Monday, September 20, 2010

Decentralization 6: Local Fees and LGUs' Independence from NG

Posting two related articles that were published in the weekend tabloid, People's Brigada News on different dates....

(1) Local Fees and Decentralization

March 11, 2010

Political decentralization does not automatically mean less government in the lives of the average citizens. Rather, it could mean less central or national government but more local government taxes, fees and regulations in the lives of ordinary citizens.

Last weekend, I went to Cebu City to speak in a forum organized by the Economics Department of the University of San Carlos (USC). Among the things that I noticed in Cebu were the high prices of fuel products. As of March 7, 2010, the price of diesel there was P37.81/liter, unleaded gas was P48.20/liter. That same day when I went back to Manila, the price of diesel was P33.80 a liter, unleaded gas was P44.20 a liter. In short, fuel prices in Cebu City were P4.00 more expensive compared to Manila prices. Why is this so?

Fuel prices in provinces north of Metro Manila are usually P0.50 to P1.00/liter more expensive, for both diesel and gasoline. In Bacolod and Iloilo cities, prices are usually P1.00/liter more expensive than Manila prices. Such price differential is usually due to transportation cost of bringing the fuel products to the provinces.

But why is the price differential in Cebu up to P4 a liter? This is grossly unfair for the Cebuano motorists and passengers.

My hypothesis is that the Cebu provincial and/or City governments imposed a separate fuel tax or fuel surcharge on top of existing import tax + excise tax + VAT by the national government.

Another thing that I noticed in Cebu, was the multiple fees that the local government imposed on passengers who enter the Cebu south bus terminal. I went there on my way to visit my relatives in Barili, a town south of Cebu City. Here are the fees that I observed:

a) taxi/car entrance fee P10,
b) passenger terminal fee P5,
c) toilet fee if one will pee P2,
d) buses parking fee, I do not know how much it is now, but more than a year ago, it was around P80/bus.

Of course the terminal operator -- the provincial or city government -- also collects from the rental of many stalls and food shops inside the terminal. The local government, therefore, collects lots of money from the bus terminal alone. In fairness, the terminal is relatively clean, not air-con but with electric fan, with tv in some sections. But the collections seem to be many, I think.

A friend from Cebu told me that the various fees are also being collected at the provincial Capitol. Like parking fee for cars, and blood pressure fee inside the Capitol clinic, P10/person, if the person is not an employee of the Capitol, for people undergoing some medical check up.

If one will check Cebu's city and provincial revenue codes, one might be surprised at the long list of government services with fees. Like marriage fee, marriage certificate fee, annulment fee, birth certificate fee, baptism fee, death certificate fee, burial fee, and so on. From womb to tomb, there is a fee!

Of course the local governments there will counter that they also provide free services to the poor, like free hospitalization or free coffin to the really poor. And the practice of collecting local taxes and fees from womb to tomb is also being done by other big cities and provinces in the country.

But it is baffling to think how come that so many “government services” are now not free, that average citizens have to pay many local taxes and fees, on top of national taxes and fees. Isn’t collecting just a few taxes and fees a form of public service already, so that average citizens will be able to keep more of their earnings for themselves and their family.

I am not really a fan of political decentralization or devolution, although I am not a fan either of centralization of powers by the national government. Bus terminals can be operated by private enterprises at a lot more passenger-friendly way with zero additional cost to passengers, compared to government operators. Look at those malls. People can enter and exit those malls anyday anywhere, zero entrance fee and zero toilet fee. And still the mall operators make money.

But then some local governments are not after better services to the public, but to collect more revenues from the public. A number of bureaucracies just exist for themselves.

(2) LGUs' Independence from National Government

September 18, 2010

In many political discussions and public administration literatures, decentralization and the relative independence of local governments from the central or national government is hailed as a virtue. It implies that the politicians and administrators of local governments can act more independently from politicians and administrators of the national government, especially the Office of the President.

The share of local governments from Internal Revenue Allotment (IRA) as percentage of their total receipts and revenues is a good indicator of how independent or dependent a local government is. Below are some relevant figures.

Projected revenues of selected big cities for 2010, in P million (except %)

City: Share from IRA / Local receipts / IRA dependence in %

Makati: 731 / 6,592 / 11.1%
Pasig: 748 / 4,202 / 17.8%
Pasay: 506 / 2,323 / 21.8%
Muntinlupa: 573 / 2,236 / 25.6%
Taguig: 723 / 2,325 / 31.1%
Paranaque: 670 / 2,129 / 31.5%
Manila: 1,747 / 5,122 / 34.1%
Quezon: 2,738 / 6,661 / 41.1%

Cebu: 1,041 / 2,120 / 49.1%
Cagayan de Oro: 841 / 1,039 / 80.9%
Iloilo: 548 / 625 / 87.7%
Antipolo: 855 / 678 / 126.1%
Davao: 2,566 / 1,701 / 150.9%

Source: DBM, BESF 2011, Table F.15,

Among the big cities in the country, Makati, Pasig and Pasay are the least dependent from IRA transfers from the national government. In contrast, the cities of Antipolo and Davao are among those cities that are generally dependent on such transfers.

But while “less dependence” from national government’s transfers may be a virtue, it may also mean that the local government is becoming too harsh on some businesses that are located in their territory by imposing too many business taxes and fees.

Local governments should attract more businesses to locate in their territory because such businesses will create more jobs. When people have jobs, they become less dependent on both national and local governments for welfare.

See also: Decentralization 5: Privatization and Civil Society, February 22, 2010

No comments: