginia tobacco;
internal revenue taxes" should be
included in the computation of the (b) R.A. No. 8240,[18] which
IRA. The majority Decision agreed grants 15% of the incremental
with this argument. revenue collected from the excise
tax on tobacco products to
Again, I respectfully disagree. provinces producing burley and
native tobacco;
The plain text of Section 6, Article X
of the 1987 Constitution requires (c) R.A. Nos. 7922,[19] and 7227,
Congress to provide LGUs with a [20] as amended by R.A. No. 9400,
just share in the national taxes, which grants a portion of the gross
which should be automatically income tax paid by business
released to them. Nowhere in this enterprises within the Economic
provision does the Constitution Zones to specified LGUs;
specify the taxes that should be
included in the just share of (d) R.A. No. 7643,[21] which
LGUs. Neither does the grants certain LGUs an additional
Constitution mandate the 20% share in 50% of the national
inclusion of all national taxes in taxes collected under Sections 100,
the computation of the IRA or in 102, 112, 113, and 114 of the
any other share granted to National Internal Revenue Code, in
LGUs. excess of the increase in collections
for the immediately preceding year;
The IRA is only one of several other
and
block grants of funds from the
national government to the local
(e) R.A. Nos. 7953[22] and 8407,
government. It was established in
[23] granting LGUs where the
the LGC of 1991 not only because of
racetrack is located a 5% share in
Section 6, Article X of the 1987
the value-added tax[24] paid by the
Constitution but also pursuant to
Manila Jockey Club, Inc. and the
Section 3 of the same article
Philippine Racing Club, Inc.
mandating Congress to "allocate
among the different local
Under the foregoing laws, Congress
government units their x x x
did not include the entirety of the
resources x x x." Clearly, Section 6,
national taxes in the computation of
Article X of the 1987 Constitution is
the LGUs' share. Thus, inasmuch
not solely implemented through the
as Congress has the authority to
IRA of LGUs. Congress, in several
determine the exact percentage
other statutes other than the LGC of
share of the LGUs, Congress
1991, grant certain LGUs an
may likewise determine the
additional share in some—not all—
basis of this share and include
national taxes, viz.:
some or all of the national taxes
for a given period of time. This is
consistent with the plenary power national internal revenue taxes
vested by the Constitution to the prescribed in Section 284 of the LGC
legislature, to determine by law, the of 1991.[30] Second, there must be
just share of LGUs in the national no direct or indirect Lien on the
taxes. This plenary power is subject release of the IRA, which must be
only to the limitations found in the automatically released to the LGUs.
Constitution,[25] which, as [31] And, third, the LGU share must
previously discussed, includes be just.[32] Outside of these
providing for a just share that is parameters, the Court cannot
automatically released to the LGUs. examine the constitutionality of
Sections 284 and 285 of the LGC of
Furthermore, aside from the express 1991, and the IRA appropriation in
grant of discretion under Sections 3 the GAA.
and 6, Article X of the 1987
Constitution, Congress possesses It bears noting at this point that the
the power of the purse. Pursuant IRA forms part of the national
to this power, Congress must make government's major current
an appropriation measure every operating expenditure.[33] By
time money is paid out of the increasing the base of the IRA, the
National Treasury.[26] In these national budget for other
appropriation bills, Congress may government expenditures such as
not include a provision that does not debt servicing, economic and public
specifically relate to an services, and national defense, is
appropriation.[27] necessarily reduced. This is
effectively an adjustment of the
Since the IRA involves an national budget—a function solely
intergovernmental transfer of public vested in Congress and outside the
funds from the National Treasury to authority of this Court.
the LGUs, Congress necessarily
makes an appropriation for these Ultimately, the determination of
funds in favor of the LGUs.[28] Congress as to the base amount
However, Congress cannot for the computation of the IRA
introduce amendments or changes is a policy question of policy
to the LGUs' share in the best left to its wisdom.[34] This
appropriation bill, especially with is an issue that must be examined
respect to the 40% share fixed in through the legislative process
Section 284 of the LGC of 1991. where inquiries may be made
Congress may only increase or beyond the information available to
decrease this percentage in a Congress, and studies on its overall
separate law for this purpose.[29] impact may be thoroughly
conducted. Again, the Court must
Verily, there are several parameters not intrude into "areas committed to
in determining whether Congress other branches of government."[35]
acted within its authority in granting Matters of appropriation and budget
the just share of LGUs in the are areas firmly devoted to
national taxes. First, the General Congress by no less than the
Appropriations Act (GAA) should not Constitution itself, and
modify the percentage share in the accordingly, the Court may
neither bind the hands of [9] 416 Phil. 438 (2001).
Congress nor supplant its
wisdom. [10] Id. at 448, citing Mayor
Magtajas v. Pryce Properties Corp.,
For these reasons, the Court should Inc., 304 Phil. 428, 446 (1994).
have limited its review on whether
Congress exceeded the boundaries [11] See Basco, et al. v. Philippine
of its authority under the Amusement and Gaming Corp., 274
Constitution. In declaring the term Phil. 323, 340-341
"internal revenue" in Section 284 of (1991); See also Batangas CATV,
the LGC of 1991 as unconstitutional, Inc. v. CA, 482 Phil. 544, 599-560
the Court in effect dictated the (2004).
manner by which Congress should
exercise their discretion beyond the [12] See Gov. Mandanas v. Hon.
limitations prescribed in the Romulo, 473 Phil. 806, 830 (2004).
Constitution. The majority Decision's
determination as to what should be [13] 1987 CONSTITUTION, Article X,
included in the LGUs' just share in Section 3.
the national taxes is an
encroachment on the Legislative [14] R.A. No. 7160, Section 284; See
Power of Congress.
also Administrative Order No. 270
(Prescribing the Implementing Rules
In light of the foregoing, I vote to and Regulations of the Local
dismiss the petitions. Government Code of 1991), Rule
XXXII, Part I, Article 378.

