BAGUIO CITY – The Philippine Institute of Development Studies (PIDS) declared the proper allocation of financial resources to each level of government will be instrumental in the success of the proposed federal system of government in the Philippines.
Dr. Rosario Manasan, PIDS public finance expert, explained the allocation of fiscal resources may enable or constrain governments in the exercise of their constitutional assigned legislative and executive responsibilities.
This year, the theme of the Development Policy Research Month celebration is “Strengthening Decentralization for Regional Development” to emphasize the need for in-depth reflections and evidence-based analysis not just on federalism but also on decentralization reforms.
Manasan noted that taxing powers and expenditures are important instruments in regulating the economy to boost the growth and development in the desired areas.
“Each level of government must have enough revenues to finance basic services for the public,” Manasan stressed during the PIDS medial road show in the city.
In a federal system, she pointed out 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 and under the said set up, the local governments or federal states can spend their funds on projects and programs that are responsive to the needs of their localities without seeking approval from the national or federal government.
Among some of the practices in the distribution of taxing powers in federal states include customs and excise taxes assigned to the federal or national government most of the time and 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 clarified this may be more directly attributed to the location of residence but in the case of Australia and India, personal income tax has been exclusively under the federal or national government.
On the other hand, Manasan stated that sales or consumption taxes are shared by both federal and state governments.
The PIDS made decentralization as one of the main topics of its development research policy month celebration this year following the heating up of the debates on the planned shift from the presidential to federal form of government.
PIDS has been designated as the lead agency in the annual celebration of the Development Policy Research Month every September to promote evidence-based research in program planning and policy-making pursuant to Proclamation No. 247, series of 2002.
The present administration has been advocating for the shift from the current presidential to federal form of government to solve the inequitable development opportunities in the different parts of the country and to strike a balance in the distribution of the country’s limited resources.
By Dexter A. See