DEPARTMENT OF FINANCE

BUREAU OF LOCAL GOVERNMENT

FINANCE

LGU Taxation and

Revenue Practices

Overview of Philippine Fiscal Decentralization

Geographically strategic: 7,107 islands

History of fiscal decentralization:

Local Autonomy Act of 1959

Decentralization Act of 1967
1973 Constitution
Batas Pambansa 337 of 1983
Presidential Decrees during the Martial Law
1987 Constitution
Local Government Code of 1991

From centralist (transfer of authority) to people-oriented service delivery at the local

level

Presently under the regime of the 1987 Constitution and the Local Government Code
of 1991

With revenue assignments, expenditure responsibilities, intergovernmental transfers,

and subnational debt

Philippine Local Governments

Provinces (81)
Municipalities (1,489)

Component Cities (105)

Barangays

Barangays

Independent Cities (40)

Highly Urbanized Cities (35)
Independent Component Cities (5)

Barangays
Total Number of Barangays: 42,028

Administrative Structure
Local governments as political and territorial subdivisions of the State
Provinces, cities, and municipalities are directly headed by a local chief
executive (Governor for provinces, and Mayor for cities and municipalities)
and a vice (Vice Governor; Vice Mayor)
Each local government has a local legislative council called Sanggunian
(Provincial Board; City/Municipal/Barangay Council) composed of councilors,
with the Vice Governor/Vice Mayor/Punong Barangay serving as Presiding
Officer
Barangays are headed by a Chairman

Revenue Assignments of Local Governments

Largely fixed (with maximum rates/ceilings) and not indexed
to inflation
Tax rates can only be adjusted up to 10% and once every 5
years
Rates/levies must be legislated through local council
Basis for real property tax is through a Schedule of Market
Values, subject to revaluation/revision once every 3 years

Revenue Assignments of Local Governments

TAXES
Tax Base

Provinces

Cities

Municipalities

Barangays

Business

No

Yes

Yes

No

Real property

Yes

Yes

Share

Share

Idle land

Yes

Yes

No

No

Real property transfers

Yes

Yes

No

No

Printing and publication

Yes

Yes

No

No

Sand, gravel and other

quarry resources

Yes

Yes

Share

Share

Delivery vans and trucks

Yes

Yes

No

No

Amusement places

Yes

Yes

Share

No

Professionals

Yes

Yes

No

No

Community tax

No

Yes

Yes

Share

Franchise

Yes

Yes

No

No

Revenue Assignments of Local Governments

FEES & CHARGES
Agricultural Machinery

Demolition Permit

Health Services

Parking

Special Cockfighting

Annual Inspection

Electrical permit

Holding of Benefits

Pedicab Operations

Storage of Flammable
Materials

Bicycle Permit

Exhumation of Cadaver Hospital fees

Permit & Solemnization Tax Clearance

Boats Permit

Fee on Occupation or
Calling

Impounding of Stray
Animals

Physical Exam &

Medical Certification

Terminal Fees

Building Permit

Filmmaking

Market

Plumbing Permit

Toll Fees & Charges

Burial Permit

Fire Certification

Marriage

Police Clearance

Towing Charges

Bus Terminals

Firearms Permit

Mayors Permit

Registration of Large
Cattle

Traffic Violations

Carts and Sledge

Fiscals Clearance

Mechanical Permit

Rental of Facilities

Tricycle Franchising

Certification

Fishing Permit

Mineral Lands

Sanitary Permit

Tuition Fees

Civil Registry Fees

Gaffers and Cockpit

Persons

Mining Claims

Secretarys Certification Video Tape Rental

Cockpits

Garbage Colections

Other Heavy
Equipment

Sheriffs Fees

Water and Power

Court Fees

Hawkers

Parades

Slaughterhouse &
Corrals

Weights and Measures

Income Profile of Local

Government Units
Provinces, Cities and Municipalities: 2009 - 2014

CONSOLIDATED PUBLIC SECTOR FINANCIAL POSITION

Particulars
TOTAL SURPLUS(+)/DEFICIT(-)
Percent of GDP

Levels (In Billion Pesos)

