Taxing powers, scope and limitations of nga and lgu

1. 1. JMJ Marist Brothers Graduate School Notre Dame of Marbel University Koronadal City,
South Cotabato Master in Public Administration PA 235 – Public Fiscal Administration
Professor – Roditt C. Delfino, PhD Reporters: Argie Ryan L. Asaria Diana Rose B. Daguro
Marvin Lyndon Ganancial Normina S. Magandia Sittie Mairah A. Mangudadatu Fatima Sarah
H. Maungco
2. 2. PRESENTATION OUTLINE SET – UP, FUNCTIONS AND COORDINATION IN PFA a.
Taxing Powers, Scope & limitations of National Government Agencies b. Taxing Powers,
Scope & limitations of Local Government Units c. Procedures and Sharing System of Internal
Revenue Allotments d. Responsibilities and Accountabilities of Agencies involved in Fiscal
Administration: NGAs & LGUs e. Government Enterprises - GOCCs - Local Economic
Enterprises
3. 3. Taxation Powers, Scope & Limitations of National Government Agencies REPORTER:
ASARIA, ARGIE RYAN L.
4. 4. What is National Government? - Under the Constitution, the government is divided into
executive, legislative and judicial departments. The separation of powers is based on the
theory of checks and balances. • Executive Branch (law enforcing body) • Legislative Branch
(law making body) • Judicial Branch (law interpreting body)
5. 5. - is under the headship of the president. The president obtains the position through
national voting system; the tenure is a six year period. • Executive Branch • Legislative
Branch - is characterized by a bicameral congress comprising the Senate and the House of
Representatives. Occupying the upper house is the Senate whose 24 members are voted in
a national election with a 6-year term.
6. 6. • Judicial Branch - demonstrates its authority to the Supreme Court of the Philippines as
the highest judicial body and presided by a Chief Justice with 14 Associate Justices; all are
appointed by the president under the advise of the Judicial and Bar Council. What are the
major sources of funds to finance the national government? 1. revenues from both tax and
non-tax sources; 2. borrowings from both domestic and foreign sources; and, 3. withdrawals
from available cash balances
7. 7. Bangko Sentral ng Pilipinas - is a banking institution granted the exclusive privilege to lend
a government its currency. Like a normal commercial bank, the bank charges interest on the
loans made to borrowers, primarily the government, typically as a ‘lender of last resort’.
8. 8. TAXATION - is a power by which an Independent State, through its law-making body,
raises and accumulates revenue from its inhabitants to pay the necessary expenses of the
government. As a power, it refers to the inherent power of a state, co-extensive with
sovereignty to demand contributions for public purposes to support the government.
9. 9. Tax law in the Philippines covers national and local taxes. National Taxes - refer to
national internal revenue taxes imposed and collected by the national government through
the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected
by the local government.
10. 10. National Tax Law - 1987 Constitution • The 1987 Philippine Constitution sets limitations
on the exercise of the power to tax. • The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
11. 11. KINDS OF NATIONAL INTERNAL REVENUE TAXES a. INCOME TAX –is a tax on a
person’s income, profits and the like, realized in a one taxable year b. ESTATE AND
DONOR TAXES Estate Tax is the tax on the right of the deceased person to transmit his
lawful heirs or beneficiaries Inheritance Tax is a tax on the right of the heirs of beneficiaries
to receive the estate of the deceased person Donor Tax – donation is an act of liberality
whereby a person disposes gratuitously of a thing or right in favour of another who accepts it
12. 12. c. VALUE ADDED TAX (VAT) – is a percentage tax imposed on every sale, barter,
exchange, or lease of goods or properties (real or personal) or sale of services in the course
of trade or business, and on every importation of goods, whether or not in the course of trade
or business, based on the gross selling price or value, or the gross receipts, payable by the
seller, transferor, lessor, or importer. d. OTHER PERCENTAGE TAXES – are taxes based
on a certain percentage of the gross selling price or gross value in money of goods sold,
bartered, exchanged, or imported, or gross receipts or earnings derived by a person
engaged in the sale of services
13. 13. PERSONS OR BUSINESS SUBJECT TO AND RATES OF OTHER PERCENTAGE
TAXES 1. Small business enterprises, i.e., those whose annual gross sales and/or receipts
do not exceed Php 550,000, - 3% of gross quarterly sales or receipts. 2. Domestic carriers
by land, air or water and transport passengers for hire, and keepers of garages-3% of gross
receipts. 3. International carriers, air or shipping, doing business in the Philippines – 3% of
their gross quarterly receipts.
