There are three main sources of revenues for local governments: 1) Local sources derived from real property taxes, business taxes and non-tax revenues; 2) External Sources from IRA shares, aids from the national government and national wealth; and 3) from borrowings.

Taxable real properties consists of lands, buildings and machineries and for assessment purposes these are classified into residential, agricultural, commercial, industrial, mineral and timberland.

Except as otherwise provided in the Local Government Code of 1991, municipalities may levy taxes, fees and charges not otherwise levied by provinces (Sec. 142, LGC). By virtue of law, local government unit shares from the income generated by the national government from all taxes and revenue sources, as follows:1 Internal Revenue Allotment (IRA) (Sec. 284, LGC), 2 Tobacco Excise Tax (R. A. No. 7171) 3 . Proceeds from the utilization of national wealth within their territorial jurisdiction (Sec. 289, LGC) and 4. Special shares from other national taxes, like the Value added Tax, (Sec. 2, R. A. No. 7643)