2009

2010

2011

2012

2013

2014

(240.15)
-3%

(356.65)
-4%

(175.10)
-2%

(165.33)
-2%

42.41
0%

82.21
1%

(7182.25)
-4%

(8253.04)
-4%

(4792.78)
-2%

(4935.96)
-2%

(2071.03)
-0.8%

(859.43)
-0.3%

(329.85)

(379.03)

(220.11)

(226.69)

(95.11)

(39.47)

-4%
(329.85)

-4%
(379.03)

-2%
(220.11)

-2%
(226.69)

-1%
(95.11)

0%
(39.47)

(298.532)

(314.458)

(197.754)

(242.827)

(164.062)

(73.092)

(8.759)

(7.689)

(3.536)

(3.506)

(3.506)

(2.675)

(19.300)

(66.925)

(19.842)

(4.955)

60.872

21.154

OTHER PUBLIC SECTOR

SSS/GSIS/PHIC
Bangko Sentral ng Pilipinas (BSP)
Government Financial Institutions

89.706
44.500
(0.168)
10.800

22.376
39.268
(63.722)
9.452

45.018
47.966
(47.432)
9.760

61.357
72.731
(94.848)
9.888

137.524
62.493
(23.725)
15.315

121.683
68.767
(10.735)
12.227

Local Government Units (LGUs)

34.695

34.103

34.724

73.648

83.441

51.424

Timing adjustment of interest

payments to BSP
Other adjustments

(0.328)
0.207

0.395
2.880

0.000
0.000

0.000
(0.062)

0.000
0.000

0.000
0.000

TOTAL PSBR
Percent of GDP

PUBLIC SECTOR BORROWING

National Government
CB Restructuring
Monitored (GOCCs)
Adjustment in net lending and
equity to GOCCs
Other Adjustments

Source: Department of Finance

Consolidated Statement of Receipts and Expenditures

PARTICULARS

2009

2010

2011

2012

2013

2014

Average

Amount in Million Pesos

Current Operating Income & Expenditures
Operating Income

311,011

336,613

366,093

367,912

389,558

429,429

366,769

Operating Expenditures

233,662

253,867

266,240

282,506

297,731

300,887

272,482

77,349

82,745

99,853

85,407

91,826

128,542

94,287

Net Operating Income/Loss

Non-Income Receipts & Non-Operating Expenditures

Non-Income Receipts

12,785

14,726

11,816

8,873

12,895

14,185

12,547

Non-Operating Expenditures

46,525

47,551

50,055

47,577

52,159

62,941

51,135

Net Increase/Decrease in Cash

43,608

49,921

61,614

46,703

52,562

79,785

55,699

Growth Rate
Current Operating Income & Expenditures
Income

8%

9%

0%

6%

10%

7%

Expenditures

9%

5%

6%

5%

1%

5%

Net Operating Income/Loss

7%

21%

-14%

8%

40%

12%

15%

-20%

-25%

45%

10%

5%

2%

5%

-5%

10%

21%

7%

14%

23%

-24%

13%

52%

16%

Non-Income Receipts & Non-Operating Expenditures

Receipts
Expenditures
Growth rate of Net
Increase(Decrease) in Cash

1.60%

200,000
180,000

1.40%

160,000
140,000

1.00%

120,000

0.80%

100,000
80,000

0.60%

60,000
0.40%
40,000

0.20%

20,000

0.00%

2009

2010

2011

LGU Overall Surplus/(Deficit)

2012

2013

2014

LGU Overall Surplus/(Deficit) (% GDP)

