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1.1 These guidelines and procedures are issued to implement the provisions on the sharing, distribution and manner of disposition of the. two per cent (2%) share of the concerned LGUs from the total collection equivalent to five per cent (5%) of the Gross Income Earned by all businesses within the Subic, Clark, John Hay, Poro Point Special Economic and Free Port Zones and the other special economic zones under the Philippine Economic Zone Authority (PEZA) pursuant to the following:

1.1.1	R.A. No. 7227 entitled, "An Act Accelerating the Conversion of Military Reservations into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for other Purposes", and
1.1.2	R.A. No. 7916 entitled, "An Act Providing the Legal Framework and Mechanism for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority."

2.0 Purpose

2.1	To provide the implementing and procedural guidelines on the release of funds to local government units which are entitled to the 2% share in the gross income earned by all businesses within the Special Economic Zones;
2.2	To delineate the responsibilities of the DILG, DBM and DOF thru BIR in the allocation and release of funds to the LGUsl;
2.3	To enhance tax collections in coordination with LGUs.

3.0 Definition of Terms

3.1 For purposes of this Joint Circular, the following terms shall be construed to mean, as follows

3.1.1	Special Economic Zones (ECOZONES) — pertain to selected areas with highly developed, or which have the potential to be developed into, agro-industrial, industrial, tourist/recreational, commercial, banking, investment and financial centers. These areas include Subic, Clark, John Hay, Poro Point Special Economic Zones and Free Port Zones and the ECOZONES established under the PEZA.
3.1.2	Gross Income Earned (GIE) — refers to gross sales or gross revenues derived from registered business activities within the ECOZONES, net of sales discounts, sales returns and allowances and minus cost of sales, cost of production or direct costs of services (depending on the nature of business) but before any deduction is made for administrative expenses or incidental losses during a given taxable period.
3.1.3	Internal Revenue Tax Collection Base (IRTCB) — refers to the total internal revenue collections after all authorized deductions as enumerated under Annex "A" hereof, have been made by BIR. Forty percent (40%) of this amount is allocated for Internal Revenue Allotment of the LGUs.

4.0 General Guidelines

4.1 All registered enterprises which conduct their business activities inside Subic, Clark, John Hay and Poro Point Special Economic Zones and all the Special Economic Zones under PEZA shall, in lieu of paying local and national taxes, pay five percent (5%) final tax on their GIE to the BIR.

4.2 Concerned LGUs shall be entitled to a 2% share out of the 5% final tax on GIE, which is equivalent to 40% of the total tax collected, proportionately divided into the following:

4.2.1.	One per cent (1%), which is equivalent to 20% of the total tax collected, to the LGUs affected by the declaration of the ECOZONE; and,
4.2.2	One per sent (1%), which is equivalent to 20% of the total tax collected, to the Special Development Fund (SDF) of each concerned LGUs outside and contiguous to the base/ECOZONE areas.

4.3 The allocation of the 1% share of the affected LGUs and 1% SDF shall be distributed on the basis of 50% population, 25% land area and 25% equal sharing. The base data to be used shall be consistent with the DBM formula of allocating the Internal Revenue Allotment (IRA), as follows:

4.3.1	For population, the census figures from the National Statistics Office using the same cut-off dates as that used by DBM.
4.3.2	For land area, the certified Masterlist of Land Area issued by the Land Management Bureau of the Department of Environment and Natural Resources.

5.0 Specific Responsibilities of each Department

5.1 The DOF thru BIR shall:

5.1.1	Submit to DBM on or before May 15, a certification of the total computed LGU share based on the revenue collections corresponding to 40% of the total final tax collected on GIE for the base year, which is two (2) years immediately preceding the current year.
5.1.2	Include the amount reflected in the aforesaid certification as one of the authorized deductions in the computation of the IRTCB.
5.1.3	In the case of the Subic, Clark, John Hay and Poro Point Special Economic Zones and pursuant to Section 57(a)(2) of the Implementing Rules and Regulations of R.A. No. 7227, compute the individual share of each LGU and transmit the same to DBM on or before May 15.

5.2 The DILG shall:

5.2.1	Issue immediately the necessary circular to all regional directors to effect the identification of LGUs affected by the declaration of the ECOZONE and those LGUs outside and contiguous to the ECOZONES entitled to receive the 2% share from the 5% gross income earnings paid by registered enterprises within and operating inside the ECOZONES in consultation with ECOZONE authorities. An appropriate timeframe for the formulation of the list shall be established by DILG.
5.2.2	Submit immediately to BIR, copy furnished the DBM. in the case of Subic, Clark, John Hay and Poro Point Special Economic Zones, and to DBM only, in the case of all other Special ECOZONES under PEZA, the list of LGUs affected by the declaration of the ECOZONES and LGUs outside and contiguous to the ECOZONES.

5.3 The DBM shall:

5.3.1	Include under the Special Purpose Fund-Assistance to Local Government Units of the proposed General Appropriations Act (GAA), the amount certified by the BIR as the total share of the LGUs affected by the declaration of the ECOZONE including those LGUs outside and contiguous to the ECOZONE.
5.3.2	In the case of all other Special Economic Zones under PEZA, compute the individual share of each LGU, and
5.3.3	Process Special Budget Requests of the affected LGUs and issue the necessary release documents corresponding to the 2% share of the LGUs from gross income earned or 40% of the total final tax collected by BIR from the ECOZONE enterprises.

6.0 Effectivity

This Circular shall take effect immediately.

Adopted: 20 Apr. 1999

(SGD.) RONALD V. PUNO
Undersecretary
Department of Interior and Local Government

(SGD.) BENJAMIN E. DIOKNO	(SGD.) EDGARDO B. ESPIRITU
Secretary	Secretary
Department of Budget and Management	Department of Finance

	Particulars	Legal Basis
a)	Rewards/Incentives to Informants	Section 281(1) of the Tax Code
b)	Share of the following from Franchise Tax:	RA 6631/RA 6632
	1) Phil. Charity Sweepstakes Office
	2) Phil. Tuberculosis Society, Inc.
	3) White Cross, Inc.
	4) City of Manila
	5) City of Makati
c)	Share of the following from Hotel Room Taxes:	PD 1448 as amended by EO 120-A
	1) Phil. Convention & Visitors Corp.
	2) Phil. Tourism Authority
d)	40% Share of concerned LGUs from Mining Taxes	RA 7160
e)	Share of concerned LGUs from tax on locally-manufactured Virginia Tobacco	RA 7171
f)	Incremental collection on Documentary Stamp Tax	RA 7660
g)	Share of concerned LGUs from VAT collection	RA 7643
h)	40% Share of concerned LGUs from the collection of taxes from businesses and enterprises within the ECOZONE	RA 7227 and RA 7916
i)	COA share from Net General Fund	Section 24(3) of PD 1445
j)	Those deductions that may henceforth be authorized by law