CONGRESSMAN HERMILANDO I. MANDANAS v. PURISIMA, GR No.

199802, 2018-07-03
Facts:
national internal revenue taxes... share of the LGUs, heretofore known as the Internal Revenue
Allotment (IRA), has been regularly released to the LGUs... the IRA is determined on the basis
of the actual collections of the National Internal Revenue Taxes (NIRTs) as certified by the
Bureau of Internal Revenue (BIR)... assailing the manner the General Appropriations Act (GAA)
for FY 2012 computed the IRA for the LGUs.
Issues:
Mandanas, et al. allege herein that certain collections of NIRTs by the Bureau of Customs
(BOC) – specifically: excise taxes, value added taxes (VATs) and documentary stamp taxes
(DSTs) – have not been included in the base amounts for the computation of the IRA... should
form part of the base from which the IRA should be computed because they constituted
NIRTs... the LGUs should also be released their unpaid IRA for FY 1992 to FY 2011, inclusive,
totaling P438,103,906,675.73.
to compel the respondents thereat to compute the just share of the LGUs on the basis of all
national taxes.
Section 6, Article X of the 1987 Constitution... the insertion by Congress of the words internal
revenue in the phrase national taxes found in Section 284 of the LGC caused the diminution of
the base for determining the just share of the LGUs, and should be declared unconstitutional;...
the OSG avers that Article 284 of the LGC is consistent with the mandate of Section 6, Article X
of the 1987 Constitution to the effect that the LGUs shall have a just share in the national
taxes... the determination of the just share is within the discretion of Congress
Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6,
Article X of the 1987 Constitution;
Whether or not the existing shares given to the LGUs by virtue of the GAA is consistent with the
constitutional mandate to give LGUs a "just share" to national taxes following Article X, Section
6 of the 1987 Constitution;
Whether or not the petitioners are entitled to the reliefs prayed for.
whether or not the exclusion of certain national taxes from the base amount for the computation
of the just share of the LGUs in the national taxes is constitutional.
Ruling:
The petitions are partly meritorious.
Section 284 of the LGC deviates from the plain language of Section 6 of Article X of the 1987
Constitution
Yet, Section 6, supra, mentions national taxes as the source of the just share of the LGUs while
Section 284 ordains that the share of the LGUs be taken from national internal revenue taxes
instead.
Garcia contends that Congress has exceeded its constitutional boundary by limiting to the
NIRTs the base from which to compute the just share of the LGUs.
We agree with Garcia's contention.
The phrase national internal revenue taxes engrafted in Section 284 is undoubtedly more
restrictive than the term national taxes written in Section 6.
Congress has actually departed from the letter of the 1987 Constitution stating that national
taxes should be the base from which the just share of the LGU comes.
Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal
autonomy in favor of the LGUs under the 1987 Constitution.
What the phrase national internal revenue taxes as used in Section 284 included are all the
taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC)
(a) Income tax; (b) Estate and donor's taxes; (c) Value-added tax; (d) Other percentage taxes;
(e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter
may be imposed and collected by the Bureau of Internal Revenue.
Section 284 has effectively deprived the LGUs from deriving their just share from other national
taxes, like the customs duties.
customs duties are also taxes because they are exactions whose proceeds become public
funds... the exclusion of other national taxes like customs duties from the base for determining
the just share of the LGUs contravened the express constitutional edict in Section 6, Article X
the 1987 Constitution.
Although it has the primary discretion to determine and fix the just share of the LGUs in the
national taxes (e.g., Section 284 of the LGC), Congress cannot disobey the express mandate of
Section 6, Article X of the 1987 Constitution for the just share of the LGUs to be derived from
the national taxes.
determined by law in Section 6 follows and qualifies the phrase just share, and cannot be
construed as qualifying the succeeding phrase in the national taxes.
The insistence of Garcia is valid to an extent.
the following have been excluded from the base for reckoning the just share of the LGUs as
required by Section 6, Article X of the 1987 Constitution, namely:... in the proceeds of the sale
and conversion of former military bases... excise taxes imposed on locally manufactured
Virginia tobacco products... in incremental revenues from Burley and native tobacco products...
share of the COA... excise taxes on mineral products... collected by the cities and provinces
and divided exclusively among the LGUs of the ARMM, the regional government and the central
government... franchise taxes paid by Manila Jockey Club, Inc., and the Philippine Racing Club,
Inc.
proceeds of the sale and conversion of the former military bases pursuant to R.A. No. 7227, the
exclusion is warranted for the reason that such proceeds do not come from a tax, fee or
exaction imposed on the sale and conversion.
incremental revenues from Burley and native tobacco products... exclusion is also justified.