LGUs Overall Surplus/Deficit

Amount in Million Pesos

1.20%

450,000

50%

400,000

40%

350,000
Amount in Million Pesos

30%
300,000
250,000

20%

200,000

10%

150,000
0%
100,000
-10%

50,000
0

-20%
2009
Operating Income

2010

2011

2012

Operating Expenditures

Net Operating Income(Loss): Growth Rate

2013

2014

Net Operating Income/Loss

Income from Local and External Sources

PARTICULARS

2009

2010

2011

2012

2013

2014

Average

Amount in Million Pesos

Income
Local Sources
External Sources

311,011

336,613

366,093

367,912

389,558

429,429

366,769

97,510

107,316

117,447

132,278

135,176

150,721

123,408

213,501

229,296

248,646

235,634

254,381

278,708

243,361

Percentage Distribution
Income

100%

100%

100%

100%

100%

100%

100%

Local Sources

31%

32%

32%

36%

35%

35%

34%

External Sources

69%

68%

68%

64%

65%

65%

66%

Growth Rate
Income
Local Sources
External Sources

8.2%

8.8%

0.5%

5.9%

10.2%

6.7%

10%

9%

13%

2%

11%

9%

7%

8%

-5%

8%

10%

6%

1.25%

1.26%
1.24%

Percentage

1.22%

1.21%

1.21%
1.19%

1.19%

1.20%

1.17%

1.18%
1.16%
1.14%
1.12%

2009

2010

2011

2012

2013

Year

Local Sources as % of GDP

2014

External
Sources
66%

Local
Sources
34%

Local Sources vs. External Sources

(Average Percentage Contribution)

Growth Rate

Local Sources vs. External Sources

14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%

2010

2011

2012

2013

2014

External Sources

7%

8%

-5%

8%

10%

Local Sources

10%

9%

13%

2%

11%

External Sources

Local Sources

Growth Rate of Revenues from Local and External Sources

Provinces
Grants/Aids
0.26%
Inter-Local
Transfer
0.46%

Inter-Local
Transfer
0.33%

Local Sources
18.79%

Cities

IRA and Nat'l

Shares
43.53%

Local Sources
55.70%

IRA and Nat'l

Shares
80.48%

Municipalities
Inter-Local
Transfer
0.30%

Grants/Aids
0.44%

Grants/Aids
0.65%
Local Sources
19.17%

IRA and
Nat'l Shares
79.88%

Operating Income Per LGU Type

Tax and Non-Tax Revenues

PARTICULARS
Local Sources

2009

2010
2011
Amount in Million Php

2012

2013

2014

Average

97,510

107,316

117,447

132,278

135,176

150,721

Tax Revenues
Real Property Tax
Business Tax
Other Taxes
Non-Tax Revenues
Fees and Charges
Receipts from Economic
Enterprises
Other Receipts

67,717
31,518
32,334
3,864
29,793
11,299

71,148
33,057
33,565
4,526
36,168
12,949

81,105
36,000
40,434
4,670
36,343
13,848

92,869
39,315
48,730
4,823
39,409
15,149

96,328
41,191
49,458
5,679
38,848
16,136

107,809
45,349
55,634
6,825
42,913
19,839

12,124

13,074

14,354

16,357

16,922

17,674

7,903

5,791

5,400

Local Sources
Tax Revenues
Real Property Tax
Business Tax
Other Taxes
Non-Tax Revenues
Fees and Charges
Receipts from Economic
Enterprises
Other Receipts

100%
69%
32%
33%
4%
31%
12%

100%
70%
30%
37%
4%
30%
11%

100%
71%
30%
37%
4%
29%
12%

100%
72%
30%
37%
5%
28%
13%

12%

12%

13%

12%

9%
7%
Growth Rate
10%
9%
5%
14%
5%
9%
4%
20%
17%
3%
21%
0%
15%
7%

6%

4%

4%

12%
6%

13%
15%
9%
21%
3%
8%
9%

2%
4%
5%
1%
18%
-1%
7%

11%
12%
10%
12%
20%
10%
23%

9%
10%
8%
12%
12%
8%
12%

Local Sources
Tax Revenues
Real Property Tax
Business Tax
Other Taxes
Non-Tax Revenues
Fees and Charges
Receipts from Economic
Enterprises
Other Receipts

6,370

12%
7%

10,145
8,140
Percentage Distribution
100%
100%
66%
69%
31%
31%
31%
34%
4%
4%
34%
31%
12%
12%
12%

