DOF MULLS INCENTIVES TO PUSH FISCAL INDEPENDENCE OF LGUs

MANILA, September 1, 2003  (STAR) By Des Ferriols  - The Department of Finance (DOF) is proposing a set of incentives to encourage local government units (LGUs) to finance their own requirements and reduce their dependence on the internal revenue allotment (IRA).

Finance Secretary Jose Isidro Camacho said the slow decentralization of LGUs is causing a strain on the budget of the National Government (NG).

According to Camacho, most LGUs rely solely on the IRA and do not bother to find ways of financing their requirements.

"In the end, the local government units are in surplus while the National Government is in deficit," Camacho pointed out.

Camacho said offering incentives to LGUs might encourage them to develop and implement ways of financing to wean them away from the IRA.

"We havenít actually figured out what these incentives would be but there must be some fiscal incentives to encourage them to look for innovative means of financing," Camacho said.

Budget Secretary Emilia Boncodin explained that as the LGUsí IRA increases, the share of the National Government in the national budget declines. As a result, it has little left to finance development programs for implementation by its line agencies whose operations also benefit LGUs.

"As the years go by, the share of LGUs in the national budget keeps going up," Boncodin explained. "The deficit doesnít necessarily go up as a result of this but it constrains the spending flexibility of the National Government."

In 2003, the IRA for local government units amounted to a total of P141.571 billion, up from P134.422 billion in 2002 and P115,827 billion in 2001. The 2003 IRA would go up to P143.437 billion in the proposed 2004 budget.


Reported by: Sol Jose Vanzi

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