Taxing powers, scope and limitations of nga and lgu

JMJ Marist BrothersGraduate School

Notre Dame of Marbel UniversityKoronadal City, South Cotabato

Master in Public Administration PA 235 – Public Fiscal Administration

Professor – Roditt C. Delfino, PhD

Reporters:Argie Ryan L. Asaria

Diana Rose B. DaguroMarvin Lyndon Ganancial

Normina S. MagandiaSittie Mairah A. Mangudadatu

Fatima Sarah H. Maungco

PRESENTATION OUTLINE

SET – UP, FUNCTIONS AND COORDINATION IN PFAa. Taxing Powers, Scope & limitations of National

Government Agenciesb. Taxing Powers, Scope & limitations of Local Government

Unitsc. Procedures and Sharing System of Internal Revenue

Allotmentsd. Responsibilities and Accountabilities of Agencies

involved in Fiscal Administration: NGAs & LGUse. Government Enterprises

- GOCCs- Local Economic Enterprises

Taxation Powers, Scope & Limitations of

National Government Agencies

REPORTER:ASARIA, ARGIE RYAN L.

What is National Government?- Under the Constitution, the government is

divided into executive, legislative and judicial departments. The separation of powers is based on the theory of checks and balances.

• Executive Branch (law enforcing body)• Legislative Branch (law making body)• Judicial Branch (law interpreting body)

- is under the headship of the president. The president obtains the position through national voting system; the tenure is a six year period.

• Executive Branch

• Legislative Branch- is characterized by a bicameral congress

comprising the Senate and the House of Representatives. Occupying the upper house is the Senate whose 24 members are voted in a national election with a 6-year term.

• Judicial Branch- demonstrates its authority to the Supreme Court

of the Philippines as the highest judicial body and presided by a Chief Justice with 14 Associate Justices; all are appointed by the president under the advise of the Judicial and Bar Council.

What are the major sources of funds to finance the national government?

1. revenues from both tax and non-tax sources;2. borrowings from both domestic and foreign

sources; and,3. withdrawals from available cash balances

Bangko Sentral ng Pilipinas

- is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, the bank charges interest on the loans made to borrowers, primarily the government, typically as a ‘lender of last resort’.

TAXATION- is a power by which an Independent State,

through its law-making body, raises and accumulates revenue from its inhabitants to pay the necessary expenses of the government.

As a power, it refers to the inherent power of a state, co-extensive with sovereignty to demand contributions for public purposes to support the government.

Tax law in the Philippines covers national and local taxes.

National Taxes- refer to national internal revenue taxes

imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the local government.

National Tax Law - 1987 Constitution• The 1987 Philippine Constitution sets limitations

on the exercise of the power to tax.

• The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

KINDS OF NATIONAL INTERNAL REVENUE TAXES

a. INCOME TAX –is a tax on a person’s income, profits and the like, realized in a one taxable year

b. ESTATE AND DONOR TAXES Estate Tax is the tax on the right of the deceased person to transmit his lawful heirs or beneficiariesInheritance Tax is a tax on the right of the heirs of beneficiaries to receive the estate of the deceased personDonor Tax – donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favour of another who accepts it

c. VALUE ADDED TAX (VAT) – is a percentage tax imposed on every sale, barter, exchange, or lease of goods or properties (real or personal) or sale of services in the course of trade or business, and on every importation of goods, whether or not in the course of trade or business, based on the gross selling price or value, or the gross receipts, payable by the seller, transferor, lessor, or importer.

d. OTHER PERCENTAGE TAXES – are taxes based on a certain percentage of the gross selling price or gross value in money of goods sold, bartered, exchanged, or imported, or gross receipts or earnings derived by a person engaged in the sale of services

PERSONS OR BUSINESS SUBJECT TO AND RATES OF OTHER PERCENTAGE TAXES1. Small business enterprises, i.e., those whose annual gross sales and/or receipts do not exceed Php 550,000, - 3% of gross quarterly sales or receipts.

2. Domestic carriers by land, air or water and transport passengers for hire, and keepers of garages-3% of gross receipts.

3. International carriers, air or shipping, doing business in the Philippines – 3% of their gross quarterly receipts.

4. Franchise holders or grantees in respect to franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year do not exceed Php 10 million – 3% of gross receipts, and on electric, gas, and water utilities-2%

5. Senders of overseas messages-10% of the amount paid for the service.

6.Life insurance companies – 5% of gross premium collected.