8%

10%

14%

3%

4%

59%

-20%

-3%

-27%

-7%

123,408
86,163
37,738
43,359
5,065
37,246
14,870

15,084
7,291
100%
70%
31%
35%
4%
30%
12%

8%
1%

25%

100%
90%

20%

31%

34%

31%

30%

29%

28%

69%

66%

69%

70%

71%

72%

2009

2010

2011

2012

2013

2014

80%
70%

Growth Rate

15%

60%
50%

10%

40%
30%

5%

20%
10%

0%
2010

2011

-5%

2012

2013

2014

Year
Tax Revenues

0%
Tax Revenues

Non-Tax Revenues

Non-Tax Revenues

Growth Rate of Tax and Non-Tax Revenues

Tax and Non-Tax Revenues

Share of Tax and Non-Tax Revenues

Composition of Tax Revenues

120,000

Average Percentage Contribution of

RPT, BT and Other Taxes to Tax
Revenues

Amount in Million Php

100,000

80,000

Other
Taxes
6%

60,000

40,000

20,000

Other Taxes
Business Tax
Real Property Tax

2009
3,864
32,334
31,518

2010
4,526
33,565
33,057

2011
4,670
40,434
36,000

Tax Revenues

2012
4,823
48,730
39,315

2013
5,679
49,458
41,191

2014
6,825
55,634
45,349

Business
Tax
50%

Real
Property
Tax
44%

Composition of Non-Tax Revenues

Average Percentage Contribution of
FC, EE and Other Receipts to Non-Tax
Revenues

50,000

45,000

Amount in Million Pesos

40,000

35,000
Other
Receipts
20%

30,000

25,000
20,000

15,000
10,000

5,000
Other Receipts
Receipts from Economic
Enterprises
Fees and Charges

2009
6,370

2010
10,145

2011
8,140

2012
7,903

2013
5,791

2014
5,400

12,124

13,074

14,354

16,357

16,922

17,674

11,299

12,949

13,848

15,149

16,136

19,839

Non-Tax Revenues

Receipts
from
Economic
Enterprises
40%

Fees and
Charges
40%

Inter-Governmental Transfers
Internal Revenue Allotment
Formula-based block grant from National Government
40% share in the national internal revenue taxes based on the National
Governments collection of the third fiscal year preceding the current fiscal
year
Allocated according to type of local
government:

Provinces - 23%;

Cities - 23%;

Municipalities - 34%; and

Barangays - 20%

Share of Provinces, Cities and

Municipalities based on:

Population - 50%;

Land Area - 25%; and

Equal sharing - 25%

Barangays: 60% Population + 40%

Equal Sharing

Inter-Governmental Transfers
Other Shares from National Tax Collection
Share from National Wealth
Share from Tobacco Excise Tax
Share from Government Corporations (PAGCOR/PCSO)
Share from Economic Zones

Share from Expanded Value Added Tax

IRA and Other Shares from National Wealth

140,000.00

Amount in Million Php

120,000.00

100,000.00

80,000.00

Province
City

60,000.00

Municipality

40,000.00

20,000.00

2009

2010

2011

2012

2013

2014

Expenditure Responsibilities
Health & Social
Services

Primary health care

Maternal and child
care
Disease control
services
Purchase of
medicines, medical
supplies, and
equipment
Social welfare
services for
children, youth,
family, community,
women, elderly,
disabled persons,
rebel returnees and
evacuees;
Relief operations;
Population
development
Socialized housing

Agriculture

Inter-barangay
irrigation
system
Water and soil
resource
utilization and
conservation
projects
Enforcement
of fishery laws
in municipal
waters
Conservation
of mangroves

Environmental
Protection &
Management

Infrastructure

Solid waste
Provision for:
disposal system Public markets
General hygiene Public buildings
and sanitation
Freedom parks and
Communityother public assembly
based forestry
areas
projects
Other similar facilities
Management and
control of
Maintenance and
communal
rehabilitation of:
forests
Roads and bridges,
School buildings and
other facilities for basic
education
Clinics, health centers
and other health
facilities
Fish ports
Artesian wells
Water supply systems
Seawalls and dikes
Drainage and sewerage
Flood control system
Traffic signals and road
signs

Tourism

Development of
tourism facilities
and other
tourist
attractions
Acquisition of
equipment
Regulation and
supervision of
business
concessions

Regulatory
Functions
Certain regulatory
functions of the
national
government:
Inspection of
food products
Adoption of
quarantine
regulations
Enforcement of
the National
Building Code
Regulations of
transport
operations
Licensing of
cockpits

