More funds to locales: virtually federalized

Starting 2022 public funds at the disposal of provinces, cities, towns, and barangays will balloon. Local governments will receive many times more shares of taxes from the national government. Filipinos had better learn to elect good governors, mayors, barangay chairmen, vices, and local legislators. On the officials will depend whether the multiplied money will advance the locales or go to waste. More than ever, voters’ lives, health, homes, workplaces, surroundings, peace and order, and other basic needs will be affected.

The Supreme Court has ruled with finality on the Internal Revenue Allotment, or tax share of local governments. The latter shall get bigger IRA starting 2022. The Court declared that “just share” no longer shall be based solely on income tax collections of the Bureau of Internal Revenue. Instead it shall be computed based on all other national taxes.

IRA still is set at 40 percent. But because of the wider base of computation, local governments will get more.

The Court struck down as unconstitutional the sections of all tax laws that limit IRA to only BIR takes. The following collections shall be included:

• National internal revenue taxes enumerated in Section 21 of the National Internal Revenue Code, as amended, collected by the Bureau of Internal Revenue and the Bureau of Customs;

• Tariffs and customs duties collected by the Bureau of Customs;

• 50 percent of value-added taxes collected in the Autonomous Region of Muslim Mindanao, and 30 percent of all other national taxes in the ARMM. The remaining 50 percent of the VAT collections and 70 percent of the other national taxes in the ARMM exclusively shall go to the region pursuant to Section 9 and Section 15 of Republic Act 9054;

• 60 percent of national taxes collected from the exploitation and development of national wealth. The remaining 40 percent shall exclusively accrue to the host local government units pursuant to Section 290 of the Local Government Code, Republic Act 7160;

• 85 percent of excise taxes collected from locally manufactured Virginia and other tobacco products. The remaining 15 percent shall go to the special purpose funds created by Republic Act 7171 and Republic Act 7227;

• The entire 50 percent of national taxes collected under Sections 106, 108, and 116 of the National Internal Revenue Code as provided under Section 283 of the NIRC;

• Five percent of the 25-percent franchise taxes paid to the national government under Section 6 of Republic Act 6631 and Section 8 of Republic Act 6632.

The Court ordered the Dept. of Finance, Dept. of Budget and Management, BIR, BoC, and National Treasury “to include all collections of national taxes in the computation of the base of the just share of the Local Government Units.”

It shall take effect in 2022, an election year. That would include the last six months of the terms of local officials to be elected this May 2019.

The ruling first came out in 2018. The national government had sought reconsideration, but was denied.

The petitioners had sought retroactive payment of IRA to 1992. That too was denied.

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The Supreme Court based its widened IRA computation on the Constitution’s Article X, Local Governments:

“Section 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.

“Section 7. Local governments shall be entitled to an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas, in the manner provided by law, including sharing the same with the inhabitants by way of direct benefits.”

On top of those, local governments have other fund sources:

“Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.”

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The flood of funds to local governments will shift the balance of power. No longer will governors, mayors, and barangay chairmen be dependent on the national government for extra money. With multiplied IRA automatically pouring in, they can initiate bigger projects. Local autonomy guarantees minimal interference from national officials.

The power shift is nearly like federalism. With more funds, the provincial boards and city, municipal and barangay councils will be able to operate independent of the central authorities.

Foreseeably federalists and opponents will find a middle ground for agreement. Thence they can work at local and national levels to ensure wise use of multiplied IRA.

They can also prevent the further Balkanization of provinces. Latest unnecessarily broken up – into three – is Palawan. That island may end up like Metro Manila. The national capital region unevenly is divided into 17 cities, each with its own ordinances and rules on traffic, curfews, environment, business permits, sanitation, and garbage.

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