14. 14. 4. Franchise holders or grantees in respect to franchises on radio and/or television
broadcasting companies whose annual gross receipts of the preceding year do not exceed
Php 10 million – 3% of gross receipts, and on electric, gas, and water utilities-2% 5. Senders
of overseas messages-10% of the amount paid for the service. 6.Life insurance companies –
5% of gross premium collected. 7. Proprietors, lessees or operators of amusement places –
15%, 18%, or 30% of gross receipts
15. 15. 8. Sale of shares of stock.-1/2 of 1% (0.05), 4%, 2%, and 1% of gross selling price or
gross value of the shares. OVERSEAS COMMUNICATION TAX The tax is imposed upon
every overseas dispatch message or conversation transmitted from the Philippines by
telephone, telewriter exchange, wireless and other communication services equivalent to
10% on the amount paid for such services payable by the person paying for the services
rendered.
16. 16. TAX ON RECEIPTS OF LIFE INSURANCE COMPANIES The tax is imposed on
persons, companies or corporations engaged in insurance business in the Philippines
equivalent to 2% of the total premiums collected. Certain premiums mentioned by law are not
included in the taxable receipts. The law exempts from the tax purely cooperative companies
or associations defined as those as are conducted by the members thereof with the money
collected from among themselves and solely for their own protection and not for profit.
Agents of non-resident foreign insurance companies shall pay a tax equal to 10% of the total
premiums received.
17. 17. AMUSEMENT TAXES 1. Taxes on gross receipts. Taxes equivalent to 18% of the gross
receipts of cockpits, cabarets, and day or night clubs; 10% in the case of boxing exhibitions;
15% in the case of professional basketball games; and 30% in the case of race tracks and
jai-alai, irrespective of whether or not any amount is charged or pay for admission, collected
from every proprietor, lessee, or operator of such establishment.
18. 18. 2. Taxes on winnings. Taxes imposed on every person who wins in a horse race or jai-
alai equivalent to 10% of his winnings or “dividends”. The same tax is collected from the
owners of winning race horses. The amusement tax on admission to places of amusement is
now levied and collected by the provinces and cities to the exclusion of national government.
19. 19. e. EXCISE TAXES ON CERTAIN GOODS Excise Tax, as used in the Tax Code, are
taxes imposed on certain specified goods manufactured or produced in the Philippines for
 domestic sale or consumption or for any other disposition and on goods imported into the
Philippines. Nature of Excise Tax Excise Taxes subject directly the produce or goods to tax.
They are, therefore, taxes on property.
20. 20. GOODS SUBJECT TO EXCISE TAXES 1. In General-Excise Taxes apply: a. To goods
manufactured or produced in the Phils. For domestic use or consumption or for any other
disposition and b. To goods imported from foreign countries 2. In Particular-The Tax Code
enumerates the goods subject to excise taxes, namely: a. Alcohol products d. Miscellaneous
goods b. Tobacco products e. Mineral products c. Petroleum products
21. 21. f. DOCUMENTARY STAMP TAXES - Is a tax on documents, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. -
The purpose of the law in imposing stamp taxes is to raise revenue, and not to invalidate the
contract
22. 22. • Tax exemptions are limited to those granted by law. However, no law granting any tax
exemption shall be passed without the concurrence of a majority of all the members of the
Congress. (1) charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, and nonprofit cemeteries and all lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational purposes (2) non-stock
non-profit educational institutions used actually, directly and exclusively for educational
purposes. The Constitution expressly grants tax exemption on certain entities/institutions
such as:
23. 23. NATURE OF TAXATION POWER 1. Inherent Power 2. Legislative Function 3. Public
Purposes 4. Operating within Territorial Jurisdiction 5. The strongest among the inherent
powers of the government. 6. Taxation is the subject to limitation • Inherent limitations •
Constitutional Limitations.