Current Operating Expenditures: FY 2009 FY 2014

PARTICULARS
EXPENDITURES

2009

2010
2011
2012
Amount in Million Pesos

2013

2014

Average

233,662

253,867

266,240

282,506

297,731

300,887

272,482

128,806

142,478

146,303

154,815

161,732

160,904

149,173

Social Services

57,291

58,973

65,025

69,980

76,247

79,639

67,859

Economic Services

43,884

48,427

50,288

53,173

55,384

55,943

51,183

3,681

3,989

4,625

4,538

4,369

4,402

4,267

100%
55%
25%
19%
2%

100%
54%
26%
19%
1%

100%
53%
26%
19%
1%

100%
55%
25%
19%
2%

6%
6%
8%
6%
-2%

5%
4%
9%
4%
-4%

1%
-1%
4%
1%
1%

5%
5%
7%
5%
4%

General Public Services

Debt Service
EXPENDITURES
General Public Services
Social Services
Economic Services
Debt Service
EXPENDITURES
General Public Services
Social Services
Economic Services
Debt Service

100%
55%
25%
19%
2%

Percentage Distribution
100%
100%
56%
55%
23%
24%
19%
19%
2%
2%
Growth Rate
9%
5%
11%
3%
3%
10%
10%
4%
8%
16%

Note:
Social Services is the sum of Department of Education, Health, Nutrition and Population Control, Labor and Employment, Housing and
Community Development, and Social Services and Social Welfare

100%

10.00%

90%

9.00%

80%

8.00%

70%

7.00%

60%

6.00%

50%

5.00%

40%

4.00%

30%

3.00%

20%

2.00%

10%

1.00%

0%

0.00%
2009

2010

2011

2012

2013

2014

General Public Services

Social Services

Economic Services

Debt Service

Average Current Operating

Expenditure by Sector

Economic
Services
19%

Social
Services
25%

Growth Rate

Current Operating Expenditures Growth Rate

Debt
Service
1%

General
Public
Services
55%

20%

Growth Rate

15%
10%
5%
0%
-5%
General Public Services
Social Services
Economic Services
Debt Service

2010
11%
3%
10%
8%

2011
3%
10%
4%
16%

2012
6%
8%
6%
-2%

Current Operating Expenditure by Sector

2013
4%
9%
4%
-4%

2014
-1%
4%
1%
1%

Sub-national Debt/Borrowing
Any local government unit may create indebtedness, and
avail of credit facilities to finance local infrastructure and
other socio-economic development projects (based on the
approved local development plan and public investment program)

Forms of indebtedness/credit facilities:

Loans, deferred payment and other financial schemes

Bonds and other long-term securities
Inter-local government loans, grants, and subsidies.
Loans from funds secured by NG from foreign sources
Build-Operate-Transfer/Joint Ventures: financing, construction,
maintenance, operation, and management of infrastructure projects by
the private sector

Sub-national Debt/Borrowing
Statutory Limitations: the amount of appropriations for
debt servicing shall not exceed 20% of the regular income
of the local government unit concerned.
Ex ante monitoring/regulations: DOF/BLGF certifies debts
service ceiling and net borrowing capacity of LGUs; the
Monetary Board issues opinion on the monetary and
balance of payments implications for every proposed
borrowing of local governments
Policy preference to secure loans with government
financial institutions

Amount in Million Php

80,000

0.80%

70,000

0.70%

60,000

0.60%

50,000

0.50%

40,000

0.40%

30,000

0.30%

20,000

0.20%

10,000

0.10%

0.00%
2009

2010

2011

2012

2013

2014

LGU Debt Service

LGUs Loans Oustanding

LGU Debt Service (% of GDP)

LGUs Loans Oustanding (% of GDP)

LGU Borrowings

The Bureau of Local Government Finance

Role of the BLGF
Legal Basis & Mandate
Clientele

Organizational Structure
Strategic Thrusts and Programs
Special Projects
VISION:
The Bureau of Local Government Finance of the Department of Finance is the focal agency
and an authority in local finance that aims to be at the forefront of local economic growth
leading the way towards national development.

