GOVERNING THE COMPUTATION OF NATIONAL INTERNAL REVENUE ALLOTMENTS TO LOCAL GOVERNMENT UNITS

WHEREAS, internal revenue allotments are apportioned among
local government units on the basis of the Tax Code, P.D. No. 144 (as amended)
and various other laws;

WHEREAS, it is necessary to rationalize the system of
national revenue allotments to local government units, in the light of the
termination of P.D. No. 1231 on December 31, 1980 and the various forms in which
national assistance is presently extended to local government units;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution, do hereby
Order and Decree:

SECTION 1. Statement of Policy.—It shall be the
policy of the State to strengthen the fiscal operations of local government
units, consistent with the principle of decentralization in government
operations. Part of the collections of the national government obtained from
internal revenue sources shall accrue to local government units, comprising
national assistance to the said local government units. The amount of assistance
shall be determined, taking into account local requirements and available
national funds, particularly as determined by the cost of implementing the
national development plan.

SEC. 2. Magnitude of Assistance.—A maximum of
twenty per cent (20%) of national internal revenue taxes shall be available for
national assistance to local government units: Provided, That the
national revenue used as basis in computation shall exclude receipts accruing to
Special or Fiduciary Funds and to Special Accounts in the General Fund, amounts
authorized by law to be used by the collecting agency, and amounts recorded as
income of the General Fund but which are charged to appropriations in the
General or other Appropriations Laws.

The amount of assistance shall be computed on the basis of collections
received by the national government during the third fiscal year preceeding the
fiscal year during which the assistance is distributed. Compliance shall be
reckoned taking into account general budgetary assistance and assistance
specifically intended for local schools, reforestation projects, or other
priority local activities supported by the national government.

SEC. 3. Allocation.—The total amount available
shall be allocated among local government units as follows: provinces—thirty per
cent (30%); municipalities—forty-five per cent (45%); and cities—twenty-five per
cent (25%).

The share of each local government unit shall be determined on the basis of
population—seventy per centum (70%); land area—twenty per centum (20%); and
equal sharing—ten per centum (10%).

SEC. 4. Rate of Change. —The annual allotment of
any local government unit shall not increase by more than twenty-five per cent
(25%) of, nor shall be less than, its actual allocation for the preceding year,
except when otherwise approved by the President (Prime Minister) upon
recommendation of the Minister of the Budget and the Minister of Local
Government and Community Development.

SEC. 5. Development Fund. —No less than twenty per
cent (20%) of the allotments received by a local government unit under this Act
shall be appropriated and used by the recipient local government unit for
development projects, except as may be otherwise approved by the Minister of the
Budget. The nature and cost of the programs, projects and activities supported
by the Development Fund shall be determined by the local government unit
following such policies and guidelines jointly issued by the Minister of Local
Government and Community Development and the Minister of the Budget.

SEC. 6. Rules and Regulations.— The Minister of the
Budget shall issue the necessary rules and regulations for the prompt and
effective implementation of this Decree.

SEC. 7. Repealing Clause. —All laws or parts of law
inconsistent herewith, particularly P.D. No. 144 and 1231, are hereby revoked or
modified accordingly.

Done in the City of Manila, this 31st day of October, in the year of Our Lord
nineteen hundred and eighty.

			(Sgd.) FERDINAND E. MARCOS President Republic of the Philippines
	By the President:
	(Sgd.) JUAN C. TUVERA
		Presidential Executive Assistant