How Local Government Units Receive Their Share of National Funds

Local Government Units (LGUs) rely heavily on allocations from the national government to fund public services and development projects. The Budget Operations Manual explains the different types of funds allocated to LGUs and how they are distributed. Here’s a quick guide to understanding how your local government receives its share of national taxes and other revenues:

National Tax Allotment (NTA)

The NTA, formerly known as the Internal Revenue Allotment (IRA), is the largest source of funding for LGUs. After the Supreme Court’s ruling on the Mandanas-Garcia Case, LGUs now receive a larger share of national taxes, giving them more resources for public services and infrastructure projects. NTA funds are automatically released on a quarterly basis and are used to deliver essential services and build local infrastructure.

Share in the Utilization of National Wealth

LGUs are entitled to a portion of the revenues generated from the utilization of natural resources within their jurisdictions. This share is crucial for communities located near mining operations, forests, and other natural resource sites. The funds can be used to improve local infrastructure and economic development.

Share in Gross Income Taxes from Businesses in Special Economic Zones

For LGUs with businesses operating in special economic zones, they receive a share of the gross income taxes paid by these companies. These funds help boost local economies by supporting infrastructure, services, and development initiatives.

Share in Value-Added Tax (VAT)

A portion of the VAT collected by the national government is allocated to LGUs. This share is used to support local development and service delivery, ensuring that funds flow back to communities to address their unique needs.

Share in Tobacco Excise Taxes

LGUs in tobacco-producing regions receive a share of excise taxes collected from tobacco products. These funds are earmarked for programs benefiting tobacco farmers and supporting local infrastructure and services.

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These allocations empower LGUs to improve services and invest in development projects that meet the needs of their communities. With the national government providing various sources of funds, LGUs can fulfill their mandates and enhance local governance.

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