7. Proprietors, lessees or operators of amusement places – 15%, 18%, or 30% of gross receipts

8. Sale of shares of stock.-1/2 of 1% (0.05), 4%, 2%, and 1% of gross selling price or gross value of the shares.

OVERSEAS COMMUNICATION TAX

The tax is imposed upon every overseas dispatch message or conversation transmitted from the Philippines by telephone, telewriter exchange, wireless and other communication services equivalent to 10% on the amount paid for such services payable by the person paying for the services rendered.

TAX ON RECEIPTS OF LIFE INSURANCE COMPANIES

The tax is imposed on persons, companies or corporations engaged in insurance business in the Philippines equivalent to 2% of the total premiums collected. Certain premiums mentioned by law are not included in the taxable receipts.

The law exempts from the tax purely cooperative companies or associations defined as those as are conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. Agents of non-resident foreign insurance companies shall pay a tax equal to 10% of the total premiums received.

AMUSEMENT TAXES

1. Taxes on gross receipts.Taxes equivalent to 18% of the gross

receipts of cockpits, cabarets, and day or night clubs; 10% in the case of boxing exhibitions; 15% in the case of professional basketball games; and 30% in the case of race tracks and jai-alai, irrespective of whether or not any amount is charged or pay for admission, collected from every proprietor, lessee, or operator of such establishment.

2. Taxes on winnings.Taxes imposed on every person who wins

in a horse race or jai-alai equivalent to 10% of his winnings or “dividends”. The same tax is collected from the owners of winning race horses.

The amusement tax on admission to places of amusement is now levied and collected by the provinces and cities to the exclusion of national government.

e. EXCISE TAXES ON CERTAIN GOODS

Excise Tax, as used in the Tax Code, are taxes imposed on certain specified goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and on goods imported into the Philippines.

Nature of Excise TaxExcise Taxes subject directly the produce or

goods to tax. They are, therefore, taxes on property.

GOODS SUBJECT TO EXCISE TAXES1. In General-Excise Taxes apply:a. To goods manufactured or produced in the Phils. For

domestic use or consumption or for any other disposition and

b. To goods imported from foreign countries

2. In Particular-The Tax Code enumerates the goods subject to excise taxes, namely:b. Alcohol products d. Miscellaneous goodsc. Tobacco products e. Mineral productsd. Petroleum products

f. DOCUMENTARY STAMP TAXES

- Is a tax on documents, and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.

- The purpose of the law in imposing stamp taxes is to raise revenue, and not to invalidate the contract

• Tax exemptions are limited to those granted by law. However, no law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the Congress.

(1) charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes

(2) non-stock non-profit educational institutions used actually, directly and exclusively for educational purposes.

The Constitution expressly grants tax exemption on certain entities/institutions such as:

NATURE OF TAXATION POWER1. Inherent Power2. Legislative Function

3. Public Purposes4. Operating within Territorial Jurisdiction5. The strongest among the inherent powers of the government.6. Taxation is the subject to limitation

• Inherent limitations• Constitutional Limitations.

SCOPE OF TAXATION OF NGAs1. Plenary or Complete

- Taxation has unlimited area of application and only restricted by the inherent and constitutional limitation.

2. Comprehensive- It has a wide scope of coverage. It covers all

persons, properties, rights and transactions subject to taxation, unless expressly exempted by laws within the sovereign.

SCOPE OF TAXATION OF NGAs3. Supreme

- it has the highest degree of application and it considered as the strongest among the inherent power of the state.

Taxation reaches every trade or occupation, every object of industry, and every species of possession. It imposes a burden which, in case of failure to discharge, may be followed by seizure or confistication of property.