24. 24. SCOPE OF TAXATION OF NGAs 1. Plenary or Complete - Taxation has unlimited area
of application and only restricted by the inherent and constitutional limitation. 2.
Comprehensive - It has a wide scope of coverage. It covers all persons, properties, rights
and transactions subject to taxation, unless expressly exempted by laws within the
sovereign.
25. 25. SCOPE OF TAXATION OF NGAs 3. Supreme - it has the highest degree of application
and it considered as the strongest among the inherent power of the state. Taxation reaches
every trade or occupation, every object of industry, and every species of possession. It
imposes a burden which, in case of failure to discharge, may be followed by seizure or
confistication of property.
26. 26. LIMITATIONS OF TAXATION OF NGAs • Levy for public purpose; • Non-delegation of
legislative power to tax. • Exemption of government entities. • Tax power is limited to
territorial jurisdiction of the State; • Taxation is subject to international comity; 1. Inherent
Limitations
27. 27. LIMITATIONS OF TAXATION OF NGAs • Due process of law (Art. III, Section I); • Equal
protection of law (Art. III, Section I); • Rule of uniformity and equity (Art. VI, Sec. 28. par.1); •
President’s power to veto separate items in revenue or tariff bills (Art. VI, Sec. 27 (2)); •
Exemption from property taxation of religious, charitable or educational entities, nonprofit
cemeteries, churches and convents appurtenant thereto (Art. VI, Sec. 28, par. 3); 2.
Constitutional Limitations
28. 28. • Exemption from property taxation of religious, charitable or educational entities,
nonprofit cemeteries, churches and convents appurtenant thereto (Art. VI, Sec. 28, par. 3); •
No public money shall be appropriated for religious purposes (Art. VI, Sec. 29); • Majority of
all the members of the Congress granting tax exemption (Art. VI, Sec. 28, par. 4);
LIMITATIONS OF TAXATION OF NGAs • No public money shall be appropriated for
religious purposes (Art. VI, Sec. 29); • Majority of all the members of the Congress granting
tax exemption (Art. VI, Sec. 28, par. 4); • No imprisonment for nonpayment of poll tax (Art. III,
Sec. 20); and • Tax collection shall generally be treated as general funds of the government
(Art. VI, Sec. 29, par. 3). 2. Constitutional Limitations
29. 29. Taxation Powers, Scope & Limitations of Local Government Units REPORTERS:
MAGANDIA, NORMINA S. MANGUDADATU, SITTIE MAIRAH A.
30. 30. TAXING POWER OF LGUs Section 18. Power to Generate and Apply Resources RA
No. 7160 – The Local Government Code of 1991 - Local government units shall have the
power and authority to establish an organization that shall be responsible for the efficient and
effective implementation of their development plans, program, objectives and priority.;
31. 31. Section 18. Power to Generate and Apply Resources RA No. 7160 – The Local
Government Code of 1991 Section 128. Scope - The provision herein shall govern the
exercise by provinces, cities, municipalities and barangays of their taxing and other revenue-
raising powers. - to create their own sources of revenues and to levy taxes, fees, and
charges which shall accrue exclusively for their use and disposition and which shall be
retained by them; to have a just share in national taxes.
32. 32. Section 129. Power to create Sources of Revenue - Each LGU has the power to create
its own sources of revenue and to levy taxes, fees, and charges. RA No. 7160 – The Local
Government Code of 1991 Section 132. Local Taxing Authority. - The power to impose a tax,
fee, or charge or to generate revenue under this Code shall be exercised by the sanggunian
of the local government unit concerned through an appropriate ordinance.
33. 33. Common Revenue – Raising Powers of LGUs TAXING POWER OF LGUs 1. Fees and
charges for services rendered 2. Charges for operation of public utilities owned, operated
and maintained by them within their jurisdiction 3. Toll fees and charges for use of public
road, pier, wharf, waterways, bridge, ferry or telecommunications system funded and
constructed by them.
34. 34. Distribution of the Power to Impose Tax by Provincial, City, Municipal and Barangay
Government: Distribution of the Power to Impose Tax by Provincial, City, Municipal and
Barangay Government: Provincial Taxes Municipal Taxes City Taxes Barangay Taxes 1.
