What Is Internal Revenue Allotment?

Introduction

The Internal Revenue Allotment or IRA is a significant source of funding for local government units in the Philippines. It is the share of the national government’s internal revenue tax collections that is allocated to LGUs to finance local government operations.

History

The IRA was first introduced in 1991 under the Local Government Code, which devolved powers and responsibilities to LGUs. The code mandated the allocation of at least 40% of the national government’s internal revenue tax collections to LGUs.

How is the IRA computed?

The IRA is computed based on the following factors: – Population (50%) – Land area (25%) – Equal sharing (25%) The population and land area are given weight to ensure that LGUs with larger populations and land areas get a bigger share of the IRA. The equal sharing factor, on the other hand, ensures that all LGUs get a minimum share of the IRA.

Uses of IRA

Local Government Operations

The IRA is primarily intended to finance local government operations, such as: – Maintenance of peace and order – Provision of basic services (health, education, social welfare, etc.) – Infrastructure development – Disaster risk reduction and management

Salary and Benefits of LGU Employees

A portion of the IRA is also used to pay for the salaries and benefits of LGU employees. The Local Government Code mandates that at least 20% of the IRA should be used for this purpose.

Development Projects

LGUs can also use the IRA to finance development projects, such as the construction of public buildings, roads, bridges, and other infrastructure.

Challenges in the Implementation of IRA

Unequal Distribution

One of the main challenges in the implementation of the IRA is the unequal distribution of funds among LGUs. While the formula for computing the IRA is intended to ensure that larger LGUs get a bigger share of the funds, smaller LGUs may still feel that they are not getting enough.

Unutilized Funds

Another challenge is the unutilized funds, which are funds that are not spent by LGUs within a given period. Unutilized funds may occur due to poor planning, lack of capacity, or corruption.

Dependence on IRA

Some LGUs have become too dependent on the IRA, which may lead to a lack of initiative to generate their own revenues. This dependence may also lead to a lack of accountability in the use of funds.

Conclusion

The Internal Revenue Allotment is a crucial source of funding for local government units in the Philippines. While it has helped finance local government operations and development projects, there are still challenges in its implementation. These challenges should be addressed to ensure that the IRA is used effectively and efficiently for the benefit of all LGUs and their constituents.