MEMORANDUM 
FOR      : ALL GOVERNORS,   CITY MAYORS AND NEB OFFICERS OF  THE ULAP 
FROM  : THE NATIONAL SECRETARIAT 
RE        : ULAP LETTER TO THE PRESIDENT ON THE SUPREME COURT RULING ON THE IRA     
                CUT 
DATE   : 27 July 2000
__________________________________________________________________________________
 

Per instructions of the National President, Gov. Joey Lina, who is now in the U.S. with the Presidential visit, allow us to furnish you a copy of his letter to H.E. President Joseph E. Estrada, copy furnished Exec. Sec. Ronaldo Zamora and DBM Sec. Benjamin Diokno, regarding the Supreme Court Ruling G.R. 132988 which declared the IRA CUT as unconstitutional. In the said letter, we asked for the ff:
1. Recall A.O. 43 and release the remaining 5% withheld from our IRA share for CY 1998 amounting to P 4 Billion;
2. Recall E.O. Nos. 189 and 190 and to immediately release the 20% development fund to all LGUs as well as the amount payable to GSIS, PhilHealth, Pag-Ibig and BIR;
3. "Automatic appropriation" and "automatic release" of the LGUs' IRA for CY 2001;
4. Effect the quarterly release of the "unprogrammed" IRA for CY 2000 in the amount of P 2.5 Billion per quarter;
5. Suspend henceforth the setting aside of any portion of the IRA for whatever purpose such as the LGSEF.
Kindly inform us should you need a copy of the said ruling so that we can send the same to your office by mail.  Should you also have any comments or suggestions, please don't hesitate to inform us as soon as possible.  Please note that we have also committed to vigorously help in the collection and remittance of taxes to the BIR.
 
            Rest assured that we will keep you posted on the IRA updates.
 
 
(Sgd.) SANDRA T. PAREDES
Executive Director, ULAP National Secretariat
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UNION OF LOCAL AUTHORITIES OF THE PHILIPPINES, INC. (ULAP)
Unit 2803 Summit One Tower
530 Shaw Boulevard, Mandaluyong City
email:  [email protected]
website:  www.ulap.org.ph
Tel. Nos: 718-1812/ 718-4351/ Telefax: 717-1810
 
 
 

24 July 2000
 
His Excellency
PRESIDENT JOSEPH EJERCITO ESTRADA
Republic of the Philippines
Malacañang Palace, Manila
Attention: Executive Secretary Ronaldo Zamora
SUBJECT:  LGUs' INTERNAL REVENUE ALLOTMENT SHARE BASED ON  THE  SUPREME  COURT  DECISION,  G. R.  No.  132988
 
Dear President Estrada:
 
            Greetings!
 
            Allow me to furnish you a copy of the Supreme Court ruling on the Pimentel vs. Aguirre and Boncodin (G.R. No. 132988) promulgated last July 19, 2000.  The said ruling "permanently PROHIBITED" the respondents (the Executive Secretary and DBM Secretary) in implementing Administrative Order Nos. 372 and 43, insofar as local government units are concerned.
 
            Allow me to quote the DECISION:
            "The Constitution vests the President with the power of supervision, not control, over local government units (LGUs).  Such power enables him to see to it that LGUs and their officials execute their tasks in accordance with law.   While he may issue advisories and seek their cooperation in solving economic difficulties, he cannot prevent them from performing their tasks using available resources to achieve their goals.  He may NOT WITHHOLD or alter any authority or power given them by law.  Thus, THE WITHHOLDING OF A PORTION OF INTERNAL REVENUE ALLOTMENTS LEGALLY DUE THEM CANNOT BE DIRECTED BY ADMINISTRATIVE FIAT." (Underscoring supplied)
            It cited Sec. 4 of Article X of the Constitution, which states that: "The President of the Philippines shall exercise general supervision over local governments.  x x x"
 
            It is now a well-established fact that the Supreme Court also fully recognizes that under existing laws,  "LGUs,  in  addition  to having administrative autonomy in the exercise of their functions, enjoy FISCAL AUTONOMY as well."   It also stated that "a basic feature of local fiscal autonomy is the  AUTOMATIC  RELEASE of the shares of LGUs in the national internal revenue"  as mandated by the  Constitution and the 1991 Local Government Code.  It stressed,  "The provision" (referring to R.A. 7160) "is, therefore, IMPERATIVE".
 
