Federalism: Massacre of the LGUs?

THE 1987 Constitution — I suppose all of you have read it – is the only Constitution in the world which enshrines as one of the State Policies the policy that “The State shall ensure the autonomy of local governments.” This is Section 25 of Article II. Take note of “shall ensure.” To immediately implement this policy, the Constitution devotes one whole article to pursue this state policy. This is Article X entitled: Local Government. Its Section 1 defines what the territorial and political subdivisions of the Republic are, namely: provinces, cities, municipalities, and barangays, as well as the Autonomous Regions in Muslim Mindanao and the Cordilleras. Section 2 declares that the territorial and political subdivisions shall enjoy local autonomy. Section 3 directs Congress to “enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization and effective mechanisms of recall, initiative and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials and all other matters relating to the organization and operation of the local units.”

Section 6 of Article X expressly provides that “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 expressly provides that “local government units shall be entitled to an equitable share in the process of the utilization and development of natural wealth within their respective areas in the manner provided by law, including sharing of the same with the inhabitants by way of direct benefits.”

The first Congress under the 1987 Constitution enacted the 1991 Local Government Code in compliance with the aforementioned Section 3 of Article X.

All of you, as well as all other incumbent elected local government officials, were elected under the mandate of Article X of the 1987 Constitution and pursuant to the 1991 Local Government Code.

The third document – the decision of the Supreme Court – is a gift from Heaven coursed through the gods of Padre Faura. How many of you have read or seen a copy of the decision?

The decision gives further strength to the concept of local autonomy, and categorically declares that the mandate of Section 25 of the Article II of the 1987 Constitution that “The State shall ensure the autonomy of local government units” “limits Congress’ control over the LGUs.” In strong and forceful words, it declares that:

“The autonomy of the LGUs as thereby ensured does not contemplate the fragmentation of the Philippines into a collection of mini-states [citing Ganzon v. Court of Appeals, G.R. No. 93252, 5 August 1991, 200 SCRA 271, 281], or the creation of imperium in imperio” [citing Land Transportation Office v. City of Butuan, G.R. No. 131512, 20 January 2000, 322 SCRA 805, 808]. It further expounds that “the grant of autonomy simply means that Congress will allow the LGUs to perform certain functions and exercise certain powers in order not for them to be overly dependent on the National Government, subject to the limitations that the 1987 Constitution or Congress may impose” [citing Ganzon vs. Court of Appeals, supra]. “Local autonomy recognizes the wholeness of the Philippine society in its ethnolinguistic, cultural, and even religious diversities” [citing Disomangcop v. Datumanong, G.R. No. 149848, 25 November 2004, 444 SCRA 203, 207].

The decision further declares that the just share of local government units in the national taxes which should be automatically released to them as provided for in Section 6 of Article X of the present Constitution refer to all national taxes and not just to national internal revenue taxes as now provided in Section 284, Title III (Shares of Local Government Units in the Proceeds of National Taxes) of the Local Government Code. Thus, this Section 284 limiting the just share to national internal revenue taxes is unconstitutional. Section 21 of the National Internal Revenue Code (NIRC) as amended by RA No. 8424 enumerates the following as national internal revenue taxes: income tax, estate and donor’s taxes, value-added tax, other percentage taxes, excise taxes, and such other taxes as are hereafter to be imposed and collected by the Bureau of Internal Revenue. The Local Government Units were not given any share at all in the following taxes:

1. The NIRT (National Internal Revenue Taxes) enumerated in Sec. 21 of the NIRC, as amended, to be inclusive of the VAT, excise taxes, the DSTs collected by the BIR and the BOC and their deputized agents.

2. Tariff and customs duties collected by the BOC.

3. 50% of the VAT collected in the ARMM, and 30% of all the national taxes collected in the ARMM, the remaining 50% of the VATs and 70% of the collections of the other national taxes in the ARMM shall be the exclusive share of the ARMM pursuant to Section 9 and Section 15 of RA No. 9054.

4. 60% of the national taxes collected for the exploitation and of the national wealth; the remaining 40% will exclusively accrue to the host LGUs pursuant to Section 29 of the Local Government Code.

5. 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products; the remaining 15% shall accrue to the special purpose funds pursuant to RA No. 7171 and RA No. 7227.

6. The entire 50% of the national taxes collected under Section 106, Section 108 and Section 116 of the NIRC in excess of the increase in the collections for the immediately preceding year.

7. 5% of the franchise taxes in favor of the national government paid by franchise holders in accordance with Section 6 of RA No. 6631 and Section 8 of RA No. 6632.”

As reported in the Business Section of the Philippine Star issue of 16 July 2018, per computation of the Department of Finance, as disclosed by Secretary Dominguez, the national government owed the Local Government Units from the date of effectivity of the Local Government Code (1992) more or less P1.5 trillion in terms of their shares from all other national taxes. However, the Supreme Court declared that the decision would be prospective in application.

This decision demolishes the principal ground for the shift to federalism. This delivers a mortal blow – a coup d’ grace – to federalism. This should stop the cha-cha train.

But how sad, tragic, and painful that on the very day (Tuesday, 3 July) the Supreme Court gave this manna from heaven to our LGUs, and before even the LGUs could even savor the victory and enjoy the fruits, they were robbed of it in a manner akin to a highway robbery. How was this accomplished? By the approval of the Consultative Committee of a draft Constitution for the Federal Republic of the Philippines. The federalism adopted effectively massacred our LGUs and buried them down the pit. Thus, for your advance information I titled my message to you as “fFederalism: Massacre of the LGUs?”

This is not just the sad, but the saddest, news I am bringing to you. I have the document that massacred the LGUs. Its cover is very captivating, enticing, attractive:

“POWER OF THE PEOPLE BAYANIHAN FEDERALISM POWER TO THE REGIONS -- Draft Constitution for a Strong Indissoluble Republic.”

Take note it does not speak of power to the LGUs. Yet, the federalism propagandists told the people that federalism would give more power and benefits to the LGUs. Let us see how this tragic drama of the massacre was committed by the adoption of federalism.

If we recall, and if the Consultative Committee does not have a short memory, at its inaugural session on 19 February 2018, Committee Chair retired Chief Justice Puno exhorted and urged the members to devote serious thought on the ”architectural design” of a Federal system “distinctly Filipino” (Manila Bulletin, 20 February 2018). Since it is to be “distinctly Filipino,” it could have no model such as the federal system in various countries, like the United States, Germany, Canada, and the Russian Federation. If you recall, even the President mentioned of a hybrid federalism like that, he said, of China and Hongkong.

We expected then that what it would recommend would be a federal system which is “distinctly Filipino,” which on the ground would work the “federal” way.