Congress had the authority to exclude them by virtue of their being taxes imposed for special
purposes.
exclusion of the share of the different LGUs in the excise taxes imposed on mineral products
pursuant to Section 287 of the NIRC in relation to Section 290 of the LGC is premised on a
different constitutional provision
Section 7, Article X of the 1987 Constitution allows affected LGUs to have an equitable share in
the proceeds of the utilization of the nation's national wealth "within their respective areas,"...
properly excluded... intended to truly enable a sustainable and feasible autonomous region as
guaranteed by the 1987 Constitution.
The shares of the municipalities in the VATs collected pursuant to R.A. No. 7643 should be
included in determining the base for computing the just share because such VATs are national
taxes, and nothing can validly justify their exclusion.
the national taxes to be included in the base for computing the just share the LGUs shall
henceforth be, but shall not be limited to, the following:
NIRTs enumerated in Section 21
Tariff and customs duties
50% of the VATs collected in the ARMM, and 30% of all other national taxes collected in the
ARMM
60% of the national taxes collected from the exploitation and development of the national
wealth; the remaining 40% will exclusively accrue to the host LGUs pursuant to Section 290 of
the LGC
85% of the excise taxes collected from locally manufactured Virginia and other tobacco
products... entire 50% of the national taxes
5% of the franchise taxes in favor of the national government paid by franchise holders...
payment of the arrears... cannot be granted.
the IRA is not in accordance with the constitutional determination of the just share of the LGUs
in the national taxes
Yet, the Court has conceded in Araullo v. Aquino III
Section 6, Article X of the 1987 Constitution commands that the just share of the LGUs in
national taxes shall be automatically released to them. The term automatic connotes something
mechanical, spontaneous and perfunctory; and, in the context of this case, the LGUs are not
required to perform any act or thing in order to receive their just share in the national taxes.
not only already determined the just share through the LGC's fixing the percentage of the
collections of the NIRTs to constitute such fair share subject to the power of the President to
adjust the same in order to manage public sector deficits subject to limitations on the
adjustments, but also explicitly authorized such just share to be "automatically released" to the
LGUs in the proportions and regularity set under Section 285[79] of the LGC without need of
annual appropriation.
the automatic release of the just share directly to the provincial, city, municipal or barangay
treasurer, as the case may be, shall be "without need of any further action,"
The 1987 Constitution is forthright and unequivocal in ordering that the just share of the LGUs
in the national taxes shall be automatically released to them.
inclusion of the just share of the LGUs in the annual GAAs is unnecessary, if not superfluous.
he just share of the LGUs in the national taxes shall be released to them without need of yearly
appropriation.
the phrase "internal revenue" appearing in Section 284 of Republic Act No. 7160 (Local
Government Code) UNCONSTITUTIONAL, and DELETES the phrase from Section 284.
"internal revenue" is likewise hereby DELETED from the related sections of Republic Act No.
7160 (Local Government Code), specifically Section 285, Section 287, and Section 290
Article 378, Article 379, Article 380, Article 382, Article 409, Article 461, and related provisions
of the Implementing Rules and Regulations of R.A. No. 7160 are hereby MODIFIED to reflect
the deletion of the phrase "internal revenue" as directed herein.
Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in Republic Act No. 7160
(Local Government Code) and its Implementing Rules and Regulations shall be understood as
pertaining to the allotment of the Local Government Units derived from the national taxes
Principles:
Taxes are the enforced proportional contributions exacted by the State from persons and
properties pursuant to its sovereignty in order to support the Government and to defray all the
public needs. Every tax has three elements, namely: (a) it is an enforced proportional
contribution from persons and properties; (b) it is imposed by the State by virtue of its
sovereignty; and (c) it is levied for the support of the Government... customs duties is the
nomenclature given to taxes imposed on the importation and exportation of commodities and
merchandise to or from a foreign country.
The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that
cannot always be erased, ignored or disregarded.
two aspects. The first relates to the grant of fiscal autonomy, and the second concerns the
automatic release of funds.
Section 6 does not mention of appropriation as a condition for the automatic release of the just
share to the LGUs