By Cai U. Ordinario @cuo_bm & David Cagahastian @davecaga
There is growing optimism for a surge in economic growth when the country shifts to a federal system, with many experts believing that truly autonomous regions will allow communities in the countryside to be more creative in generating income.
Experts interviewed by the BusinessMirror during the forum on federalism earlier this week are upbeat over the shift to a federal system of government, which will grant political and economic autonomy to the
proposed regions in the Philippines.
“It is human nature that when a person is responsible for his own well-being, that he becomes more creative in generating income,” taxation lawyer Dina Lucenario of the law firm of Castillo Laman Tan Pantaleon and San Jose told the BusinessMirror.
“If there is more flexibility in how to run the local governments and share in the profits, then the regions would have more incentives in developing their respective strengths, whether these be in the areas of natural resources, human resources, tourism, manufacturing and other industries,” Lucenario added.
The income to be generated in the regions is deemed to be the crucial factor which will decide whether a federal system of government will succeed.
Former Finance Secretary Margarito B. Teves said the discussions on federalism should touch upon the issue of why the local government units (LGUs) have not been able to fully maximize the taxing powers given to them by the Local Government Code of 1991.
Teves said this discussion is important to find out how the tax administration in the proposed federalism will be structured.
“Before we craft the structure of the tax administration, we have to study the existing taxing powers of the LGUs and find out why some of these powers are not fully realized,” Teves said in a separate interview.
The shortfalls in revenue collection by the LGUs have been blamed in the past for the lack of the funds for capital expenditures in the regions, making LGUs dependent upon the Internal Revenue Allotment (IRA), or their annual 40- percent share from the income-tax collection of the Bureau of Internal Revenue (BIR).
Without the necessary income in the regions and the adequate tax collection by the LGUs, there would be no effective federal system of government, since the political situation would be just like before, when the regions are dependent upon the national government for funding of critical infrastructure projects.
However, former Senate President Aquilino Q. Pimentel Jr., who was one of the keynote speakers at the European Chamber of Commerce in the Philippines and the BusinessMirror’s forum on federalism, offered a solution to the problem of low-income generation in the regions at the onset of the proposed federal government.
Pimentel said there has to be an “equalization fund,” which will subsidize the operations and capital expenditures of the poorer regions, while they build up their infrastructure and economy, which are required to attract foreign investors to create jobs in the regions.
As the regions develop their economy, more businesses can be enticed to set up shop in the regions and consequently allow the corresponding LGUs to collect more revenues in the form of taxes and business permits.
“The share of the LGUs in the revenues that they would collect should be 20 percent for the federal government and 80 percent for the corresponding LGU. Right now, it’s only that which is collected by the BIR is shared by the LGUs; they don’t have a share in all the other revenues, such as customs duties, excise taxes for gasoline and other kinds of income,” Pimentel said.
Hitting SDGs
A federal form of government may also allow the country to better monitor its performance in meeting the Sustainable Development Goals (SDGs), according to the National Economic and Development Authority (Neda).
The SDGs, or Global Goals, is a set of 17 socioeconomic goals that 193 United Nations member-countries, including the Philippines, have committed to meet by 2030.
The goals are composed of around 169 targets and over 300 global indicators. The SDGs were adopted in September 2015.
“It [federalism] could [help] if the monitoring system would be configured correspondingly so that we don’t have it at a national level but we have it on a per state [basis],” Neda Deputy Director General Rosemarie G. Edillon recently told the BusinessMirror.
However, Edillon said agencies, like the Philippine Statistics Authority (PSA), which is tasked to gather data and monitor the country’s progress, will have to make adjustments. She said that, while there are provincial statisticians, adjustments have to be made in terms of “amalgamating” the data. Edillon also said the budget for monitoring the SDGs will also have to be adjusted.
Further, because of the nature of a federal form of government, federal states may have to come up with their own SDG progress report.
“It actually means there will be greater accountability, that’s for sure,” Edillon said. “It could actually promote more accountability.”
The Global Goals aim to end poverty and hunger; promote universal health, education for all and lifelong learning; achieve gender equality, sustainable water management; ensure sustainable energy for all, decent work for all, resilient infrastructure; and reduce income inequality between and among countries.
The goals also include to create sustainable cities; ensure sustainable consumption and production; take action against climate change; conserve and sustainably use oceans and marine resources; reduce biodiversity loss; achieve peaceful and inclusive societies; and revitalize global partnership for development.