Role of the BLGF

As an attached agency of the Department of Finance (DOF), the BLGF
supports the DOFs mandate to:
Supervise the revenue operations of all local government units; and
Monitor and support the implementation of policies and measures on local revenue
administration;

Provide technical assistance to local governments on local treasury

and assessment operations, and overall revenue generation activities
Assist in policy development and implementation to promote fiscal
decentralization in the LGUs
Assist the DOF in appointment and overall administrative supervision of
local treasurers and in providing technical supervision to assessors in
all local governments

Legal Basis & Mandate

Section 43 of Executive Order No. 127 of 1987, as amended
Assist in the formulation and implementation of policies on local
government revenue administration and fund management;
Assist LGUs in the development and implementation of Real Property Tax
Administration (RPTA) projects;
Develop plans and programs for the improvement of tax collection
enforcement mechanisms and credit utilization schemes at the local levels;
Exercise administrative and/or technical supervision over local treasury
and assessment operations;
Exercise line supervision over its regional offices and coordinate regional
activities to maximize manpower and financial resources; and
Perform such other appropriate functions as maybe assigned.

Legal Basis & Mandate

Local Government Code of 1991 (RA 7160) and its Implementing Rules &
Regulations
Assist in the promulgation of necessary rules and regulations for the
classification, appraisal and assessment of real property necessary for taxation
purposes (Sec. 201)
Assist in the promulgation of necessary rules and regulations for simplified
disbursement scheme designed for the speedy and effective enforcement of
the IRA system (Sec. 288);
Appointment of the treasurer of each LGU from at least three (3) ranking
eligible recommendees of the Local Chief Executive, subject to civil service law,
rules and regulations (Sec. 470 and 471);
Certification of the requirements for the creation of LGU or conversion from one
level to another (Sec. 7); and
Income classification of LGUs (Sec. 8)

BLGF Clientele
LGUs: Local Chief Executives, Local Legislative, Council,
Local Finance Committee, Local Treasurer, Assistant
Treasurer and Treasury Personnel, Local Assessor,
Assistant Assessor and Assessment Personnel
National Government Agencies: DOF, DILG, DEN, DAR,
DBM, NEDA, CSC, COA, Ombudsman
Government Financial Institutions: BSP, LBP, DBP, etc.
Development Partners/Bilateral/Multilateral Institutions
General Public/Taxpayers

Organizational Structure

Special Projects
L O G O F I N D Local Government Finance and Development

Project (with MDFO)

Second Land Administration & Management
Project (with DENR, LRA)
EU PFM 2

ADB TA 7809
REGALA

LGU Public Financial Management (with DBM,

DILG, COA, NEDA)
Support to Local Government Revenue
Generation and Land Administration &
Management (with DENR)

Recent DOF/BLGF Interventions

Professionalization Law including government appraisers and assessors (under the Real
Estate Service Act or Republic Act No. 9646)
Directive of the Secretary to all local treasurers to step up revenue collections and to
the assessors to update property values and adopt idle land tax
Electronic Statement of Receipts and Expenditures, with sanctions for non-compliant
treasurers
LGU Fiscal Sustainability Scorecard, Publication of Fiscal Performance of LGUs and Tax
Watch Advertisements (http://iskor.blgf.gov.ph)
Performance Standards for Local Treasurers (forthcoming)
Updating of Treasury and Assessment Operations Manuals (ongoing)
Scaling up of land governance and valuation reforms in more LGUs
Capacity building programs on updating of property values

LGU TAX WATCH Ads

LGU TAX WATCH

LGU TAX WATCH

LGU TAX WATCH

LGU TAX WATCH

LGU TAX WATCH

Moving forward
Review of the fiscal provisions of the 1991 Local Government Code: consider
amendments on tax assignments and revenue mandates
Review current regulations on utilization of national transfers, local fiscal incentives,
subnational borrowing, etc.
Prioritize the key legislation pending in Congress:
Valuation Reform Bill: recentralize the approval of property valuations
Income Classification Bill for the Secretary of Finance to set income brackets and to
regularly reclassify local governments every 3 years
Bill increasing the income requirement for creation of cities from Php100M to Php250M
(which may be increased every 3 years).

Continuous monitoring/technical assistance through oversight agencies: improve

accountability and transparency, more capacity building for resource mobilization, harmonize
PFM tools at the local levels, among others

Focus on rural areas/local governments with high poverty incidence

THANK YOU & MABUHAY!