ALL regions will have enough resources to operate their respective governments and pursue programs to spur economic growth under the fiscal design of the proposed draft Federal Constitution, the Constitutional Committee (Con-com) technical working group (TWG) said.
According to a discussion paper a copy of which was provided to the BusinessMirror, the Con-com TWG estimated that the available funds to be controlled by regions under the proposed federal setup will amount to at least P57 billion for Autonomous Region in Muslim Mindanao (ARMM) and Negros Island Region (NIR) to as high as P93.8 billion for the National Capital Region.
The amount was based on the regions’ 50-percent share on the government’s top 4 revenue sources and the taxes to be administered by the federated regions. The said basis doesn’t apply to ARMM and NIR since there is no available data yet on revenue collection corresponding to the taxes they will administer.
The discussion paper, which was submitted during a Senate hearing on the proposal to change or amend the 1987 Constitution, also noted that the simulation exclude transfers under the equalization fund, which will be defined on a yearly basis by the Federal Intergovernmental Commission. The simulation also didn’t yet include the revenues in the utilization of natural wealth, program grants through the General Appropriations Act and such other revenues in the future that Congress would provide by law.
The simulation has also yet to include borrowings, which may be authorized by federal law and allowed by the Monetary Board, to finance capital outlays and major income generating projects of the regions.
To note, the Con-com is estimating that the equal share from the top revenue sources of the government of each of the 18 federated regions is P57 billion.
Under the proposed Charter, the Con-com is proposing that federated regions will have a share of not less than 50 percent all collected income taxes, excise taxes, value-added taxes and customs duties, which are the top revenue sources of central government. The other 50 percent will go to the federal government. The TWG noted that because of the “50-50 formula” on the top 4 revenue sources of the government, the federal government and the regional governments will each have a share of approximately P1.027 trillion.
Also, the Con-com is proposing that the federated regions will collect several taxes. These include real property tax, estate tax, donor’s tax, documentary stamp tax, professional tax, franchise tax, games and amusement tax, environmental tax, pollution tax, road user’s tax, vehicle registration fees, transport franchise fees and other taxes that may be granted by federal law.
Given the projected figures, the Con-com TWG noted that the regions will be able to cover the current Internal Revenue Allotment requirements of local governments and still have a positive cash position to finance regional operations, programs, projects and activities.
“The resulting positive cash position will enable the regions to finance shared powers and the associated expenditures,” the discussion paper read. “If any region shall need additional funds for its operation this can be addressed through the transfers mechanisms of the equalization fund as well as revenues from taxing powers and other revenue generating mechanisms…and borrowings.”
This will also free up the federal government of regional and local concerns to focus on issues of national importance, the Con-com TWG added.
The federal government and the regional governments, once established, shall also have enough powers and resources to operationalize the federal setup.
Under the fiscal provisions, the federal government shall have P2.235 trillion to finance federal operations, programs, projects and activities, including expenditures on the branches of the federal government, Constitutional Commissions, defense and security, foreign affairs, law and order, among others. This amount includes the computations for other taxes, non-tax and borrowings.
The Con-com TWG also claimed that by applying the federalism fiscal design on the current unitary system fiscal performance, spatial and geographic equity is achieved across all regions while at the same time, the federal government remains fiscally strong to address both federal functions and the regional gaps.
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The breakdown of estimated total cash funds per region based on their equal share from the top 4 revenue sources of the government and the taxes they administer under federalism are as follows:
- Region 1 – P58.796 billion
- Region 2 – P58.363 billion
- Region 3 – P65.358 billion
- Region 4A – P70.77 billion
- Region 4B – P58.161 billion
- Region 5 – P59.194 billion
- Region 6 – P60.543 billion
- Region 7 – P60.349 billion
- Region 8 – P58.152 billion
- Region 9 – P57.915 billion
- Region 10 – P58.776 billion
- Region 11 – P60.068 billion
- Region 12 – P58.938 billion
- Region 13 – P57.735 billion
- NCR – P93.812 billion
- Cordillera Administrative Region – P57.991 billion
- ARMM – P57 billion
- NIR – P57 billion
Source: Constitutional Committee Technical Working Group Discussion Paper