DBM: Lower IRA in 2012 due to revenue decline in 2009

A July 12, 2011 press release by the Department of Budget and Management

Abad encourages LGUs to focus spending on social contract priorities

Budget and Management Secretary Florencio B. Abad today explained that the smaller internal revenue allotment (IRA) of local government units (LGUs) for fiscal year 2012 is due to the sharp decrease of revenue collections in 2009 due to the global economic slump as well as revenue-eroding measures passed at that time.

“Year after year, we in the Department of Budget and Management have followed the provisions of the Local Government Code on the share of LGUs in national internal revenue taxes, with no exception. It is unfortunate that revenues in 2009 declined, but that is the legally-mandated base year for computing the IRA for fiscal year 2012,” he said.

He cited Section 284 of Republic Act No. 7160 which states that LGUs shall have a 40-percent share in national internal revenue taxes “based on the collection of the third fiscal year preceding the current fiscal year.” Following this formula under the law, IRA shares of LGUs will decrease by P13.635 billion or 4.8 percent to P273.31 billion in 2012 as compared to P286.94 billion in 2011.




(For FY 2010)


(For FY 2011)


(For FY 2012)

Internal Revenue Tax Collection




Net of Deductions*




IRA (40 percent)




*Deductions include non-cash collections such as tax refund, special fund representing share of LGUs from taxes such as mining tax, VAT, excise tax, etc. which are released to beneficiary LGUs and COA share.

Abad said that in order to maximize the impact of resources that would be available to LGUs in 2012, he encouraged them to align their programs, projects and activities to the five priority areas under the Aquino Social Contract.

“The National Government can co-finance LGUs’ critical development projects such as school buildings, rural health centers, infrastructure that supports agriculture and tourism, and other endeavours consistent with the Social Contract,” he said. He noted that each LGU is mandated by the LGC to appropriate at least 20 percent of its IRA for development projects.

These five priority areas under the Social Contract are: Anti Corruption, Transparent, Accountable and Participatory Governance; Poverty Reduction and Employment of the Poor and Vulnerable; Rapid, Inclusive and Sustained Economic Growth; Just and Lasting Peace and the Rule of Law; Integrity of the Environment and Climate Change Adaptation and Mitigation.