Cost of IRA ruling could rise to P195B
A prospective Supreme Court (SC) ruling requiring increased transfers from the central to local governments could cost much more than initially estimated by the Department of Budget and Management.
The impact could go as high as P195 billion, Finance Secretary Carlos Dominguez 3rd told legislators at Development Budget Coordination Committee (DBCC) briefing at the House of Representatives.
Dominguez explained that the amount was “on top of the P575.5 billion in local governments’ internal revenue allotment (IRA) shares from national internal revenue taxes collected in 2016 to be disbursed in 2019, bringing the total to over P771 billion.”
Budget Secretary Benjamin Diokno previously said that the ruling, which declared that the IRA should be based on all national taxes and not just internal revenue taxes, would cost the government P160 billion if it had to be implemented next year.
“The DBCC yesterday recommended to the President to file a motion for reconsideration,” Dominguez said.
Uncertainty over the exact nature of the high court decision have led economic managers to claim that the government could be forced to shell out as much as P6 trillion in unpaid IRA.
Debt watchers Fitch Ratings and Moody’s Investors Service also mentioned the ruling in their latest assessments on the Philippines’ credit standing.
Fitch said the decision “could put upward pressure on the general government debt ratio, as well as creating challenges for effective public finance management.”
Moody’s, for its part, noted that “there may be a gap between the national and local governments with respect to their ability to manage fiscal resources, posing a risk to the improved fiscal discipline that has characterized national government finances over the past decade.”
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