Philippine President Signs New Law for Automatic Income Classification of Local Government Units
Manila — President Ferdinand R. Marcos Jr. has signed a bill into law that institutes the automatic income classification for local government units (LGUs) in the Philippines, Malacañang announced on Friday.
According to a news release by Philippines News Agency, aims to promote local autonomy and help LGUs reach their full economic potential. The Department of Finance (DOF), in coordination with the Department of Budget and Management (DBM) and in consultation with LGU Leagues, will create the law’s implementing rules and regulations within three months of its effectivity.
The legislation categorizes provinces, cities, and municipalities based on their income ranges and average annual regular income. The Finance Secretary, in consultation with the National Economic and Development Authority (NEDA) and concerned LGUs League, will have the authority to adjust these income ranges based on actual growth rates from the last income reclassification. Additionally, the Secretary of Finance will conduct regular income reclassifications every three years to align with prevailing economic conditions.
The first general income reclassification will occur within six months after the law takes effect, and will continue every three years subsequently. Garafil stated that the first reclassification will be enacted on January 1st of the year following the issuance of the table of income classification by the Finance Secretary.
Municipalities will be categorized into five classes based on their annual average income, ranging from First Class, with an average annual income of PHP200,000,000, to Fifth Class, with an annual income less than PHP90,000,000. This classification will serve as the basis for various forms of administrative and statutory aid, financial grants, and other types of assistance to LGUs. It will also inform the capability of LGUs to undertake development programs and projects.
Moreover, the new law will guide the total annual supplemental appropriation for personnel services for an LGU, and for compensation adjustment under the Salary Standardization Law of 2019. Other areas impacted by the law include the creation of new LGUs, the setting of the number of elective members in local legislative bodies, issuance of free patent titles to residential lands, minimum wages for domestic workers, and insurance coverage for LGU properties with the Government Service Insurance System (GSIS).
The Department of the Interior and Local Government (DILG) expressed that the enactment of this law underscores the role of LGUs in national development. Interior Secretary Benjamin Abalos Jr. highlighted that the new legislation brings the country closer to achieving genuine local autonomy, as originally envisioned by the Local Government Code enacted thirty-two years ago.