Transfer of Real Property Ownership 2. Printing and Publication 3. Franchise Tax 4. Sand
and Gravel 5. Professional Tax 6. Amusement Tax 7. Annual Fixed tax for Delivery Van/truck
8. Real Property Tax 9. Additional 1% SEF Tax 10. Tax on Idle Land 11. Special Levy on
Land 12. Public Utility Charges 1. Business Tax on manufacturers, assemblers, repackers,
processors, brewers, distillers, rectifiers, compounders of liquors and others, or
manufacturers of any article of commerce 2. Bus. Tax onwholesalers, distributors, dealers 3.
Bus. Tax on retailers 4. Bus. Tax on Exporters, manufacturers, wholesalers & retailers of
essential commodities 1. Taxes, Fees and charges imposed by provinces and municipalities
at rates not to exceed the maximum rates allowed to provinces and municipalities by not
more than 50% excepts in cases of Professional and Amusement Tax 2. Community Tax 1.
Taxes on stores or retailers with fixed business Establishment 2. Service Fees of charges on
regulation or use of brgy. Owned properties 3. Brgy. Clearance fee 4. Other fees and
charges on a.) commercial breeding of fighting cocks b.) cockfights and cockpits c.) places of
recreation charging admission;
35. 35. Provincial Taxes Municipal Taxes City Taxes Barangay Taxes 13. Toll fees/charges 14.
Service Fees/Charges 5. Bus. Tax on contractors 6. Bus. Tax on Banks & Financial
Institutions 7. Bus. Tax on Peddlers 8. Bus. Tax on other Businesses 9. Income tax on Banks
10. Fees & Charges on Business & Occupation 11. Fees for sealing and licensing of weights
and measures 12. Fishery rentals fees and charges 13. Community Tax 14. Special Levy on
Land 4. Additional 1% Tax on Idle Land 5. Tax on Idle Land 6. Special Levy on Land 7.
Public Utility Charges 8. Toll Fees/Charges 9. Service Fees/charges d.) Billboards, sign
boards, neon signs, outdoor advertisements e.) advertisements by means of vehicles,
baloons, kites, etc. Distribution of the Power to Impose Tax by Provincial, City, Municipal and
Barangay Government:
36. 36. Revenue Sources Provinces Cities Municipalities Barangays Real Property Tax √ √ ✓
40% of provincial ✓25% of collections prov’l or 30% of city collections Transfer of Real
Property Ownership √ √ Tax on sand, gravel, and other quarry resources √ √ ✓ 30% of
provincial ✓ 40% of prov’l collections Amusement Tax √ √ ✓ 50% of prov’l collections
Business Tax √ √ √ Franchise Tax √ √ Community Tax √ √ ✓ 50% of collections Tax
Assignment by LG in the Philippines
37. 37. Provincial Taxes Provincial Share Component City Share Brgy. Share Tax on Sand,
Gravel & Quarry Resources 30 % 30% 40% Amusement Tax 50% 50% None Real Property
Tax 35% 40% 25% Summary of Provincial Taxes with Shared Proceeds
38. 38. Summary of City Taxes with Shared Proceeds City Taxes City Share Brgy. Share Sand
and Gravel Tax 60 % Where quarry is located 40% Real Property Tax 70% 30%
39. 39. 1.Constitutional Limitations 2.Inherent Limitations 3. Statutory Limitations - LGUs’ taxing
and revenue raising powers are limited. They can only impose taxes, fees and charges as
the law may allow. LIMITATIONS IN THE TAXING POWERS OF LOCAL GOVERNMENT
UNITS
40. 40. RA 7160, SECTION 133 Common Limitations on the Taxing Powers of LGUs a. Income
tax, except when levied on banks and other financial institutions; b. Documentary stamp tax;
c. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except
as otherwise provided herein; Computation of income tax
41. 41. d. Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues,
and all other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned; e. Taxes, fees and
charges and other impositions upon goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for
bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such
goods or merchandise;
42. 42. f. Taxes, fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen; g. Taxes on business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively
from the date of registration; h. Excise taxes on articles enumerated under the National
Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;
43. 43. i. Percentage or value-added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein; j. Taxes on the gross
receipts of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water, except as provided
in this Code; k. Taxes on premiums paid by way of reinsurance or retrocession;
44. 44. l. Taxes, fees or charges for the registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof, except tricycles; o. Taxes, fees or charges
of any kind on the National Government , its agencies and instrumentalities, and local
government units. m. Taxes, fees, or other charges on Philippine products actually exported,
except as otherwise provided herein;
45. 45. Procedures and Sharing System of Internal Revenue Allotment REPORTER: DAGURO,
DIANA ROSE B.
