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Thursday, March 28, 2024

Some LGUs seen unprepared for devolved services

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The architects of the devolution system transferring basic state services and facilities from the national government to local government units may have the best of intentions, but the move could be fraught with serious oversights and end up with undesired results, according to economic experts.

A policy expert raised this concern during a recent half-day webinar that tackled two relatively new laws on excise taxation in the country, including Republic Act No. 11346 and RA 11467.

The discussions were organized by the Center for Local Governance & Professional Development Inc. with a view to “raising awareness and further creating public value for several societal issues and concerns.”

Prof. Alex Magno, a prominent columnist and professor, acted as moderator of the event.

Novel Bangsal, executive director of the budget and tax research bureau of the House of Representatives, expressed apprehensions that some LGUs might not be ready to handle additional responsibilities as an offshoot of the decentralization process.

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He said assigning basic but vital government services to “ill-equipped” LGUs might not be a good idea.

This is held extremely significant in light of the so-called Mandanas-Garcia 2018 ruling by the Supreme Court which is set to take effect this year and is expected to exacerbate the problem.

The SC decision is meant to “lessen the fiscal impact of having to transfer more financial resources to the LGUs and the national government has started to identify spending responsibilities for select devolved mandates to be transferred back to local governments.”

The World Bank noted that some LGUs “have started to raise concerns regarding their financial and technical capacity to absorb re-devolved mandates, while maintaining full autonomy in planning and managing the additional resources coming from the Mandanas-Garcia ruling”.

“Underspending by local governments may worsen, as many local governments do not have the capacity to absorb a significant increase in revenues,” the WB said.

Under the 2018 decision championed by Batangas Rep. Hermilando Mandanas and Bataan Rep. Enrique Garcia, the LGUs’ share of the national revenue collections would increase by 55 percent in the 2022 budget, reaching P1.08 trillion or 4.8 percent of the country’s gross domestic product compared to 3.5 percent in 2021

The WB cited the ruling, but warned that the government faces a significant risk that the transition process could lead to a large gap in service delivery, as a lack of coordination between the national and local government and weak implementation capacity could delay the transition towards increased decentralization.”

Bangsal noted the case of the Department of Health. He said this year alone, the DOH received P205 billion earmarked for healthcare delivery services through the Philippine Health Insurance Corp. The amount is higher by 20 percent than the P171.9 billion allotted for the DOH lastyear.

The DOH achieved only 14 of its 26 performance commitments, leaving 12 commitments “unattained”, he said.

Bangsal said that in 2020, the DOH targeted 95 percent of children nationwide to be immunized, but came up with only 61-percent performance.

The SC ruled that the LGUs’ “just share” of revenues includes all national government taxes, and not limited only to Bureau of Internal Revenue collections. It effectively raised the base for computing LGUs’ share or National Tax Allotment—formerly known as the Internal Revenue Allotment—of the national government taxes.

Economist Miguel Antonio Estrada, a representative from the Senate tax study and research office, said RA 11346 and RA 11467 basically addressed two major issues: increased revenue collection through higher sin taxes on tobacco and alcohol product; and enhanced healthcare delivery services.

He said demand for cigarettes went down by 5 to 11 percent for every 10 percent hike in excise taxes on tobacco.

Lawyer Beverly Milo of the Bureau of Internal Revenue’s large taxpayers services gave the participants a walk-through the two laws.

She said the pandemic saw a decline in the demand for tobacco and alcoholic drinks, but this was offset by the upward adjustments of the excise taxes.

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