LGUs to receive next year P4B flowback from VAT collections

By Philippine Information Agency (PIA 8)
August 12, 2007

TACLOBAN CITY, Leyte  –  The Department of Budget and Management’s announcement that the Local Government Units will receive nearly P4 billion next year as their share in the value added tax (VAT) collections, is actually a fulfillment of President Gloria Macapagal-Arroyo’s thrust of allowing the local government units to share in the fruits of the country’s economic growth.

This move of the National Government is one way of enhancing tax collections through the help of the local governments. It is virtually an incentive for the local government units to help in the promotion of tax compliance.

The amount of P3.98 billion which is allocated for the LGUs’ VAT dividends is included in the P218.7 billion which the National Government will be remitting to the local government units, in tax flowbacks next year, the biggest item of which is the Internal Revenue Allotment totaling P210.73 billion, as reported by the DBM.

It would be recalled that under RA 7643, local governments will get 20 percent of 50 percent of the so-called incremental collections from VAT.

Incremental collections from VAT is defined as the excess in the annual increase in actual collections of VAT in the immediately preceding year over the annual increase in the second preceding year.

The amount of P3.98 billion VAT dividends for LGUs next year is P440 million higher than the P3.54 billion allocated this year for the LGUs’ VAT dividends.

The 2008 share of LGUs from the VAT incremental collections is based on the increase in collection between 2007 and 2006, minus the increase in collection between 2006 and 2005.

The formula for LGU allocation is contained in the Joint Circular 1-02 issued on February 6, 2002 by the Department of Budget and Management, Department of Finance, and the Department of Interior and Local Government.