Increase of IRA, federalism and CORE

HAPPY WEEKEND

By Gina Dizon  

BONTOC, MOUNTAIN PROVINCE - The recent roadshow by the constitutional reforms (CORE) advocacy of the Department of Interior and Local Government (DILG) forwarded constitutional reforms the government wants to attain. The Mountain Province roadshow was facilitated by DILG provincial director Anthony Ballug and speakers DILG Paracelis officer Johnny Maymaya Jr and Kalinga State University dean Atty Joynny Wayet last November 26 here at the Multipurpose grounds attended by more than a thousand participants among students, barangay officials and government employees.

Interesting to note how the national government now under the fourth year of President Rodrigo Duterte’s watch, barely two years before he shall finish his six-year term is eager to pursue federalism through the enactment of constitutional reforms.

Federalism as we note was Duterte’s enticing campaign slogan when he ran for office in 2016. His flagship program that is federalism wants to make separate states of the Philippine be economically independent and politically ruled under a federal system of government where authority shall come from its federal separate state setup rather than the present unitary form where central government is the authority.  

              Duterte won by a margin of 6.6 million votes and federalism which then flip-flopped in the recent years is being waged again. This time, through constitutional reforms.

A major constitutional reform is the increase of the internal revenue allotment (IRA). That is, IRA is a major determination in federalism to make a federal state financial capable while getting the just share and support from the national government.  

A major turn of financial increase for LGUs is the effect of the Mandanas doctrine which in effect makes the internal revenue allotment of local governments units increase by 2022.

Thanks to Batangas Governor Hermilando Mandanas, who questioned the process of allocating IRA funds for the LGUs in 2012 the final ruling by Supreme Court having been issued in April 2019.

              The Mandanas doctrine clarifies that the share from the IRA of the LGUs does not exclude other national taxes like customs duties.  The exclusion of other national taxes like customs duties from the base for determining the just share of the LGUs contravened the express constitutional edict in Section 6, Article X of the 1987 Constitution. Section 6 that LGUs shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.

Customs duties with its P589 billion collections in 2018 have long been administered by the national government and not had been distributed among LGUs since the local government code was enacted in 1991.

Currently, LGUs are given their IRA from taxes collected by the Bureau of Internal and Revenue Allotment. Section 284 of Republic Act 7160, which created LGUs, states that provincial, city and municipal governments should receive 40 percent of total national internal revenue taxes collected by the national government.

Supreme Court though did not make their ruling retroactive in the Mandanas ruling and shall instead make the effectivity by 2022.  

In said case, SC ruled that the IRA of LGUs should include tariff and duties collected by the Bureau of Customs, 50 percent of value-added tax, 30 percent of national taxes collected in the Autonomous Region in Muslim Mindanao, 60 percent of national taxes collected from the exploitation and development of national wealth, 85 percent of excise tax from tobacco products and a portion of franchise tax under Republic Acts 6631 and 6632 (Horse Racing Laws), among others.

Currently, local government units share 40% of the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year.

Comes now constitutional reforms by the CORE moving for amendments of article 6 and 14 of article 10 of the constitution which says” local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released”.

The CORE forwards that section 6 article 10 be amended to “Local government units and the Regional Development Authority shall have a just share, as determined by law on the basis of their financial needs, organizational capacities, and resources, in all national taxes based on the second year preceding the current fiscal year and which shall be automatically released to them.

The CORE defines financial needs pertains to income investments, and savings needed by the LGUs to facilitate and implement its plans and programs and have effecting spending. Resources refer to financial, natural or physical or human resources of or under the control of the Philippines.

CORE also defines organizational capacity as the ability of an organization to fulfill its mission through a blend of sound management strong governance and persistent to assessing and achieving results, likewise, defined as the government’s ability to marshal, develop, direct, and control its financial, human, physical and information resources.

Currently IRA is based on population (50%), land area (25%) and equal sharing (25%).

A look at the IRA of an LGU is practically sliced off by the salaries and benefits of employees with a very limited cost for mobilization and operational expenses.

The very involvement of government employees for constitutional reforms is looked forward to where a bulk of programs are given for them to work in including land use planning, agricultural extension, research, solid waste management, primary health care, social welfare services, public parks, water supply, irrigation and drainage, sewerage, flood control, including inter municipal telecommunications.

With customs duties and other national taxes infused in the IRA, LGUs are also expected to increase their capacity to raise revenues.

CORE proposes that the criteria for IRA sharing shall be on poverty incidence, geographic peculiarities, level of own source of revenues and level of financial management revenues. 

The CORE forwards that poverty incidence gives more resources to poverty- stricken areas in o to address more effectively the country’s goal of poverty alleviation and reduction; geographic peculiarities, and addresses the financial requirements peculiar to the coastal LGUs.

Level of own-source revenue aims to reduce IRA share of LGUs with more own-source revenue and increase the IRA of LGUs with less own-source revenue.  Level of financial management revenue refer to the inclusion of performance-related indicators to have a positive effect on revenue generation, expenditure management, and financial discipline.