Imperial Manila has lorded over the entire affairs of the nation. Elected and appointed leaders see development in the prism of Manila looking outward and determining what is good, what is bad; what is to be shared, what remains in their hold; local leaders being beggars than builders of their locality and thus, dreaming remains in the realm of wishful thinking than actually steering in one direction.
Note: This column originally appeared in The Manila Times on September 17, 2019.
A lot of advocates for federalism/parliamentary are quiet these days because of the decision of PRRD not to make it a priority. When you mention federalism to economic managers, the oft-repeated retort is: “Why would you want to destabilize the system? We are growing and the gains are everywhere and you want to disturb this growth path?” Somehow you wonder about the resolve of these people in ensuring that the last mile is developed and no one is left behind. Truly an imperial Manila view, that central government and a stronger president are better than shared power and shared governance. Remember those lines when you read the Supreme Court ruling on the Mandanas case (GR 199802) made last July 3, 2018. And every local government unit should take the ruling by heart.
The legal action taken by Batangas Gov. Dodo Mandanas was initiated in January 2012, or six years ago. In his petition, Mandanas claimed that from 1992 to 2012, unreleased Internal Revenue Allotment (IRA) due the provinces, cities, municipalities and barangay had reached P500 billion. Central to his petition was Section 284 on Allotment of Internal Revenue Taxes of Republic Act 7160 (the “Local Government Code”), which clearly defines “just share” of the IRA: “Sec. 284. Allotment of Internal Revenue Taxes. Local government units (LGUs) shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year, as follows: a) on the first year of the effectivity of this Code, 30 percent; b) on the second year, 35 percent; c) on the third year and thereafter, 40 percent.”
“It is clear that the legally mandated revenue base to compute the IRA should include the entire national internal revenue taxes collected annually,” Mandanas said.
With a 10-3 vote, the Supreme Court ruled the basis for the “just share” of LGUs under Section 6, Article X of the Constitution as being based on all national taxes and not only national internal revenue taxes, as provided in Section 284 of the Local Government Code. In a bid to enforce the ruling, Mandanas recommended to recast the Fiscal Year 2019 budget with IRA of the provinces, cities, municipalities and barangay for 2019 be increased by approximately P200 billion. Based on the Supreme Court decision, the collections of the Bureau of Customs (BoC), including tariffs, customs duties, value-added taxes (VAT), documentary stamp taxes (DST), and excise taxes should be included in the IRA computation, which was not done by the Department of Budget and Management (DBM) in computing the 2019 IRA.
The Supreme Court also confirmed that the LGUs — provinces, cities, municipalities and barangay — have not been receiving what they should have legally received from 1992 up to the present. That is as old as the Local Government Code!
“The total accumulated differential has already reached approximately P1.5 trillion. The collections of the BoC of the national taxes were not included in the 1992 up to the present computation of IRA.”
The reimbursement of the back IRA has to be made, in consultation with the LGUs and the development and budget coordination committee (DBCC). DBCC is composed of the DBM, the Department of Finance (DoF), National Economic and Development Authority, Office of the President, and Bangko Sentral ng Pilipinas. But instead of ensuring that the correct accounting is made, again, a member of the economic cluster said the Supreme Court ruling is “damaging” to the economy. Imagine the national government cornering a huge amount, depriving the local governments of what the law granted to them. The worse part is that the local governments would have been better off had the “just share” been given.
The error of computation started in 1992, and yet it was allowed to be carried through for 26 years. The Supreme Court noted the fiscal challenge it could create and hence using the operative fact principle, decided for a prospective effect on said ruling. A motion for reconsideration was made by the National Government (NG) on Aug. 10, 2018 by the Office of the Solicitor General (OSG), while a motion for execution of judgement was filed by Mandanas, et. al. on Aug. 28, 2018. By June 10, 2019, the decision became final and executory. By Aug. 16 2019, the OSG filed a motion for clarification on “the proper means of computing the 60-40 sharing between the NG and LGUs per Section 284 of the Local Government Code and that the LGUs will start receiving the adjusted IRA in 2022.” The Supreme Court ruled with finality “just share should be based on all national taxes collected on ‘the third fiscal year preceding.’ In the absence of any amendment by Congress, the rates fixed in Section 284 of the LGC, as herein modified, shall control.”
Some are saying, “we cannot trust the local governments to use the money correctly.” Others are of the view that with the “just share,” we can actually unleash the inertia needed in local governance to finally put together plans, programs and activities that are defined from the ground up. It’s just like the health budget that was never given to the local government units when health was devolved. And we continue to wonder why we are in a rut?
Imperial Manila has lorded over the entire affairs of the nation. Elected and appointed leaders see development in the prism of Manila looking outward and determining what is good, what is bad; what is to be shared, what remains in their hold; local leaders being beggars than builders of their locality and thus, dreaming remains in the realm of wishful thinking than actually steering in one direction. Despite decentralization (covers deconcentration and devolution), we are poorer because the funds have not been given. The central government thinks the peripheries are not ready. When you have a man from Mindanao, these things do matter because he knows how it is to be local and to be from Mindanao. But the prism has changed. He is a strong president. He wields power and dispenses favors. The game has not changed that even the “just share” is subject to their call. Imperial Manila remains and the LGUs line up for crumbs, assuming they do not have a chair at the presidential table.
Good local leaders are aplenty and ready to build their localities but still, they need to go to Manila to get things done, save probably a trash collector who is shocking the nation in doing what is obvious: implement the law, pick low-hanging fruits and market the city while waiting for the 2020 local budget. Six months under the previous dispensation’s budget. Good thing if there is something left behind. Still, the Isko Moreno’s at the local government level know that you need to be closer to Manila to get more for your locality — central and not devolved. Thirty years after, we have not unleashed the power of imagination of the local governments. And the LGUs will have to wait for 2022 to fire its engine and get things going. After 2022 would mean a post-Duterte era, for now.