            On the basis of the above principle, the  CUT  on the IRA as contained in the GAA of  CY  2000 is also UNCONSTITUTIONAL and bereft of any legal basis.  Congress cannot cut nor withhold any part of the IRA of the LGUs unless it first amends the provisions  of  the  1991  Local  Government Code and/or the Constitution since R.A. 7160 is the recognized law that sets a definitive formula in computing the rightful IRA share of LGUs. 
 
            In case there is an  unmanageable  public  sector  deficit, the Court cited provisions in the LGCode and its Implementing Rules and Regulations  that BEFORE the President may interfere in local fiscal matters, there are several requisites that  must  be complied with, to wit: (1) unmanageable public sector deficit; (2) consultations with Congress and Leagues of LGUs; and (3) recommendation of Secretaries of DBM, DOF and DILG.
 
            Moreover, with the said ruling,  E. O.  Nos. 189 and 190, which likewise temporarily defers the release of the 20% development fund of LGUs and withholds the amounts from the LGUs' IRA intended for payments to GSIS, PhilHealth, Pag-Ibig and BIR, respectively,  have no more legal basis since the High Tribunal already ruled that:
"Such withholding clearly contravenes the Constitution and the law.  Although temporary, it is equivalent to a holdback, which means, "something held back or withheld, often temporarily".    Hence  the  "temporary" nature of the  retention by the  national  government  does not matter.  ANY RETENTION IS PROHIBITED!"  (Underscoring supplied).
            While we recognize the good intention behind its issuance, to further comply with these  twin  directives  despite  the latest Supreme Court ruling would be to tolerate its illegal nature. The rule of law requires that "even the best intentions must be carried out within the parameters of the Constitution and the law".
  
            In the light of all these well-established jurisprudence on the matter, as National President  of  the Union of Local Authorities of the Philippines (ULAP), allow me to humbly reiterate our position and formally request the Department of Budget and Management, in behalf of all the local officials throughout the country, to:
 
1. Recall A.O. 43 and release the remaining 5% withheld from our IRA share for CY 1998, amounting to P 4 Billion (Please note that LGUs have considered the 5% withheld from our IRA for CY 1998 as receivables from the national government);
 
2. Recall E.O. No. 189 and to immediately release the 20% development fund directly to the LGUs for CY 2000;
 
3. Recall E.O. No. 190 and release the full IRA share due to the LGUs for CY 2000;
 
4. Submit to Congress the National Expenditure Budget for CY 2001 with the IRA as "automatically appropriated" to be "automatically released" directly to the LGUs (We understand that this has already been done);
 
5. Effect the quarterly releases of the IRA's "unprogrammed fund" for CY 2000, amounting to P 2.5 Billion per quarter or a balance of P 7.5 Billion; and to
 
6. Suspend henceforth the setting aside of any portion of the IRA for whatever purpose such as the Local Government Service Equalization Fund (LGSEF).
 
            Rest assured, however, that the LGUs will remain as effective partners of the national  government.   We will ensure that the programs and policies effected locally will be integrated and coordinated towards a common national goal.  
 
            We  do recognize the fact that we need to effect a sound fiscal management system to cushion the impact of the present financial crisis we are in.  We have thus met with BIR Commissioner Fonacier and his officials and we will soon enter into a more detailed Memorandum of Agreement specifying points of action where LGUs can directly provide assistance in the collection of taxes at the local level.   Through this effort alone, i.e. to effect an efficient remittance to the BIR of withholding taxes, per their estimate, we can help raise an additional P 4 Billion this year. After all, the economic, political and social development at the smaller political units are expected to propel social and economic growth and development of our country.
 
            We  trust  that you will issue the necessary circulars relative to this matter and inform all of us concerned as soon as possible on the action you have taken in this regard.
 
            Thank you very much.
 
                       Very truly yours,
 

               (Sgd.) GOV. JOEY D. LINA
        National President, ULAP and LPP
 
 
 
CC:  Sec. Benjamin Diokno
Department of Budget and Management (DBM)
Gen. Solano St., San Miguel
 
DILG Sec. Alfredo Lim,