2021 LGU collection target to be cut 68% to P102.01 billion

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THE Bureau of Local Government Finance (BLGF) is looking at slashing the total collection target of local government units (LGUs) next year to P102.01 billion, a 68-percent decline from the P321.6-billion original target it set for the same period before the Covid-19 pandemic.

Should this be realized, BLGF Executive Director Niño Raymond B. Alvina said the 2021 target for next year would be a 47-percent drop from its revised final collection target for this year for LGUs at P193.04 billion.

This, as BLGF expects significantly lower proceeds across all revenue sources next year.

For real property tax and business tax, BLGF said they are looking at initial collection targets that are 50 percent lower than their final targets this year. Moreover, collection targets for fees and charges, and receipts from economic enterprises are also expected to drop by 42 percent and 35 percent, respectively.

“We expect that the effect would be more pronounced next year as a result of the financial losses in 2020, on which local tax assessments will be based. And of course, the lower capacity to pay of taxpayers due to job losses, lower production of goods and services, business closures, or retirements and the overall contraction of the economy,” Alvina said.

However, Alvina told BusinessMirror these are still “initial” targets and have yet to be finalized.

“Those 2021 targets have not yet been released, still part of our outlook/estimates and analysis. The figures will be finalized in the next few days as we check on individual LGU variances, then we will release to the local treasurers,” he said.

As of the first half of this year, BLGF said actual local revenue collections amounted to P157.93 billion, equivalent to just 51 percent of the original full-year target at P307.08 billion.

Compared to the collection performance in the same period in 2019 at P162.24 billion, this was lower by 3 percent or P4.31 billion as all major local revenue sources suffered a year-on-year decline except for business tax which posted an increase of P6.05 billion or 8 percent.

Receipts from economic enterprises for the first semester this year suffered the biggest decline of 31 percent to P8.95 billion from P13.04 billion in the same period a year ago.

In its 2021 fiscal risks statement report, the Cabinet-level Development Budget Coordination Committee (DBCC) said the negative financial impact of Covid-19 pandemic to the national government will be felt further by LGUs in the medium term as the national tax allocation transfers from the national government to LGUs by FY 2023 will be based on FY 2020, where the decline in national government collections is expected.

While there will be an anticipated increase in the LGUs’ adjusted internal revenue allotment (IRA) due to the Supreme Court ruling on the Mandanas case, the DBCC said this will be “short-lived” and may continue in FY 2024 if collections for FY 2021 of the national government do not significantly recover.

The Mandanas ruling said computations of the share of LGUs in the national taxes should include national internal revenue taxes and customs duties.

As a result, the DBCC said the new computation will result in an additional IRA requirement of around P234.4 billion in 2022 or 0.92 percent of GDP. Further, the DBCC said this will translate to a lower national government share and consequently lesser space to fund new and/or existing programs, activities, and projects.

To mitigate the impact of the SC ruling, the DBCC also earlier said the Executive is currently considering three measures, which include submitting a legislative proposal to Congress that lowers the LGU share from 40 percent to 30 percent of national taxes; declaring an “unmanageable fiscal deficit” to bring down the LGU share from 40 percent to 30 percent; and gradually devolving services to the LGUs.

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