46. 46. What is Internal Revenue Allotment? • Internal revenue allotment is the annual share of
local governments out of the proceeds from national revenue taxes. • It is estimated at forty
percent (40%) of the actual collections of national internal revenue taxes during the third
fiscal year preceding the current year ( Section 284 of RA No. 7160)
47. 47. What constitute the national Internal revenue taxes being used as bases for the
computation of IRA? 1. Income Tax 2. Estate Tax and Donor’s Tax 3. Value Added Tax 4.
Other Percentages Taxes 5. Taxes imposes by special laws, such as travel tax
48. 48. Sec. 285. Allocation to LGU LGUs % Allocation Provinces 23% Cities 23% Municipalities
34% Barangays 20% Total 100%
49. 49. The distribution of shares of individual provinces, cities and municipality shall be
determined on the basis of the following formula: Factor Percentage Source Document
Population 50% NSO Proclamation Order Land Area 25% LMB Official masterlist of Land
Area Equal Sharing 25% Total 100%
50. 50. • Php80,000.00 for each barangay with a population of not less than 100 inhabitants. •
the balance is allocated as follows: The share of each barangay is computed as follows:
Population 60% Equal Sharing 40% Total 100%
51. 51. Illustrative example of how the IRA is computed (for CY 2000) 1997 National Internal
Revenue Tax Collection as certified by the BIR ------- P 304.440B x 40% IRA for CY 2000 ----
------- P 121.778B Less: Actual Cost of Devolved Functions & City-funded hospitals 6.539B
Unprogrammed amount 10.000B Local Government Service 5.000B Sub-total ___21.539B
Net IRA P 100.239B STEP 1: Compute the Net IRA
52. 52. STEP 2: Allocate Net IRA (P100.239B) per Sec. 285 of RA No. 7160 Share per LGU:
Provinces (23%) P 23.055B Cities (23%) 23.055B Municipalities(34%) 34.081B Barangays
(20%) 20.048B P 100.239B
53. 53. Equal Sharing = ( P20.048B x 40%) divided by total no. of barangays Population = (
P20.048B x 60%) x the ratio of a barangay population to total Phil. population STEP 3:
Allocate the aggregate barangay share of P20.048B to all barangays based on population
(60%) and equal sharing (40%)
54. 54. Process Flow : Release of IRA DBM-ROCS 1. Prepares the SARO, NCA and Schedule
of Releases 2. Prepares funding checks DBM Regional Office Prepares Notice of Funding
Checks Issued (NFCIs) for transmission to barangays • Gov’t Servicing Bank • Receives
Funding Checks for credit to the account of the barangays Punong Barangay/Brgy.
Treasurer Withdraws cash from bank
55. 55. Sec. 286 Automatic Release of Shares • The share of each LGU shall be released,
without need of any further action, directly to the provincial, city, municipal or barangay
treasurer, as the case may be, on a quarterly basis within five days after the end of each
quarter, and which shall not be subject to any lien or holdback that may be imposed by the
National Government for whatever purpose.
56. 56. Sec. 287 Local Development Projects • Each local government unit shall appropriate in
its annual budget no less than twenty percent (20%) of its annual internal revenue allotment
for development funds. Copies of the development plans of local government units shall be
furnished by the DILG.
57. 57. Responsibilities and Accountabilities of Agencies involved in Fiscal Administration: LGUs
REPORTER: GANANCIAL, MARVIN LYNDON
58. 58. Local government units, by virtue of the 1987 Constitution and the Local Government
Code of 1991, otherwise known as Republic Act 7160 have been given the power to raise
certain taxes. Each local government unit (LGU) has the power to create its own sources of
revenue and to levy taxes, fees and charges The grant of power to create sources of
 revenue is consistent with the basic policy of local autonomy The taxes, fees and charges
shall accrue exclusively to the LGU.
