Local government fee rules prescribe 10% markup on cost of services

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NEW RULES regulating fees issued by the Bureau of Local Government Finance (BLGF) require local government units (LGUs) to charge no more then a 10% markup on the cost of services.

The BLGF laid out the rules in its local fees and charges (LFC) toolkit via memorandum circular no. 020-2019.

The circular requires LGUs to evaluate the cost of service delivery and to charge fees on a cost-plus-10% basis.

The rules “set a range… of reasonable (charges),” BLGF Executive Director Niño Raymond B. Alvina told BusinessWorld in a phone message Thursday.

The LFC toolkit consists of spreadsheet templates encoded with the Local Fees and Charges Estimation System.

“This is to help the LGUs in better designing their fees and charges to make them fair and commensurate to the cost of regulation or service rendered by the LGU,” Mr. Alvina added.

The BLGF requires special justification for fees that exceed cost-plus-10%.

Under the rules, the LGU may also decide to subsidize services, charging fees at below cost.

“The LGU may decide to keep rates subsidized or lower than the actual cost. If it’s more than the parameter (of a 10% margin), the LGU is encouraged to either adjust the rates, or improve the quality and efficiency of the service,” he said.

After reviewing the cost of all services, LGUs need to submit the results to an LGU Oversight Committee on Revising of Fees and Charges, which will be created by the mayor.

The BLGF, the Philippine Tax Academy (PTA) and the Department of Interior and Local Government (DILG) will offer training and technical assistance to aid LGU personnel in reviewing fees.

“We will work on (the database) once the LGUs start reviewing and revising their rates. Right now, we’ve started training for the NCR (National Capital Region) LGUs and more training will come in partnership with the DILG,” Mr. Alvina said, referring to the Department of Interior and Local Government.

Joint memorandum circular (JMC) 2019-01 released in May ordered local governments to impose “just and reasonable” fees and charges for all services rendered to the public.

The circular was authorized by Republic Act 11032, or the Ease of Doing business and Efficient Government Service Delivery Act of 2018.

Under RA 7160 or the Local Government Code (LGC) of 1991, LGUs are authorized to “create their own sources of revenue and to levy taxes, fees, and charges.” — Beatrice M. Laforga