As debates on federalism in the country heat up, state think tank Philippine Institute for Development Studies (PIDS) makes it one of the main topics of its Development Research Policy Month (DPRM) celebration this year.
Pursuant to Proclamation No. 247 issued in 2002, PIDS has been designated as lead agency in the annual celebration of the DPRM every September to promote the significance of evidence-based research in program planning and policymaking.
This year’s DPRM theme is “Strengthening Decentralization for Regional Development” or “Pagpapatibay ng Desentralisasyon Tungo sa Kaunlarang Panrehiyon” to emphasize the need for in-depth reflections and evidence-based analyses not just on federalism but also on decentralization reforms in general.
During the 3rd Mindanao Policy Research Forum, which is one of the activities lined up for the DPRM, held at the Ateneo Zamboanga de Zamboanga Auditorium on September 7 (Thursday), PIDS’ public finance expert Rosario Manasan presented the findings of her study on the possible fiscal impacts of shifting to a federal form of government.
Manasan talked about the importance of properly allocating financial resources to each level of government under a federal system. According to her, the allocation of fiscal resources may enable or constrain governments in the exercise of their constitutionally assigned legislative and executive responsibilities. She also noted that taxing powers and expenditures are important instruments for regulating the economy.
The PIDS senior research fellow underscored that each level of government must have enough revenues to finance basic services for the public.
In a federal system, taxing and spending powers are decentralized to local governments or federal states, which give them a free hand to decide how and where to use their budgets. With this setup, Manasan said, they will be able to spend their funds on projects and policies that are responsive to the needs of their localities without seeking approval from the national or federal government.
Citing some practices in the distribution of taxing powers in federal states, Manasan pointed out that customs and excise taxes are assigned most of the time to the federal or national government. The same goes with corporate taxes. However, in some federations, these may be under the concurrent jurisdiction of federal and state governments.
For personal income tax, Manasan said this may be more directly attributed to the location of residence. But in the case of Austria and India, personal income tax has been exclusively under the federal or national government.
Sales or consumption taxes are shared by both federal and state governments, she added.
Furthermore, Manasan raised the possibility that some local government units may not be ready for the shift to federalism especially in terms of development and financial stability.
To address the risks of greater disparities under a more decentralized form of government, Manasan said policymakers must design a feasible intergovernmental transfer, which could be in the form of tax shares, unconditional block grants, or specific purpose conditional grants to assist poorer states or regions.
It can also be through equalization arrangements, which are administered by the federal or national government to help poorer states just like the current practice in Germany, Canada, and Switzerland.
Aside from Manasan, speakers including Dr. Romulo Emmanuel M. Miral Jr., director-general of the Congressional Policy and Budget Research Department, and Mr. Jonathan Malaya, executive director of the PDP Laban Federalism Institute were also at the forum.
The activity, which was co-organized by the Mindanao Development Authority and the Ateneo de Zamboanga University, was attended by members of the academe, civil society organizations, national government agencies, and local governments in Mindanao.
Meanwhile, a press conference was also conducted during the event to promote awareness about the DPRM celebration and explain its overarching theme to the press. This is part of the series of regional media road shows organized by PIDS in partnership with the central and regional offices of the Philippine Information Agency. ###