A bill filed in the Senate proposes to give local government units (LGUs) a bigger role in national development by allocating one percent of total value-added tax (VAT) revenues to fund their projects—provided they show significant improvements in tax collection.
Senate Bill No. 405, authored by Senator Panfilo “Ping” Lacson, aims to incentivize LGUs that post at least a 10 percent increase in VAT collections compared to the previous year. The measure seeks to push local governments to create a more business-friendly environment and streamline processes for small entrepreneurs.
“Such incentives are designed to serve as motivation for LGUs to facilitate business operations and reduce barriers for small entrepreneurs, hence further enhancing tax collection efficiencies,” Lacson said.
Under the bill, the Bureau of Local Government Finance and the Department of Finance will be responsible for verifying the LGUs’ VAT performance, while the Department of Budget and Management will handle the release of incentives through a Local Government Development Fund (LGDF).
The LGDF will be sourced from one percent of the actual VAT collections for fiscal year 2022. A portion of the fund—P100 million—is earmarked for a web-based monitoring system to track project implementation, a move meant to boost transparency and accountability.
The bill also introduces capacity-building measures to improve the public service delivery and financial management systems of LGUs.
“Giving the LGUs the necessary wherewithal to be active participants in the development of our country will contribute to dismantling the culture of mendicancy and political patronage that viciously thrive in our system,” Lacson said, stressing that empowering LGUs is key to achieving “the elusive inclusive growth that the Filipinos all aspire for as a nation.”
