The Internal Revenue Allotment in the Philippines is the automatic annual transfer of a fixed share of national tax collections from the national government to every province, city, municipality, and barangay. It was renamed the National Tax Allotment after a 2018 Supreme Court ruling expanded which taxes count toward the pool, but the mechanism is the same: 40 percent of qualifying national tax collections from three years earlier, released automatically, with the money distributed by formula. For fiscal year 2026, that amounted to ₱1.19 trillion.
The 40 Percent Share and the Three-Year Lag
Section 284 of Republic Act 7160, the Local Government Code of 1991, fixes the local government share at 40 percent of national internal revenue taxes. The President may temporarily reduce the share during an unmanageable public sector deficit, but even then it cannot fall below 30 percent.
The allotment for any given year is computed from actual tax collections in the third fiscal year before the budget year. The 2026 allotment is based on audited 2023 collections. That lag exists so local treasurers plan against a firm, audited figure rather than a moving estimate.
Why It Was Renamed the National Tax Allotment
For decades the national government computed the local share using only taxes collected by the Bureau of Internal Revenue. Two petitions challenged that reading, arguing the Constitution guarantees local governments a “just share” in all national taxes. In its July 3, 2018 decision in G.R. No. 199802, the Supreme Court agreed. The ruling became final and executory on April 10, 2019.
The computation base then expanded to include customs duties, excise taxes, value-added taxes, and other levies collected by the Bureau of Customs and other national agencies. When the ruling took effect in fiscal year 2022, the allotment jumped by roughly ₱263.5 billion, a 37.9 percent increase, bringing that year’s total to about ₱959 billion. To reflect the broader base, the Internal Revenue Allotment was renamed the National Tax Allotment. The 40 percent rate and the three-year lag did not change.
How the Pool Is Divided Across Local Government Levels
Once the national total is set, it splits into four fixed shares:
- Provinces: 23 percent
- Cities: 23 percent
- Municipalities: 34 percent
- Barangays: 20 percent
Municipalities receive the largest slice because they handle much of the frontline service delivery in rural and suburban areas. Barangays collectively get the smallest portion, but there are thousands of them, so per-unit amounts are much smaller.
How Each LGU’s Individual Share Is Calculated
Within the province, city, and municipality buckets, an individual unit’s share is determined by three weighted factors:
- Population, 50 percent. Census data drives half the formula, so more populated jurisdictions receive proportionally more.
- Land area, 25 percent. Larger jurisdictions get additional resources for longer roads, more remote facilities, and higher infrastructure costs.
- Equal sharing, 25 percent. Every unit at the same level receives an identical baseline regardless of size or population.
Barangays follow a different formula. Every barangay with at least 100 inhabitants gets a guaranteed minimum annual allotment of ₱80,000. The remaining balance is split 60 percent by population and 40 percent through equal sharing. Land area does not enter the barangay computation.
What LGUs Must Spend It On
Local governments do not have free rein over how NTA funds are used. Several earmarks apply.
The 20 Percent Development Fund
Section 287 of the Local Government Code requires every LGU to set aside at least 20 percent of its annual NTA share for development projects. The money funds lasting infrastructure: roads, bridges, public markets, drainage systems, water supply facilities, and similar capital improvements. Local development plans must be submitted to the Department of the Interior and Local Government.
Disaster Risk Reduction and Management Fund
Republic Act 10121 requires local governments to reserve not less than 5 percent of estimated revenue from regular sources for the Local Disaster Risk Reduction and Management Fund. The base is total estimated regular revenue, which includes locally generated income alongside the NTA, not the NTA alone. These funds cover preparedness, rescue equipment, medical supplies, calamity insurance premiums, and post-disaster reconstruction. Thirty percent of the fund is designated as a Quick Response Fund for immediate relief during calamities.
Gender and Development
Under Republic Act 9710, the Magna Carta of Women, every LGU must allocate at least 5 percent of its total budget to gender and development programs, including women’s welfare, health services, livelihood programs, and anti-violence efforts.
Why the Money Is Released Automatically
Article X, Section 6 of the 1987 Constitution states that local government units “shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.” That word “automatically” is the shield. No president, budget secretary, or congressional committee can hold NTA funds as political leverage or redirect them to other national priorities. The money flows by constitutional command.
The Department of Budget and Management handles the logistics. For fiscal year 2026, the DBM credited the full NTA directly to each LGU’s authorized government servicing bank as an upfront lump sum, giving local treasurers immediate access for annual planning rather than staggered quarterly releases. National officials are legally prohibited from diverting these funds during periods of fiscal stress. The one narrow exception is the presidential authority under Section 284 to reduce the overall percentage during an unmanageable public sector deficit, subject to consultation with Congress and the leagues of local governments, and never below the 30 percent floor.
One boundary worth noting: LGUs that host mining, forestry, fishery, or similar natural resource operations receive a separate allocation called the share in national wealth under Sections 289 and 290 of the Local Government Code. That is a distinct revenue stream from the NTA and reaches only a minority of local governments.