Professional Documents
Culture Documents
What will happen to the Internal Revenue Allotment (IRA) if our country shifts to a federal
structure of government?
increased?
the specifics of fiscal autonomy is part and parcel of the federal design process. Fundamentally,
however, the fiscal regime of a federal structure simply mirrors the allocation of state functions
Meaning, greater political and administrative autonomy for the subnational government should
powers.
Thus, it is highly possible in such an instance that the IRA would no longer be retained. In this
How will national mandates such as national defense and foreign affairs be funded?
Will the designated federal-level taxes be enough?
Will there be a need to impose additional levies on business and personal incomes?
And what about other highly specialized government bodies that have nationwide
federal structure, then this would imply that the devolution of state functions may only be as
substantive as the one implemented under the Local Government Code (LGC). Such a scenario
seems contradictory to the very spirit of federalism that envisages the subnational government
assuming responsibility for state functions except only those beyond their capability (i.e.,
national defense and foreign affairs). And worse, it may also fail to deliver the economic boost
proponents always promise to justify the move to federalize. Clearly, the discussion on fiscal
autonomy under a federal structure can commence only after a definitive picture of how state
functions are divided between the federal and subnational levels of government has emerged.
Ostensibly, such a rational allocation arrangement cannot simply be formulated from nothing.
And where else can this be drawn save from a robust and thorough analysis of decentralization
under the LGC? But this can be a tricky task. According to the Philippine Development Plan
2011-2016 which guided the previous administration, the majority of LGUs still lack the will to
raise adequate local revenues and are unduly dependent on the IRA. Obviously, this assessment
does not convey the picture of local leaders demonstrating an autonomous governance
mindset, and thus does not exactly inspire expanding fiscal autonomy even further.
On the other hand, the work of the Galing Pook Foundation also proves that the
decentralization of government functions can produce good outcomes. Its website is replete
with real-life examples demonstrating that the proper use of the LGC can bring socioeconomic
benefits to local communities. Interestingly, the final word on this apparent paradox shown by
analyses on the impact of the LGC comes from economists who wrote in “Regional
Development Dynamics and Decentralization in the Philippines” that: “Decentralization in the
the quest for a proper and reasonable response can commence with Senate Joint Resolution
No. 10, which was filed by the foremost proponent of federalism in the country during his time
The first four “whereas” clauses in the Explanatory Note truly set us on the right train of
thinking:
“Whereas, the Constitution provides for a unitary system of government where the
center of finance and development in the country resulting in a highly centralized system
of government;
“Whereas, the highly centralized system of government has brought about a spotty
development of the nation where preferential treatment has been given to localities
whose officials are friendly with or have easy access to an incumbent administration;
“Whereas, this lopsided arrangement has spawned a host of problems including massive
nationwide poverty to runaway insurgencies and rebellions that feed on the societal
We are quite literally at the end of our tether. Indeed, the list of government failures is endless.
But at the core of this lengthy enumeration is basically our severe anxiety over our
overcentralized government. The net effect, according to President Duterte in his inauguration
speech, is “the erosion of confidence in the capacity of our public servants to make the people’s