LIMITATIONS OF TAXATION OF NGAs

• Levy for public purpose;• Non-delegation of legislative power to tax.• Exemption of government entities. • Tax power is limited to territorial jurisdiction

of the State;• Taxation is subject to international comity;

1. Inherent Limitations


• Due process of law (Art. III, Section I);

• Equal protection of law (Art. III, Section I);

• Rule of uniformity and equity (Art. VI, Sec. 28. par.1);

• President’s power to veto separate items in revenue or tariff bills (Art. VI, Sec. 27 (2));

• Exemption from property taxation of religious, charitable or educational entities, nonprofit cemeteries, churches and convents appurtenant thereto (Art. VI, Sec. 28, par. 3);

2. Constitutional Limitations

• Exemption from property taxation of religious, charitable or educational entities, nonprofit cemeteries, churches and convents appurtenant thereto (Art. VI, Sec. 28, par. 3);

• No public money shall be appropriated for religious purposes (Art. VI, Sec. 29);

• Majority of all the members of the Congress granting tax exemption (Art. VI, Sec. 28, par. 4);


• No public money shall be appropriated for religious purposes (Art. VI, Sec. 29);

• Majority of all the members of the Congress granting tax exemption (Art. VI, Sec. 28, par. 4);

• No imprisonment for nonpayment of poll tax (Art.

III, Sec. 20); and• Tax collection shall generally be treated as general

funds of the government (Art. VI, Sec. 29, par. 3).

2. Constitutional Limitations

Taxation Powers, Scope & Limitations of Local Government

UnitsREPORTERS:

MAGANDIA, NORMINA S.MANGUDADATU, SITTIE MAIRAH A.

TAXING POWER OF LGUs

Section 18. Power to Generate and Apply Resources

RA No. 7160 – The Local Government Code of 1991

- Local government units shall have the power and authority to establish an organization that shall be responsible for the efficient and effective implementation of their development plans, program, objectives and priority.;

Section 18. Power to Generate and Apply ResourcesRA No. 7160 – The Local Government Code of 1991

Section 128. Scope

- The provision herein shall govern the exercise by provinces, cities, municipalities and barangays of their taxing and other revenue-raising powers.

- to create their own sources of revenues and to levy taxes, fees, and charges which shall accrue exclusively for their use and disposition and which shall be retained by them; to have a just share in national taxes.

Section 129. Power to create Sources of Revenue- Each LGU has the power to create its own

sources of revenue and to levy taxes, fees, and charges.

RA No. 7160 – The Local Government Code of 1991

Section 132. Local Taxing Authority.

- The power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the sanggunian of the local government unit concerned through an appropriate ordinance.

Common Revenue – Raising Powers of LGUsTAXING POWER OF LGUs

1. Fees and charges for services rendered2. Charges for operation of public utilities

owned, operated and maintained by them within their jurisdiction

3. Toll fees and charges for use of public road, pier, wharf, waterways, bridge, ferry or telecommunications system funded and constructed by them.

Distribution of the Power to Impose Tax by Provincial, City, Municipal and Barangay Government:


Provincial Taxes

Municipal Taxes

City Taxes

Barangay Taxes

1. Transfer of Real Property Ownership

2. Printing and Publication

3. Franchise Tax4. Sand and Gravel 5. Professional Tax6. Amusement Tax7. Annual Fixed tax

for Delivery Van/truck

8. Real Property Tax9. Additional 1%

SEF Tax10. Tax on Idle Land11. Special Levy on

Land12. Public Utility

Charges

1. Business Tax on manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, compounders of liquors and others, or manufacturers of any article of commerce

2. Bus. Tax onwholesalers, distributors, dealers

3. Bus. Tax on retailers4. Bus. Tax on

Exporters, manufacturers, wholesalers & retailers of essential commodities

1. Taxes, Fees and charges imposed by provinces and municipalities at rates not to exceed the maximum rates allowed to provinces and municipalities by not more than 50% excepts in cases of Professional and Amusement Tax

2. Community Tax

1. Taxes on stores or retailers with fixed business Establishment

2. Service Fees of charges on regulation or use of brgy. Owned properties

3. Brgy. Clearance fee

4. Other fees and charges on

a.) commercial breeding of fighting cocks

b.) cockfights and cockpits

c.) places of recreation charging admission;

Provincial Taxes

Municipal Taxes

City Taxes

Barangay Taxes

13. Toll fees/charges14. Service

Fees/Charges

5. Bus. Tax on contractors

6. Bus. Tax on Banks & Financial Institutions

7. Bus. Tax on Peddlers8. Bus. Tax on other

Businesses9. Income tax on Banks10. Fees & Charges on

Business & Occupation

11. Fees for sealing and licensing of weights and measures

12. Fishery rentals fees and charges

13. Community Tax14. Special Levy on Land

4. Additional 1% Tax on Idle Land

5. Tax on Idle Land

6. Special Levy on Land

7. Public Utility Charges

8. Toll Fees/Charges

9. Service Fees/charges

d.) Billboards, sign boards, neon signs, outdoor advertisements e.) advertisements by means of vehicles, baloons, kites, etc.


