DOF on draft Federal Constitution: ‘Leaves much to be desired’

The draft Federal Constitution “leaves much to be desired” particularly on the financial aspect, according to the Department of Finance (DOF).

In a Senate hearing on the National Budget on Tuesday, Senator Sherwin Gatchalian asked if the economic team had an official position on Federalism.

While Finance Secretary Carlos G. Dominguez III said there was none, he lamented that the draft Constitution had issues with regard to finances, particularly on shouldering debt and financing certain agencies.

“If we don’t manage this correctly, it can end up to be a fiscal nightmare. So I think the legislature in its wisdom can sort those issues out,” Dominguez said.

Dominguez said in his meeting with some Constitutional Committee (ConCom) members, he raised issues such as how the country’s debt will be paid and who will raise the funds for the Philippine military.

The Finance Secretary added that he also asked who will foot the bill when it comes to the Department of Foreign Affairs and the Central Bank, in case it requires additional capital.

“The response was the sharing with the local governments or the states will be after those expenses. But I said you know when I read the draft, it doesn’t say so there. It just says 50 percent,” Dominguez said.

“So I said you know that’s what you say but how come its not in the draft? So I think there are a lot of issues that have to be worked out,” he added.

However, Dominguez said he supports the public discussions of the draft Constitution and said this will help address issues concerning Federalism.

In response, Concom spokesman Ding Generoso said in a statement on Tuesday that Dominguez’s concerns were addressed clearly in the draft Constitution.

Generoso said paying the national debt, military, the Foreign Affairs department and Bangko Sentral ng Pilipinas (BSP) will be the concern of the federal government following the definition of its exclusive powers.

“The BSP is the single agency responsible for monetary policies, which is an exclusive power of the federal government, thus if it ever needs additional capital, the federal government will provide for it,” Generoso said.

Further, contrary to the claims of Dominguez, Generoso said the fiscal administration aspect of the draft constitution was clear.

Under the draft, there will be a 50-50 sharing between the federal and regional governments from the top four revenue sources of government.

Under the proposed charter, the Con-com is proposing that the 50-50 sharing will come from collected income taxes, excise taxes, value-added taxes and customs duties, which are the top revenue sources of central government. Using 2017 data, this amounts to over P2 trillion.

“The Federal (national) government basically retains the taxation power, except for selected taxes and fees the collection of which will be transferred to the regional governments. Using 2017 data, these amount to about P60 to 70 billion,” Generoso said.

Generoso said, using 2017 data, the federal government will have more than P3 trillion cash annually.

This includes borrowings while a little over P1 trillion will go to the federated regions—the taxes and fees that they will collect and the equal share in the top four revenue sources.

“The federal government will have more than two trillion left in its coffers, which will cover for the cost of its operations, including the budgets for national defense, foreign affairs and debt service,” Generoso said.

“Much of the functions and duties of the regional offices of the different departments will be transferred to the regional governments, thus there will be a corresponding reduction in the regional budgets of the different departments,” he added.

Meanwhile, the National Economic and Development Authority (NEDA) is in the process of completing its assessment on the existing draft.

NEDA Undersecretary Rosemarie G. Edillon told reporters, at the sidelines of the Budget hearing at the Senate on Tuesday, the study compared the draft Constitution to the 1987 Constitution.

Edillon said the parameters of the study includes economic and financial concerns. She said the study was commissioned by the Office of the President.

“We have to look at all the aspects of the draft Constitution,” Edillon said.

In July, Socioeconomic Planning Secretary Ernesto M. Pernia said the economic team had a lot of misgivings regarding federalism and said transitioning to a federal form of government in the medium term could disrupt the country’s economic momentum.

Pernia said NEDA recommended that the transition to federalism be done in no less than 15 years to ensure that the Philippine economy can maximize its growth momentum.

The Constitutional Commission is proposing a three-year transition which will start soon after the new constitution is approved in the 2019 plebiscite.

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