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WHEREAS, internal revenue allotments are apportioned  among local government units on the basis of the  Tax Code, P.D. No. 144 (as amended) and various  other laws;   chanroblesvirtualawlibrary

WHEREAS, it is necessary to rationalize the system of national revenue allotments to local government  units, in the light of the termination of P.D. No.  1231 on December 31, 1980 and the various forms in  which national assistance is presently extended to  local government units;chanroblesvirtualawlibrary

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested  in me by the Constitution, do hereby Order and Decree:cralaw:red

Section 1.    Statement of Policy. — It shall be the policy of the State to strengthen the fiscal operations of  local government units, consistent with the principle  of decentralization in government operations. Part of  the collections of the national government obtained from  internal revenue sources shall accrue to local  government units, comprising national assistance to  the said local government units. The amount of assistance  shall be determined, taking into account local requirements  and available national funds, particularly as determined  by the cost of implementing the national development plan.  chanroblesvirtualawlibrary

Section 2.    Magnitude of Assistance. — A  maximum of twenty per cent (20%) of national internal revenue taxes shall  be available for national assistance to local government  units: Provided, That the national revenue used as basis  in computation shall exclude receipts accruing to Special  or Fiduciary Funds and to Special Accounts in the General Fund, amounts authorized by law to be used by the collecting agency, and amounts recorded as income of the General Fund  but which are charged to appropriations in the General  or other Appropriations Laws. chanroblesvirtualawlibrary

The amount of assistance shall be computed on the basis  of collections received by the national government during  the third fiscal year preceding the fiscal year during  which the assistance is distributed. Compliance shall  be reckoned taking into account general budgetary  assistance and assistance specifically intended for local  schools, reforestation projects, or other priority local  activities supported by the national government.

Section 3.    Allocation. — The total amount available shall be allocated among local government units as follows:  provinces — thirty per cent (30%); municipalities — forty-five per cent (45%); and cities — twenty-five per cent (25%).

The share of each local government unit shall be  determined on the basis of population — seventy per centum (70%); land area — twenty per centum (20%); and equal sharing — ten per centum (10%).

Section 4.    Rate of Change. — The annual allotment of any local government unit shall not increase by more than  twenty-five per cent (25%) of, nor shall be less than,  its actual allocation for the preceding year, except when  otherwise approved by the President (Prime Minister)  upon recommendation of the Ministry of the Budget and  the Minister of Local Government and Community Development.

Section 5.    Development Fund. — No less than twenty per cent (20%) of the allotments received by a local government  unit under this Act shall be appropriated and used by the  recipient local government unit for development projects, except as may be otherwise approved by the Minister of  the Budget. The nature and cost of the programs, projects  and activities supported by the Development Fund shall be determined by the local government unit following such  policies and guidelines jointly issued by the Minister  of Local Government and Community Development and the  Minister of the Budget.

Section 6.    Rules and Regulations. — The Minister of the Budget shall issue the necessary rules and regulations  for the prompt and effective implementation of this Decree.

Section 7.    Repealing Clause. — All laws or parts of law inconsistent herewith, particularly P.D. No. 144 and 1231, are hereby revoked or modified accordingly.

Done in the City of Manila, this 31st day of October, in the year of Our Lord, nineteen hundred and eighty.

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