Revenue Sources Provinces Cities Municipalities Barangays

Real Property Tax √ √ ✓ 40% of provincial

✓25% ofcollections prov’l or 30% of citycollections

Transfer of Real Property Ownership

√ √

Tax on sand, gravel, andother quarry resources

√ √ ✓ 30% of provincial

✓ 40% of prov’l collections

Amusement Tax √ √ ✓ 50% of prov’lcollections

Business Tax √ √ √

Franchise Tax √ √

Community Tax √ √ ✓ 50% of collections

Tax Assignment by LG in the Philippines

Provincial Taxes

Provincial Share

Component City Share

Brgy. Share

Tax on Sand, Gravel & Quarry Resources

30 % 30% 40%

Amusement Tax

50% 50% None

Real Property Tax

35% 40% 25%

Summary of Provincial Taxes with Shared Proceeds

Summary of City Taxes with Shared Proceeds

City Taxes City Share Brgy. ShareSand and Gravel Tax

60 % Where quarry is located

40%

Real Property Tax

70% 30%

1.Constitutional Limitations2.Inherent Limitations3. Statutory Limitations

- LGUs’ taxing and revenue raising powers are limited. They can only impose taxes, fees and charges as the law may allow.

LIMITATIONS IN THE TAXING POWERS OF LOCAL GOVERNMENT UNITS

RA 7160, SECTION 133Common Limitations on the Taxing Powers of

LGUsa. Income tax, except when levied on banks and other

financial institutions;

b. Documentary stamp tax;

c. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;

Computation of income tax

d. Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned;

e. Taxes, fees and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise;

f. Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

g. Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration;

h. Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;

i. Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;

j. Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code;

k. Taxes on premiums paid by way of reinsurance or retrocession;

l. Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles;

o. Taxes, fees or charges of any kind on the National Government , its agencies and instrumentalities, and local government units.

m. Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;

Procedures and Sharing System of Internal Revenue

AllotmentREPORTER:

DAGURO, DIANA ROSE B.

What is Internal Revenue Allotment?

• Internal revenue allotment is the annual share of local governments out of the proceeds from national revenue taxes.

• It is estimated at forty percent (40%) of the actual collections of national internal revenue taxes during the third fiscal year preceding the current year ( Section 284 of RA No. 7160)

What constitute the national Internal revenue taxes being used as bases for the computation

of IRA?1. Income Tax2. Estate Tax and Donor’s Tax

3. Value Added Tax4. Other Percentages Taxes5. Taxes imposes by special laws, such as travel tax

Sec. 285. Allocation to LGULGUs % Allocation

Provinces 23%Cities 23%Municipalities 34%Barangays 20%Total 100%

The distribution of shares of individual provinces, cities and municipality shall be determined on the basis of the following formula:

Factor Percentage Source DocumentPopulation 50% NSO Proclamation

OrderLand Area 25% LMB Official

masterlist of Land Area

Equal Sharing

25%

Total 100%

• Php80,000.00 for each barangay with a population of not less than 100 inhabitants.

• the balance is allocated as follows:

The share of each barangay is computed as follows:

Population 60%

Equal Sharing 40%Total 100%

Illustrative example of how the IRA is computed (for CY 2000)

1997 National Internal RevenueTax Collection as certified by the BIR ------- P 304.440B

x 40% IRA for CY 2000 ----------- P 121.778B Less: Actual Cost of Devolved Functions & City-funded hospitals 6.539B Unprogrammed amount 10.000B Local Government Service 5.000B Sub-total ___21.539B

Net IRA P 100.239B

STEP 1: Compute the Net IRA

STEP 2: Allocate Net IRA (P100.239B) per Sec. 285 of RA No. 7160

Share per LGU: Provinces (23%) P 23.055B Cities (23%) 23.055B Municipalities(34%) 34.081B Barangays (20%) 20.048B

P 100.239B

Equal Sharing = ( P20.048B x 40%) divided by total no. of barangays

Population = ( P20.048B x 60%) x the ratio of a barangay population to total Phil. population

