12.2 Shares in National Wealth, Tobacco Taxes, and Special Purpose Grants

Shares in National Wealth, Tobacco Taxes, and Special Transfers

National-wealth entitlement and amount

RA 7160 Section 289 gives LGUs an equitable share in proceeds from utilization and development of national wealth within their areas. Under Section 290, the ordinary share is 40% of the gross collection derived by the national government in the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and other taxes, fees, or charges, including related surcharges, interests, or fines, and 40% of the specified gross collection by a government agency or government-owned or controlled corporation engaged in utilization and development.

Do not substitute the direct-benefit formula for every operator. Section 293's direct benefits address a government agency or GOCC engaged in developing and utilizing national wealth that does not pay the taxes, fees, or charges contemplated by the preceding provisions. The host LGUs are entitled to the higher of 1% of gross sales or receipts from the preceding calendar year or 40% of the taxes, fees, or charges the entity would otherwise have paid.

Allocation among host LGUs

For resources located in a province, the Section 292 allocation is:

• Province: 20%
• Component city or municipality: 45%
• Barangays: 35%

For a highly urbanized or independent component city, the city receives 65% and its barangays 35%. When the resource spans two or more LGUs, the affected share is apportioned 70% by population and 30% by land area, using the statutory formula.

Section 293 requires the national agency or GOCC to remit the share directly to the local treasurer within five days after the end of each quarter, under the implementing rules. The treasurer must identify the source, covered period, allocation basis, and recipient fund and reconcile the remittance with the national certification.

Use of proceeds

Section 294 directs LGUs to appropriate their national-wealth shares to finance local development and livelihood projects. For proceeds derived from the development and utilization of hydrothermal, geothermal, and other sources of energy, at least 80% must be applied solely to lowering the cost of electricity in the source LGU. The 80% rule is not a general permission to use only 20% of non-energy national-wealth proceeds for development; it is a special restriction on energy-derived proceeds.

Tobacco-producing areas

RA 7171 and RA 8240 provide special shares for qualifying tobacco-producing provinces from specified national excise-tax revenues. The beneficiary test, certified production data, current revenue base, release, and authorized uses must be taken from the applicable statute as amended and the current DBM/BIR release documents. Treat these as special-purpose transfers, not ordinary locally generated revenue, and preserve the expenditure restrictions and reporting trail.

Registered business enterprises after CREATE MORE

Older reviewers often state a single PEZA “5% tax” as though it always settles every national and local liability. RA 12066, the CREATE MORE Act, requires a current regime-specific analysis. The 5% Special Corporate Income Tax (SCIT) is in lieu of national and local taxes and local fees and charges for an eligible export registered business enterprise during the applicable incentive period.

For an RBE under an income tax holiday or enhanced deductions regime, an LGU may enact a registered business enterprise local tax (RBELT) of not more than 2% of gross income, in lieu of all local taxes, fees, and charges. RBELT does not apply while the RBE is under SCIT. In a problem, identify the enterprise, registered activity, incentive regime and period, situs, and ordinance before choosing the local treatment.

Verifying the source, allocation, and remittance

A national-wealth share computation needs more than a percentage. Identify the natural resource or energy activity, the government agency or government-owned corporation that collected the charge or generated the proceeds, the gross collection or statutory base, the production or collection period, and the LGUs in which the resource is located. Section 290 states the ordinary aggregate LGU share of forty percent of gross collections derived by the national government in the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and related charges, including the specified energy-production share. Apply any controlling special law where the facts place the receipt outside that general rule.

Then use the applicable Section 292 allocation. For a resource located within a province, the Code's ordinary allocation is twenty percent to the province, forty-five percent to the component city or municipality, and thirty-five percent to the barangay. Different rules apply to a highly urbanized or independent component city and when the natural resource spans two or more LGUs; do not force every fact pattern into the provincial split.

Reconcile the remittance advice, agency certification, production or collection statement, bank credit, treasury receipt, accounting entry, and recipient-LGU allocation. A delayed or unexplained difference should be raised with the remitting agency and oversight offices using the statutory base and period. Record the share in the proper fund and preserve any purpose restriction imposed by the governing law.