Monday, July 23, 2018

BWorld 233, Federalism, Cha-cha, and more government

* This is my column in BusinessWorld last Friday, July 20, 2018.



“The aim, therefore, of patriots was to set limits to the power which the ruler should be suffered to exercise over the community; and this limitation was what they meant by liberty.”

— John Stuart Mill, “On Liberty” (1859)

The Duterte administration’s federalism push mainly plans to expand government from two to three layers with three sets of elected officials: (a) big national government with three branches (executive, legislative, judiciary) plus Constitutional bodies, (b) expanded municipal/city and provincial governments with their own executive and legislative branches, and the new (c) 18 state governments with their own three branches.

So while the 80+ provincial governors, vice-governors will be retained, there will be new 18 state governor and vice-governor positions that will be created. The number of business permits and taxes will expand while the number of national taxes have already expanded as shown by TRAIN 1 law.

Here is the distribution of powers between the national/federal and regional/state governments under Article XII of ConCom’s draft constitution. The agencies in parenthesis are my insertion to show where existing agencies fit in and the “S” refers to state-level agency.

A. EXCLUSIVE POWERS
Article XII, Section 1. Federal Government exclusive power over:

Article XII, Section 1. Federal Government exclusive power over:
Section 2. Within their territory, states’
exclusive power over:
(a) Defense, security of land, sea, and air territory (DND)
(b) Foreign affairs (DFA)
(c) International trade (DTI)
(d) Customs and tariffs (DOF, BOC)
(e) Citizenship, immigration and naturalization (DOJ, BI)
(f) National socio-economic planning (NEDA)
(g) Monetary policy and federal fiscal policy, banking, currency (BSP)
(h) Competition and competition regulation bodies (PCC)
(i) Inter-regional infrastructure and public utilities including telecommunications and broadband networks (DPWH, DICT)
(j) Postal service (PhilPost)
(k) Time regulation, standards of weights and measures (DTI)
(l) Promotion and protection of human rights (CHR)
(m) Basic education (DEPED)
(n) Science and technology (DOST)
(o) Regulation and licensing of professions (PRC)
(p) Social security benefits (SSS, GSIS)
(q) Federal crimes and justice system (DOJ, NBI)
(r) Law and order (DILG, PNP)
(s) Civil, family, property, and commercial laws, except as may be otherwise provided for in the Constitution (Judiciary)
(t) Prosecution of graft and corruption cases (Ombudsman, Judiciary)
(u) Intellectual property (IPOPHIL)
(v) Elections (COMELEC)
(a) Socio-economic development planning (NEDA-S)
(b) Creation of sources of revenue (DOF-S)
(c) Financial administration and management (DBM-S)
(d) Tourism, investment, and trade development (DOT-S, DTI-S)
(e) Infrastructure, public utilities and public works (DPWH-S, ERC-S, MWSS-S,…)
(f) Economic zones (PEZA)
(g) Land use and housing (HUDCC)
(h) Justice system (DOJ-S, State Judiciary)
(i) Local government units (DILG-S)
(j) Business permits and licenses (LGUs)
(k) Municipal waters (DA-S, BFAR)
(l) Indigenous peoples’ rights and welfare (NCIP)
(m) Culture and language development (CFL-S, DEPED-S)
(n) Sports development (PSC)
(o) Parks and recreation (LGUs)

B. SHARED POWERS
Section 4 says “Powers not exclusively given to either the Federal Government or to the Federated Regions are shared powers… can be exercised jointly or separately. In case of dispute or conflict in their exercise, the federal power shall prevail.”

This refers to current functions by 10 Departments: CHEd, DA, DAR, DENR, DoE, DoH, DoLE, DoTr, DSWD, DILG-PNP. Also two constitutional bodies CoA and CSC. The implication then is that there will be 19 Departments of Agriculture, one federal and 18 state departments; 19 DAR, 19 DENR, 19 CoA, etc. This will cost a huge amount of taxpayer money to maintain.

Various government corporations under these agencies like DoE’s NPC, NEA, and PSALM very likely will remain under the Federal government.

C. EXCLUSIVE TAXATION POWERS BY THE STATES
Under Article XIII, Fiscal Powers and Financial Administration, Section 2, the state governments have the power to levy and collect the following taxes, licenses and fees, meaning they will be removed from the national/federal government’s taxation powers:

“(a) Real Property Tax; (b) Estate Tax; (c) Donor’s Tax; (d) Documentary Stamp Tax; (e) Professional Tax; (f) Franchise Tax; (g) Games and Amusement Tax; (h) Environmental Tax, Pollution Tax, and similar taxes; (i) Road Users Tax; (j) Vehicle Registration Fees; (k) Transport Franchise Fees; and (l) Local taxes and other taxes which may be granted by federal law.”

So by implication, the federal government will retain exclusive taxation powers over income tax (personal and corporate), excise, VAT, customs duties.

But the states will get “not less than fifty percent (50%) of all the collected taxes on income, excise, VAT, and customs duties, which shall be equally divided among them and automatically released.”

The federalism agenda of the Duterte administration therefore, is a dangerous, interventionist, tax-hungry scheme whose main purpose is to spur more political development, not economic development.

A big manufacturing plant or similar facility must secure a barangay permit, a municipal/city permit, a provincial permit, a state permit, on top of getting national permit. And there are many sub-permits in each layer of local and national government agencies.

The federalism agenda would have been more palatable if there are explicit plans to (a) abolish many national departments and agencies and allow the state governments to create their own departments, (b) abolish provincial governments and governors before creating state governments and governors. But no such proposals exist. This administration’s federalism agenda, therefore, is confiscatory; a big employment plan for more government politicians and bureaucrats.

And now there are explicit calls to extend the term limits of current officials, to postpone the 2019 elections, coming from the Speaker himself, the top official who will oversee the Charter change.

The Charter change and federalism initiative of the Duterte administration should be rejected by the people, if they wish to have less bureaucracies, less egocentric politicians like the Speaker, fewer taxes, and more freedom in their lives.
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