Mandanas v. Ochoa

Section 284 of the Local Government Code (LGC) gave LGUs a share, the Internal Revenue Allotment (IRA), in "national internal revenue taxes" of the third preceding fiscal year, rising to 40%. In G.R. No. 199802, Mandanas and other local officials sought certiorari, prohibition and mandamus against the FY 2012 GAA's computation of the IRA. They argued that excise taxes, VAT and documentary stamp taxes collected by the Bureau of Customs were wrongly left out of the base, and they claimed P60.75 billion for 2012 plus arrears for 1992-2011. In G.R. No. 208488, Congressman Enrique Garcia, Jr., later substituted by Jose Enrique Garcia III, sought mandamus. He argued that inserting "internal revenue" into Section 284 shrank the constitutional base of "national taxes" under Section 6, Article X, and that special-law exclusions were invalid. The OSG argued that mandamus does not lie, that determining the just share is for Congress, and that BOC collections may be treated differently. The cases were consolidated.

1. 1Whether mandamus is the proper remedy to challenge Section 284 of the LGC and the GAA
2. 2Whether limiting the base of the LGUs' just share to national internal revenue taxes violates Section 6, Article X of the 1987 Constitution
3. 3Whether the LGUs are entitled to arrears and to automatic release of their just share

The petitions were partly granted. Mandamus does not lie because determining the just share is a discretionary power of Congress. But Garcia's petition, which alleged grave abuse of discretion, was treated as certiorari under the expanded judicial power in Section 1, Article VIII. Section 6, Article X provides: "Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them." Congress may fix the size of the share, but the base is "national taxes", which is broader than national internal revenue taxes. So Congress could not narrow the base by statute, and could exclude taxes only where another constitutional provision allows it, such as special-purpose funds and the host LGUs' share in national wealth under Section 7, Article X. The Court listed what the base must include. These are the NIRC taxes, including VAT, excise and documentary stamp taxes whether collected by the BIR or the BOC, and tariff and customs duties. Base-conversion proceeds under RA 7227, the COA audit fee, and the racing-club franchise tax apportionment were upheld. Arrears were denied: under the operative fact doctrine as applied in Araullo v. Aquino III, the ruling is prospective. Because Section 6 does not condition release on appropriation, "the just share of the LGUs in the national taxes shall be released to them without need of yearly appropriation." Disposition: the Court deleted "internal revenue" from Sections 284, 285, 287 and 290 of the LGC, ordered all national tax collections included in the base, dismissed the arrears claims, and commanded automatic quarterly release.