DoF chief flags ‘potential nightmare’ in federalism

THE SHIFT to a federal form of government could be a “nightmare” for the Philippines, particularly in the fiscal policy side of the proposal according to the country’s Finance chief.

“Let’s just say it will be challenging, very challenging, because the tendency,...we will need different federal states to retain as much revenues as they can and give the national government as much expenses as they can,” Finance Secretary Carlos G. Dominguez III said at the Management Association of the Philippines’ inaugural meeting yesterday in Taguig City.

“So there’s potential for it to become a nightmare. We are watching very closely particularly the revenue- sharing schemes that are going to be improved in the local government,” he added.

The House of Representatives approved on Jan. 16. House Concurrent Resolution (HCR) No. 9 which calls on Congress to be convened into a constituent assembly, ahead of provisions being crafted on the watch of the House committee on constitutional amendments that aim to overhaul the present system of government into a federal structure. President Rodrigo R. Duterte has been pushing for this change in government structure since way before last year’s presidential campaign.

The House of Representatives and the Senate have been in a deadlock over the matter of voting jointly (the House’s stand) or separately on constitutional amendments.

The House leadership has said it will go ahead with charter change, but senators have questioned the constitutionality of that move as initiated by only one chamber. Senate minority leader Franklin M. Drilon, for his part, said the transmittal of HCR No. 9 to the Senate is “a recognition na kinikilala nila na kasama ang Senado sa pagamyenda ng (that they recognize that the Senate is part of amending the) Constitution.”

The House committee on constitutional amendments has yet to arrive at discussions on the federal governments’ fiscal regime.

The Department of Finance ( DoF) earlier said that 99% of local government units’ (LGUs) projects right now rely mostly on internal revenue allotments (IRAs) provided by the national government, despite already having the power to tax measures not provided by the National Internal Revenue Code.

IRAs are the automatically earmarked funds for LGUs, equivalent to 40% share of national taxes collected three years prior to the planned fiscal year, as mandated by Republic Act No. 7160, or the Local Government Code of 1991.

Asian Development Bank Country Director Richard S. Bolt said in an earlier interview that aside from boosting their locally sourced revenues, there is a need for LGUs to develop spending capacity as the government moves to a federal government.

“If you(‘re) gonna push more budget down, you should have capacity (for) these things,” he said.