House Speaker: No IRA under federalism

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Metro Manila (CNN Philippines, February 6) — House Speaker Pantaleon Alvarez said on Monday the share of local governments in national revenues will likely be scrapped once the government shifts to federalism.

Alvarez said the Internal Revenue Allotment (IRA) will be replaced by a revenue-sharing arrangement where the lion's share would go to the component states.

Under the current system, the collected national internal revenue taxes is split 60-40. Sixty percent goes to the national government, while only 40 percent goes to the local government units through the IRA.

Under a federal setup, where provinces will be clustered into states, local government units would get to keep 80 to 85 percent of its total revenue.

"Sobra-sobra na iyon kung i-compute mo sa IRA mo iyan, hindi ba? Kailangan lang talaga magsipag iyong region na iyon. Sa nakikita ko, every region in this country may mga potential, ang laki, ang laki ng potential," Alvarez said.

[Translation: "If you compute it, that's over and beyond their current IRA. The region only needs to work hard to earn under a federal government. Each region in the country has huge potential."]

Alvarez believes this would force local government units to be competitive and utilize their resources well.

"Pagalingan 'yan bawat state. So pe-pwede silang gumawa ng kanya-kanyang economic policies upang sa ganon ay mahikayat nila yung mga investors na mag-locate dun sa kanilang lugar," he said.

[Translation: They will prove they're better than the other states. They can craft their own economic policies, and attract investors to do business in their region.]

These, he added, will lead to job creation and other economic opportunities.

"Now they can chart their own destiny. Iyon ang kagandahan doon [That's the beauty of it]," Alvarez said.

Data from the Department of Finance (DOF), however, show that except for the National Capital Region, Regions IV-A, and III, other regions remain heavily dependent on IRA.

DOF officials explain the local sources of revenue for most regions are not enough to fund their expenditures.

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To help these poor provinces, Alvarez said they will be clustered together with the rich provinces. This way, those with more resources can share it with those who have less.

"Hindi ba, para kaya silang buhatin ng region na 'yun. Halimbawa, Davao Region, mayaman iyan. Puwede mong isama iyan sa Caraga na mahirap na region. Halimbawa, iyong Region 8, mahirap iyan. Pwede mo ring isama sa Region 7, Cebu, kasi mayaman yung Region 7. Tulungan lang  [They will support each other]," Alvarez explained.

The House Speaker added the federal government will still provide subsidy to provinces, which are having difficulty earning revenues through a special fund.

"Kasi sa ibang bansa, kagaya ng Malaysia may tinatawag nga silang Special Equalization Fund. Para doon sa halimbawa, nahihirapan iyong isang region, iyon muna, sina-subsidize nila iyon hanggang makabangon uli," Alvarez said.

[Translation: In other countries like Malaysia, they have what they call Special Equalization Fund. Subsidy is provided for struggling regions until they can recover.]

Talks of shifting to federalism gained steam again when President Rodrigo Duterte won. He believes this form of government will finally bring peace to the conflict-ridden region.

A federal government creates autonomous states that have greater power over the administration and resources of the territory they cover. Under the current presidential system, authority is centralized in the national government based in Manila.