STEP 3: Allocate the aggregate barangay share of P20.048B to all barangays based on population (60%) and equal sharing (40%)

Process Flow : Release of IRADBM-ROCS

1. Prepares the SARO, NCA and Schedule of Releases2. Prepares funding checks

DBM Regional OfficePrepares Notice of Funding

Checks Issued (NFCIs) for transmission to barangays

• Gov’t Servicing Bank• Receives Funding Checks

for credit to the account of the barangays

Punong Barangay/Brgy. Treasurer

Withdraws cash from bank

Sec. 286 Automatic Release of Shares

• The share of each LGU shall be released, without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the National Government for whatever purpose.

Sec. 287 Local Development Projects

• Each local government unit shall appropriate in its annual budget no less than twenty percent (20%) of its annual internal revenue allotment for development funds. Copies of the development plans of local government units shall be furnished by the DILG.

Responsibilities and Accountabilities of

Agencies involved in Fiscal Administration:

LGUs REPORTER:

GANANCIAL, MARVIN LYNDON

Local government units, by virtue of the 1987 Constitution and the Local Government Code of 1991, otherwise known as Republic Act 7160 have been given the power to raise certain taxes.

Each local government unit (LGU) has the power to create its own sources of revenue and to levy taxes, fees and charges

The grant of power to create sources of revenue is consistent with the basic policy of local autonomyThe taxes, fees and charges shall accrue exclusively to the LGU.

SEC. 130. Fundamental Principles – the following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers of local government units:

a. Taxation shall be uniform in each local government unit;b. Taxes, fees, charges and other impositions shall:

1. Be equitable and based as far as practicable on the taxpayer’s ability to pay;

2. Be levied and collected only for public purposes;3. Not be unjust, excessive, oppressive, or confiscatory;4. Not be contrary to law, public policy, national economic policy, or in restraint of trade;

d. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subjected to disposition by, the local government until levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and

c. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person;

e. Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

THE CONDUCT AND MANAGEMENT OF FINANCIAL AFFAIRS, TRANSACTIONS,

AND OPERATIONS OF PROVINCES, CITIES, MUNICIPALITIES, AND

BARANGAYS.

SEC. 305. Fundamental Principles. – The financial affairs, transactions, and operations of local

government units shall be governed by the following fundamental principles:

(a) No money shall be paid out of the local treasury except in pursuance of an appropriations ordinance or law;

(b) Local government funds and monies shall be spent solely for public purposes;

(c ) Local revenue is generated only from sources expressly authorized by law or ordinance, and collection thereof shall at all times be acknowledged properly;

(d) All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for as local funds, unless otherwise provided by law;

(e) Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received;

(f) Every officer of the local government unit whose duties permit or require the possession or custody of local funds shall be properly bonded, and such officer shall be accountable and responsible for said funds and for the safekeeping thereof in conformity with the provisions of law;

(g) Local governments shall formulate sound financial plans, and the local budgets shall be based on functions, activities, and projects, in terms of expected results; development plans, goals, and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources;

(i) Local budgets shall operationalize approved local development plans;

(j) Local government units shall ensure that their respective budgets incorporate the requirements of their component units and provide for equitable allocation of resources among these component units;

(k) National planning shall be based on local planning to ensure that the needs and aspirations of the people as articulated by the local government units in their respective local development plans are considered in the formulation of budgets of national line agencies or offices;

(l) Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units; and

m) The local government unit shall endeavor to have a balanced budget in each fiscal year of operation.

Government Enterprises:

GOCCs & Local Economic Enterprises

REPORTER:MAUNGCO, FATIMA SARAH H.

GOCC – Government-Owned and Controlled Corporation

• A stock or a non-stock corporation whether performing governmental or proprietary functions, which is directly chartered by a special law or, if organized under the general corporation law, is owned or controlled by the government directly or indirectly through a parent corporation or a subsidiary corporation.

Presidential Decree No. 2029

• Presently 158 GOCC• 84 Chartered • 74 registered under the SEC

Owned and controlled by the state supposed to address market failures and correct imperfections.

A corporation created by special law or incorporated and organized under the Corporation Code and in which government, directly or indirectly, has ownership of the majority of the capital stock.

