REVISING THE PRESENT SYSTEM OF NATIONAL INTERNAL REVENUE ALLOTMENTS TO LOCAL GOVERNMENTS

WHEREAS, under the National Internal Revenue Code and other
existing laws, internal revenue allotments are apportioned among the
local governments on the basis of various formulas for distribution;

WHEREAS, the present system of internal revenue allotments
has resulted in a lopsided distribution of funds among the local
government units such that a few provinces and cities receive greater
shares while the majority receive less; and

WHEREAS, for purposes of administrative simplicity and
efficiency and in order to establish a more equitable system of
distribution of allotments and introduce the developmental concept in
the allocation of funds to local governments, it has become imperative
and compelling to revise the present internal revenue allotment system;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and General
Order No. 1, dated September 22, 1972, as amended, in order to
transform the tax system into an effective tool for the implementation
of the desired changes such as income redistribution and reforms in our
new society, do hereby order and decree that the present system of
national internal revenue allotments to local governments be revised as
herein provided:

1. Twenty per centum (20%) of the collections from
   national internal revenue taxes not otherwise accruing to special funds
   and special accounts in the general fund shall accrue to local
   governments to be computed on the basis of the collections of the third
   fiscal year preceding the current fiscal year.
2. This allotment shall be distributed as follows:
   Thirty per centum (30%) to provinces
   Forty-five per centum (45%) to municipalities
   Twenty-five per centum (25%) to cities
3. The share of each local government unit shall be determined on
   the basis of the following formula:
   Seventy per centum (70%) — Population
   Twenty per centum (20%) — Land Area
   Ten per centum (10%) — Equal Sharing
4. For the first three fiscal years of implementation of this
   Decree (FY’s 1974, 1975 and 1976) the annual allotment of any local
   government shall not increase by more than fifteen per centum
   (15%) nor decrease by more than fifty per centum (50%) of its
   actual allotment during the fiscal year 1970-71. Thereafter, the shares
   of each local government shall be determined solely on the basis of
   Sections 1, 2 and 3 hereof.
5. There is hereby created a Barrio Development Fund to be
   constituted of the ten percent shares of the barrios in real estate
   tax collections as provided under Republic Act No. 3590 (the Revised
   Barrio Charter) and annual contributions from each province, city and
   municipality in an amount not exceeding P500 per barrio, which fund
   shall be spent solely for community development projects that would meet
   the requirements set forth by the Secretary of Local Government and
   Community Development. The Provincial Treasurer shall be the custodian
   of this fund and he shall maintain in his books a special account
   therefor. Releases of this fund shall be made through the Municipal
   Treasurer concerned who shall be responsible for the proper disbursement
   and accounting of the same.
6. Each province, city and municipality shall appropriate in
   its annual general fund budget no less than twenty per centum
   (20%) of its annual allotment for development projects.

   The development plans of the local units shall be subject to the
   approval of the Secretary of Local Government and Community Development,
   who shall issue the necessary guidelines for the purpose.

7. In addition, five per centum (5%) of the
   collections from national internal revenue taxes not otherwise
   accruing to special funds and special accounts in the general fund shall
   accrue to a local government fund which shall he released by the
   President as financial aid to local governments or to projects.
8. This revised allotment system shall take effect July 1, 19
   73.
9. The Secretary of Finance shall issue the necessary rules
   and regulations for the prompt and effective implementation of this
   Decree.

All laws or parts of law inconsistent herewith are hereby revoked
or modified accordingly.

Done in the City of Manila, this 3rd day
of March, in the year of Our Lord, nineteen hundred and seventy-three.