Internal Revenue Allotment scheme was established under the 1991 Local Government Code. At least 40% of the country's internal revenue income will be allocated to the LGUs in the following manner:
- Provinces - Twenty-three percent (23%);
- Cities - Twenty-three percent (23%);
- Municipalities - Thirty-four percent (34%); and
- Barangays - Twenty percent (20%)
Section 284 of RA No. 7160 or the Local Government Code of 1991, which provides that LGUs shall have a 40% share from the national internal revenue taxes on collection of the third (3rd) fiscal year preceding the current fiscal year; and Section 285 which provides the manner of allocation to the LGUs.
Section 286 of RA No. 7160 provides that the share of each local government units 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 (5) 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 (actually, the allotment for IRA is released comprehensively but cash allocation is released monthly, 80% of IRA share of LGUs on or before the 8th day of the month and the remaining 20% on or before the 24th day of every month).
Section 4 of RA No. 9358 or the Supplemental Appropriation for FY 2006 provides that future local government share in the national internal revenue taxes or IRA shall henceforth be automatically appropriated.
The revenue share of each province, city and municipality is determined on the basis of the following very simple formula:
- Population - Fifty percent (50%);
- Land Area - Twenty-five percent (25%); and
- Equal sharing - Twenty-five percent (25%)
To ensure the release of the IRA on time, the lawmakers added a provision that it shall be automatically released to the LGUs on a quarterly basis and shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.
USES OF FUND
To fund basic services and facilities pursuant to Section 17 of the Local Government Code of 1991 particularly those which have been devolved by the National Government.
To fund development projects as identified in the LGUs Annual Investment Plan (Section 287 of the LGC directs LGUs to set aside not less than 20% of their IRA for development projects).