59. 59. SEC. 130. Fundamental Principles – the following fundamental principles shall govern
the exercise of the taxing and other revenue-raising powers of local government units: a.
Taxation shall be uniform in each local government unit; b. Taxes, fees, charges and other
impositions shall: 1. Be equitable and based as far as practicable on the taxpayer’s ability to
pay; 2. Be levied and collected only for public purposes; 3. Not be unjust, excessive,
oppressive, or confiscatory; 4. Not be contrary to law, public policy, national economic policy,
or in restraint of trade;
60. 60. d. The revenue collected pursuant to the provisions of this Code shall inure solely to the
benefit of, and be subjected to disposition by, the local government until levying the tax, fee,
charge or other imposition unless otherwise specifically provided herein; and c. The
collection of local taxes, fees, charges and other impositions shall in no case be let to any
private person; e. Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.
61. 61. THE CONDUCT AND MANAGEMENT OF FINANCIAL AFFAIRS, TRANSACTIONS,
AND OPERATIONS OF PROVINCES, CITIES, MUNICIPALITIES, AND BARANGAYS.
62. 62. SEC. 305. Fundamental Principles. – The financial affairs, transactions, and operations
of local government units shall be governed by the following fundamental principles: (a) No
money shall be paid out of the local treasury except in pursuance of an appropriations
ordinance or law; (b) Local government funds and monies shall be spent solely for public
purposes;
63. 63. (c ) Local revenue is generated only from sources expressly authorized by law or
ordinance, and collection thereof shall at all times be acknowledged properly; (d) All monies
officially received by a local government officer in any capacity or on any occasion shall be
accounted for as local funds, unless otherwise provided by law; (e) Trust funds in the local
treasury shall not be paid out except in fulfillment of the purpose for which the trust was
created or the funds received;
64. 64. (f) Every officer of the local government unit whose duties permit or require the
possession or custody of local funds shall be properly bonded, and such officer shall be
accountable and responsible for said funds and for the safekeeping thereof in conformity with
the provisions of law; (g) Local governments shall formulate sound financial plans, and the
local budgets shall be based on functions, activities, and projects, in terms of expected
results; development plans, goals, and strategies in order to optimize the utilization of
resources and to avoid duplication in the use of fiscal and physical resources;
65. 65. (i) Local budgets shall operationalize approved local development plans; (j) Local
government units shall ensure that their respective budgets incorporate the requirements of
their component units and provide for equitable allocation of resources among these
component units; (k) National planning shall be based on local planning to ensure that the
needs and aspirations of the people as articulated by the local government units in their
respective local development plans are considered in the formulation of budgets of national
line agencies or offices;
66. 66. (l) Fiscal responsibility shall be shared by all those exercising authority over the financial
affairs, transactions, and operations of the local government units; and m) The local
government unit shall endeavor to have a balanced budget in each fiscal year of operation.
67. 67. Government Enterprises: GOCCs & Local Economic Enterprises REPORTER:
MAUNGCO, FATIMA SARAH H.
68. 68. GOCC – Government-Owned and Controlled Corporation • A stock or a non-stock
corporation whether performing governmental or proprietary functions, which is directly
chartered by a special law or, if organized under the general corporation law, is owned or
controlled by the government directly or indirectly through a parent corporation or a
subsidiary corporation. Presidential Decree No. 2029
69. 69. • Presently 158 GOCC • 84 Chartered • 74 registered under the SEC Owned and
controlled by the state supposed to address market failures and correct imperfections. A
corporation created by special law or incorporated and organized under the Corporation
Code and in which government, directly or indirectly, has ownership of the majority of the
capital stock. Executive Order No. 64 of 1993
70. 70. Why GOCC are created? And Why? Grounded on the idea that market failures do exist
and government needs to intervene to protect public interest. The use of corporate vehicle
recognized as efficient means to mobilized government assets.
