FACTS: Congressman Hermilando I. Mandanas and other petitioners challenge the manner in which the just share in the national taxes of the local government units (LGUs) has been computed.
Section 6, Article X of the 1987 Constitution provides, “Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.” While Section 284 of the Local Government Code provides, “Allotment of Internal Revenue Taxes. – Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as 30%, 35% and 40% for the first, second and third year and thereafter respectively.”
ISSUE: Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X of the 1987 Constitution.
RULING: Yes. Although the power of Congress to make laws is plenary in nature, congressional law-making remains subject to the limitations stated in the 1987 Constitution. The phrase national internal revenue taxes engrafted in Section 284 is undoubtedly more restrictive than the term national taxes written in Section 6. As such, Congress has actually departed from the letter of the 1987 Constitution stating that national taxes should be the base from which the just share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a statute there should be no departure). Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution.
PRINCIPLE: Municipal corporations are now commonly known as local governments. They are the bodies politic established by law partly as agencies of the State to assist in the civil governance of the country. Their chief purpose has been to regulate and administer the local and internal affairs of the cities, municipalities or districts. They are legal institutions formed by charters from the sovereign power, whereby the populations within communities living within prescribed areas have formed themselves into bodies politic and corporate, and assumed their corporate names with the right of continuous succession and for the purposes and with the authority of subordinate self-government and improvement and the local administration of the affairs of the State.
Municipal corporations, being the mere creatures of the State, are subject to the will of Congress, their creator. Their continued existence and the grant of their powers are dependent on the discretion of Congress.
