Receive rather than give
With a sense of glee, a Lady Mayor said yes to federalism in a public forum. She felt short-changed with the current sharing arrangement of revenues. In her mind, she felt that it was totally unfair. Why should her Local Government Unit (LGU) share part of its revenues with the central government? How comforting to believe that under the proposed federal form of government, LGUs can keep all their revenues for themselves!
The Lady Mayor is not alone. Resource persons on federalism promise that LGUs would have more revenues by casting their lots on going federal. And so many believe them.
Is there truth to this claim? How much do LGUs give and how much do they receive under the present system?
The givers are the National Capital Region (NCR); Region 4a (Calabarzon), and, Region 7 (Central Visayas). These regions generate more income compared to how much they receive from the expenditures of the central government. NCR contributed 38% of GDP in 2016 and received only 22% of the government’s budget. Calabarzon earned 14.8% of GDP and received only 8% of total government spending. These regions end up losers in the “exchange” of resources. They would have a better deal if they had the power to impose the income tax and the VAT and kept the revenues themselves. They have robust tax bases and bullish economic activities.
The receivers are the rest of the Philippines: Region I (Ilocos); Region 2 (Cagayan); Region 3 (Central Luzon); Region 4b (Mimaropa); Region 5 (Bicol); Region 6 (Western Visayas); Region 8 (Eastern Visayas) Region 9 (Zamboanga); Region 12 (Soccsksargen); Caraga; and ARMM. They generate less income and output compared to their share in the national budget. Five percent (5%) of the national budget goes to Ilocos and the region generates only 1.7% of GDP. ARMM shares 3% of total expenditures and generates less than 1% of GDP (0.7%) They are the winners in the current exchange. They generate little income and will earn little if they are given the power to impose the income tax and the VAT. They wil lend up the losers in a federal system. They have little resources and need to be heavily subsidized.
Davao and the Cordillera Administrative Region are break-even cases. They almost give what they receive. CAR got 3% of the total budget which is almost equivalent to its GDP share of 3.1%. Davao contributes 4.4% to GDP and received 4% of the budget.
So what powers the strong support of poorer LGUs in becoming federal? The supporters pin their hopes on an equalization fund. Unfortunately, the source of the fund and how it will be distributed have not yet been defined. Will richer LGUs subsidize poorer regions by sharing part of their local revenues? What would motivate residents of Valenzuela, Cebu, Quezon City, and Makati to pay their taxes if they will be spent on services for the residents in Cagayan, Maguindanao, Zamboanga, and Mindoro? While it is better to give than to receive, this generosity should not apply to local taxes. Local residents should pay for the benefits that they demand. If they want better health, education, and social services, then, they should pay for them. There is no justice when taxpayers expect others to pay for what they want to enjoy. This is not fiscal autonomy but patronage.
It is a case of the blind leading the blind?
May the spirit of Easter be the source of our light and cleanse our hearts from what is not good.
mguevara@synergeia.org.ph