71. 71. History of GOCC in the Philippines • Mid 50’s and early 60’s GOCC disastrous financial
performance. • 37 GOCC in 1965 • During president Marcos first 10 years, GOCC reach up
to 120 in 1975 • 303 GOCC in 1984 • And in 2010 there is 604 GOCC’s in which 446 are
operational water districts.
72. 72. There is no central agency tasked to monitor and supervise the activities of the
government corporate sector or the GOCC’s Creation of GCMC ( Government Corporate
Monitoring Committee.) “Executive Order No. 936“ Authorized the privatization of GOCC’s
(that resulted to only 158 GOCC’s today.) Presidential Proclamation No. 50
73. 73. Conditions in where GOCC operate • In cases where private sector is unwilling or unable
to provide goods and services vital to the society such construction of large infrastructure i.e.
roads & ports; • When there is a need to create bias in favor of disadvantage sector of the
society in a free market such as distribution of staples and sugar; • To spur the development
of strategic activities with wide ranging economic impact; and • When there exist natural
monopolies which government want to control to protect the consuming public.
74. 74. Groups of GOCC  Cluster A – Financial Institutions  Cluster B - Public Utilities,
Industrial, area development, agricultural, trading, promotional  Cluster C – Social, Cultural
and Scientific
75. 75. How do GOCC’s performance impact the government • Section 3 of R.A. 7656 require all
GOCC to remit 50% of annual net earning in cash, stock or property dividends to national
government. (35.7 billion collected from GOCC in 2009 or 25.3% of total non-tax revenue ) •
GOCC’s constitutes expenditures, they deemed to be entitled to financial support in form of
subsidies, equity infusion & lending. . (23.8 billion of financial aid or 1.7% in government
budget in 2009.)
76. 76. GOCC Governance Act of 2011 (Republic Act No. 10149) • Consolidation of Senate Bill
no. 2640 & House Bill No. 4067 • Central advisory, monitoring and oversight body with
authority to formulate, implement and coordinate policies concerning GOCC’s and related
corporation.
77. 77. Disclosure & audit requirements “R.A. 10149 require full disclosure of all GOCC through
a website and grant unrestricted public access” • Latest annual audited financial report within
30 days from receipt • Audited financial statements in immediate 5 years • Quarterly, annual
report & trial balance • Current corporate operating budget
78. 78. Complete compensation package of all board members & officers • Travel •
Representation • Transportation and any form of allowances or expenses. Local & foreign
borrowings. Performance scorecards & strategy maps  Government subsidiary & net
lending All borrowing guaranteed by the government All information GCG requires
79. 79. Exempted of the coverage of R.A. 10149 • Bangko Sentral ng Pilipinas • State
Universities & Colleges Cooperatives • Local water districts • Economic zone authorities •
Research institution
80. 80. Compensation and Position classification system for GOCC officers & employees
Subject to Phil president approval Additional incentives No incentives shall be granted
unless GOCC has fully paid taxes for which its liable Position Titles and Salary Grade
Directors/Trustees/Employees
81. 81. PUBLIC ECONOMIC ENTERPRISES-a • A business like entity,wholly or partially owned
by local government that sells a product or service to meet a perceived specific public
demand. COMMON PUBLIC ECONOMIC ENTERPRISES: 1. Public markets 2.
Slaughterhouses 3. Bus terminals 4. Waterworks 5. cementeries
82. 82. PURPOSEFUL PEE • is the one that contributes to the sustainable development and
quality service delivery goals of the local government unit (LGU) and the nation
83. 83. How do Purposeful PEEs contribute to poverty reduction? 1. Require less subsidy from
government and generate profit. 2. Equitable delivery of products and services will increase
the access of marginalized groups to local services. 3. Quality services such as utilities,
markets and transportation will attract potential investors to the LGUs.
84. 84. LOCAL GOVERNMENT CODE • Republic Act 7160, otherwise known as the Local
Government Code under Section 17 states that... (IX) public markets, slaughterhouses and
other municipal enterprises; (X) public cemetery Under section 17, the phrase “ and others”
is added, which connotes that any other utilities or services can be considered as economic
enterprises, provided they generate income or revenues.
85. 85. v
86. 86. THANK YOU!   