Executive Order No. 64 of 1993

Why GOCC are created? And Why?

Grounded on the idea that market failures do exist and government needs to intervene to protect public interest.

The use of corporate vehicle recognized as efficient means to mobilized government assets.

History of GOCC in the Philippines

• Mid 50’s and early 60’s GOCC disastrous financial performance.

• 37 GOCC in 1965• During president Marcos first 10 years, GOCC

reach up to 120 in 1975• 303 GOCC in 1984 • And in 2010 there is 604 GOCC’s in which

446 are operational water districts.

There is no central agency tasked to monitor and supervise the activities of the government corporate sector or the GOCC’s

Creation of GCMC ( Government Corporate Monitoring Committee.)

“Executive Order No. 936“

Authorized the privatization of GOCC’s (that resulted to only 158 GOCC’s today.)

Presidential Proclamation No. 50

Conditions in where GOCC operate • In cases where private sector is unwilling or unable to

provide goods and services vital to the society such construction of large infrastructure i.e. roads & ports;

• When there is a need to create bias in favor of disadvantage sector of the society in a free market such as distribution of staples and sugar;

• To spur the development of strategic activities with wide ranging economic impact; and

• When there exist natural monopolies which government want to control to protect the consuming public.

Groups of GOCC

Cluster A – Financial Institutions

Cluster B - Public Utilities, Industrial, area development,

agricultural, trading, promotional Cluster C – Social, Cultural and Scientific

How do GOCC’s performance impact the government

• Section 3 of R.A. 7656 require all GOCC to remit 50% of annual net earning in cash, stock or property dividends to national government.

(35.7 billion collected from GOCC in 2009 or 25.3% of total non-tax revenue )

• GOCC’s constitutes expenditures, they deemed to be entitled to financial support in form of subsidies, equity infusion & lending. .

(23.8 billion of financial aid or 1.7% in government budget in 2009.)

GOCC Governance Act of 2011 (Republic Act No. 10149)

• Consolidation of Senate Bill no. 2640 & House Bill No. 4067

• Central advisory, monitoring and oversight body with authority to formulate, implement and coordinate policies concerning GOCC’s and related corporation.

Disclosure & audit requirements

“R.A. 10149 require full disclosure of all GOCC through a website and grant unrestricted public

access”

• Latest annual audited financial report within 30 days from receipt

• Audited financial statements in immediate 5 years

• Quarterly, annual report & trial balance• Current corporate operating budget

Complete compensation package of all board members & officers

• Travel• Representation • Transportation and any form of allowances or

expenses.

ÞLocal & foreign borrowings.ÞPerformance scorecards & strategy maps Þ Government subsidiary & net lending ÞAll borrowing guaranteed by the government ÞAll information GCG requires

Exempted of the coverage of R.A. 10149

• Bangko Sentral ng Pilipinas• State Universities & Colleges Cooperatives• Local water districts• Economic zone authorities• Research institution

Compensation and Position classification system for GOCC officers & employees

Subject to Phil president approval

Additional incentives No incentives shall be granted unless GOCC

has fully paid taxes for which its liable

Position Titles and Salary Grade

Directors/Trustees/Employees

PUBLIC ECONOMIC ENTERPRISES-a

• A business like entity,wholly or partially owned by local government that sells a product or service to meet a perceived specific public demand.

COMMON PUBLIC ECONOMIC ENTERPRISES: 1. Public markets 2. Slaughterhouses3. Bus terminals 4. Waterworks 5. cementeries

PURPOSEFUL PEE

• is the one that contributes to the sustainable development and quality service delivery goals of the local government unit (LGU) and the nation

How do Purposeful PEEs contribute to poverty reduction?

1. Require less subsidy from government and generate profit. 2. Equitable delivery of products and services will increase the access of marginalized groups to local services. 3. Quality services such as utilities, markets and transportation will attract potential investors to the LGUs.

LOCAL GOVERNMENT CODE

• Republic Act 7160, otherwise known as the Local Government Code under Section 17 states that... (IX) public markets, slaughterhouses and other municipal enterprises; (X) public cemetery Under section 17, the phrase “ and others” is added, which connotes that any other utilities or services can be considered as economic enterprises, provided they generate income or revenues.

THANK YOU!

Taxing powers, scope and limitations of nga and lgu

Education

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