WHO WILL HANDLE NATIONAL ASSETS?

As the government function for each state will now be devolved, it follows that some or most of the existing national assets have to be transferred to the host states to serve the federalism purpose of having them obtain control over government activities in their respective territories. These assets may include airports, ports, power plants, irrigation systems and similar large infrastructures.

There is an issue though: should the host states pay for those assets or receive them for free?

The important underlying principle must be to provide fairness to all the states. If so, then the host states should pay for the assets transferred to them and the total proceeds allocated among all states on a fair basis that should be consistent with the basis for other kinds of allocation among the states.

There are some contentious issues, though.

How should the Malampaya funds and other similar funds be disposed of? What about Philippine Amusement and Gaming Corporation’s assets and earnings? Philippine Charity Sweepstakes Office? The national banks — Development Bank of the Philippines and LANDBANK — and other government corporations? If the federal government keeps them, is doing so consistent with the federalism that its proponents are advocating?

HOW DO WE RESTRUCTURE THE NATIONAL TAX SYSTEM?

To serve the objective of Philippine federalism, I believe that the states will need to have substantial independence in raising its own taxes and debt money to provide the funds to pursue its own development objectives. The state must have command over both the source and the use of its money. That way, the state has a clear accountability to its own citizens.

Unfortunately, the present national tax system cannot be restructured to make the state fully raise its own tax money.

The dual tax system (Option 1) may work if the tax take of the federal government is not greater than the amount of funds it needs.

The greater amount that goes to the states makes them sourceof-fund independent. If it is the other way around, the federal government retains control of part of the funds that will be allocated to the states.

The remaining option ( Option 2) of keeping the status quo where the federal government continues to collect all the national taxes and to allocate the total collections among itself and the states is much worse. The federal government remains in total control, just like before.

In fact, under this scenario, there is really no need for federalism.

POORER PROVINCES MAY NOT BE BETTER OFF

Under federalism, these poor regions, when structured into states, will be in a very difficult financial position.

This is so whether the collection of the national taxes can be restructured such that the larger portion of these taxes are collected directly by the states, or these taxes are totally collected by the federal government as before and allocated among the federal government and the states on a fair basis.

The economic disparity between the rich states and the poor states will continue to widen and, thus, trigger a massive population

( This piece has been edited for purposes of brevity. The full piece can be accessed by visiting < http:// bit. ly/ federaltax2> or using a smartphone to scan the QR code.)