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SECTION 129. Power to Create Source of Revenue - Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units.

LOCAL REVENUE GENERATION

a. Land-based Tools

b. Community Activity-based Tools

c. Infrastructure-based Tools

d. Debt-based Tools

e. Revenue sharing Tools

1. Basic Real Property Tax (Sec. 232).2. Special Education Fund – SEF Real

Property Tax (Sec. 235).3. Land Transfer Tax (Sec. 135).4. Idle Land Tax (Sec. 236).5. Public Land Use Tax (Sec. 235a).6. Land Sale of Foreclosed Real

Properties (Sec. 257, 258 and 260).7. Land Investment8. Land Reclassification (Sec. 20).9. Land Development Permit Fee (557

and 558).10. Tax on Sand, Gravel and other

Quarry Resources (Sec. 138).

1. Business Tax (Sec. 143)2. Community Tax (Sec. 156)3. Franchise Tax (Sec. 137)4. Tax on Business of Printing and Publication

(Sec. 136).5. Professional Tax (Sec. 139).6. Amusement Tax (Sec. 140).7. Annual Fixed Tax on Delivery Trucks or Vans

(Sec. 141).8. Fishery Rentals, Fees and Charges (Sec. 149).9. Service Fees and Charges (Sec. 153).

1.Special Levy (Sec 250)

2.Toll Fees or Charges (Sec. 155).

3.Public Utility Charges (Sec. 155).

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1)Debt Financing (Sec. 297-302).

2)Financial Investment (Sec 18

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1)Share in Mining, Fishery, and Forestry Taxes (Sec. 290).

2)Share in the Gross Sales or Taxes of Government-Owned and Controlled Corporations (Sec. 291).

3)Congressional funds.

Traditional method: Estimates income on the basis of

Past collections Newly enacted tax ordinances Amendments to existing tax or revenue

ordinances Program of tax collection campaign

Revenue forecasting Estimates income based on the

average growth rate of the actual income for the last five years.▪ Presumptive Income Levels (PIL) –

estimates tax bases for business and amusement tax▪ Firm’s electric bill▪ Number of employees▪ Amount of inventory

(countercheck the amount of gross receipts declared by the tax payer)

Collection – done mainly by the Treasurer’s office (all taxes, fees and charges shall be

paid within the first twenty(20) days of January and of each subsequent quarter)

Factors affecting the collection efficiency of the local treasurer’s office Limited personnel Inadequate records-keeping and

management systems Political mediation Precarious peace and order condition in

the locality Low tax ethic Lack logistics Revenue data bank

Vertically integrated planning Provides local governments with the

connection to the broader and longer-term framework of development

Local development planning Identification of development programs

and projects that are appropriate for credit financing

Basis for budget proposals and reference in preparing work and financial plans.

Basis of recommendation of spending for economic, social and general services

Local Government Budget Process Legal instrument which authorizes

the expenditure of public funds Accounting framework for fixing the

fiscal stewardship of public offers Management tool for planning the

direction and magnitude for the utilization of government revenues and receipts

Setting a local government budget involves three key decisions:

1) Allocation2) Distribution3) Stabilization/Growth

The Allocation Decision is based in three criteria:

1) Economic efficiency2) Technical efficiency3) Net social benefits/costs

Budgeting Cycle

Executive Budget Local Chief Executive Local Finance

Committee

Done between July 15 and October 15 of the current year

Transmitted to the Local Sanggunian not later than October 16

Legislative discussion of proposed budget is done by the Sanggunian between October 16 and November 17

Enact annual budget by issuing an appropriation ordinance on or before the current fiscal year

Submission of the budget for review is required within 10 days

The review action by the reviewing authority may lead to either the declaration of the budget as to the following :

This phase involves the release and actual disbursement of funds for the identified functions – Work and Financial Plan and Request for Allotment

Budget Preparation Expenditure items

▪ Mandatory contributions (required prior to the Code’s effectivity) Social security and insurance benefits of employees Reserve money for earned leave credits of retiring

employees Gratuities of employees that are optionally retiring

▪ Personal services

Budget Authorization Conflicts between the executive and

legislative branches of the local government cause the delay of the passage of the budget (opposing political camps/party)

Budget Review Change in the process of review of

appropriation led to non-conformity of review actions and decisions▪ Some sanggunians would authorize anything

appropriated by lower level of local units for political purposes

▪ Failure to submit supporting documents on time

Budget Execution Non submission of work and financial

plan and request for allotments by the heads of departments or offices

Non submission of supporting documents for the request for allotments.

Use of appropriated funds or savings

Budget Accountability Delayed submission of financial statements

to the local finance committee by the local accountant

LGU failed to prepare development programs for the 20% Development Plan

LGU appropriated funds for development projects less than the level of appropriation required

LGUs failed to implement or complete projects programmed under the fund

Budget Accountability Incurrence of cash drafts due to improper

use of trust funds Disbursements which lead to disallowances

after audit Failure by LGUs t conduct periodic physical

inventory or to maintain complete property records

Failure to liquidate cash advances, thus making those advances accumulate through the years.