[1] Decision, pp. 2-5. [15] Id.

[2] Republic Act No. 7160. Approved [16] R.A. No. 7160, Section 286(a).
on October 10, 1991.
[17] AN ACT TO PROMOTE THE
[3] 1987 CONSTITUTION, Article X, DEVELOPMENT OF THE FARMER IN
Section 2. THE VIRGINIA TOBACCO PRODUCING
PROVINCES. Approved on January 9,
[4] Sen. Alvarez v. Hon. Guingona, 1992.
Jr., 322 Phil. 774, 783 (1996); See
also R.A. No. 7160, Section 3(d). [18] AN ACT AMENDING SECTIONS
138, 140, & 142 OF THE NATIONAL
[5] 1987 CONSTITUTION, Article X, INTERNAL REVENUE CODE, AS
Section 5. AMENDED, AND FOR OTHER
PURPOSES. Approved on January 1,
[6] Id. at Article X, Section 7. 1997.

[7] Id. at Article X, Section 6. [19] AN ACT ESTABLISHING A

SPECIAL ECONOMIC ZONE AND FREE
[8] See 1987 CONSTITUTION, Article PORT MUNICIPALITY OF SANTA ANA
X, Sections 10-12; See also R.A. No. AND THE NEIGHBORING ISLANDS IN
7160, Section 9. THE MUNICIPALITY OF APARRI,
PROVINCE OF CAGAYAN, PROVIDING
FUNDS THEREFOR, AND FOR OTHER AND EXTENDING THE SAID
PURPOSES. Approved on February FRANCHISE BY TWENTY-FIVE (25)
14, 1995. YEARS FROM THE EXPIRATION OF
THE TERM THEREOF. Approved on
[20] AN ACT ACCELERATING THE November 23, 1997.
CONVERSION OF MILITARY
RESERVATIONS INTO OTHER [24] R.A. No. 7716, as amended by
PRODUCTIVE USES, CREATING THE R.A. No. 8241.
BASES CONVERSION AND
DEVELOPMENT AUTHORITY FOR [25] Vera v. Avelino, 77 Phil. 192,
THIS PURPOSE, PROVIDING FUNDS 212 (1946).
THEREFOR AND FOR OTHER
PURPOSES. Approved on March 13, [26] 1987 CONSTITUTION, Article VI,
1992. Section 29(1).

[21] AN ACT TO EMPOWER THE [27] Id. at Article VI, Section 25(2).
COMMISSIONER OF INTERNAL
REVENUE TO REQUIRE THE [28] Id. at Article VI, Section 29(1).
PAYMENT OF THE VALUE-ADDED
TAX EVERY MONTH AND TO ALLOW [29] Gov. Mandanas v. Hon. Romulo,
LOCAL GOVERNMENT UNITS TO supra note 12, at 839.
SHARE IN VAT REVENUE, AMENDING
[30] Id. at 832.
FOR THIS PURPOSE CERTAIN
SECTIONS OF THE NATIONAL [31] Pimentel, Jr. v. Aguirre, G.R. No.
INTERNAL REVENUE CODE. 132988, July 19, 2000.
Approved on December 28, 1992.
[32] Gov. Mandanas v. Hon. Romulo,
[22] AN ACT AMENDING REPUBLIC supra note 12.
ACT NUMBERED 6632, ENTITLED 'AN
ACT GRANTING THE PHILIPPINE [33] Department of Budget and
RACING CLUB, INC., A FRANCHISE Management, Expenditure
TO OPERATE AND MAINTAIN A RACE Categories and their Economic
TRACK FOR HORSE RACING IN THE Importance, <
PROVINCE OF RIZAL,' AND https://www.dbm.gov.ph/wp-
EXTENDING THE SAID FRANCHISE content/uploads/2012/03/PGB-
BY TWENTY-FIVE YEARS FROM THE B4.pdf > accessed last July 2, 2018.
EXPIRATION OF THE TERM THEREOF.
Approved on March 30, I995. [34] See Mayor Magtajas v. Pryce
Properties Corp., Inc., supra note 10,
[23] AN ACT AMENDING REPUBLIC at 447, in which the Court held that:
ACT NUMBERED 6631, ENTITLED 'AN
ACT GRANTING MANILA JOCKEY "This basic relationship between the
CLUB, INC., A FRANCHISE TO national legislature and the local
CONSTRUCT, OPERATE AND government units has not been
MAINTAIN A RACETRACK FOR HORSE enfeebled by the new provisions in
RACING IN THE CITY OF MANILA OR the Constitution strengthening the
ANY PLACE WITHIN THE PROVINCES policy of local autonomy. Without
OF BULACAN, CAVITE OR RIZAL' meaning to detract from that policy,
we here confirm that Congress
retains control of the local
government units although in
significantly reduced degree now
than under our previous
Constitutions. The power to
create still includes the power
to destroy. The power to grant
still includes the power to
withhold or recall. True, there are
certain notable innovations in the
Constitution, like the direct
conferment on the local government
units of the power to tax, which
cannot now be withdrawn by mere
statute. By and large, however, the
national legislature is still the
principal of the local government
units, which cannot defy its will or
modify or violate it." (Emphasis
Ours)

[35] Francisco, Jr., et al. v. Toll

Regulatory Board, et al., 648 Phil.
54, 84-85 (2010).