Should the new charter retain the IRA?

The Internal Revenue Allotment is the constitutionally mandated share of each local government unit in the national taxes.

According to “Caught between Imperial Manila and the Provincial Dynasties: Towards a New Fiscal Federalism,” a paper from the Ateneo School of Government: “Looking at the IRA dependence rates of each local government unit [in] 1992-2015, a majority of the provinces, cities, and municipalities depend on the IRA for more than 50 percent of their budgets. Further, a significant number of these LGUs rely on IRA for more than 90 percent of their local budgets. Hence, local governments came to depend heavily on fiscal transfers from the central government.”

Moreover, “the IRA has also proven to perpetuate a dependence of LGUs on the national government,” according to legal scholar Romeo Raymond Santos in “The Internal Revenue Allotment: A Review of Legislative, Executive and Judicial Decisions.”

The phrases “depend heavily” and “perpetuate a dependence” raise a dangerous red flag. The fact is the IRA was never designed to put LGUs at the mercy of Malacañang. This exchange between Commissioners Regalado Maambong and Jose Nolledo during deliberations in the 1986 Constitutional Commission shows that the purpose of the IRA is the very opposite of the current situation:

“MR. MAAMBONG. Also, this provision on ‘automatic release of national tax share’ points to more local autonomy. Is this
the intention?

“MR. NOLLEDO: Yes, the Commissioner is perfectly right.” (Record of the Constitutional Commission, Volume 3, Aug. 12, 1986, p232)

Precisely because the IRA must deepen LGUs’ autonomy, Section 288 of the Local Government Code commands that each LGU appropriate in its annual budget no less than 20 percent of its annual IRA for development projects.

But such high reliance on the IRA raises the possibility that this fund is being used by LGUs to cover mainly the operational costs of the kapitolyo and the munisipyo. If this is the case, then I think many will agree that it is inappropriate. Indeed, there can be a potential violation of the Local Government Code here which the Commission on Audit ought to scrutinize.

The 1987 Constitution does not attach any conditions on the share of the LGUs from the national taxes except that it must be released automatically. The new charter can avoid this anomalous treatment of the IRA by specifically mandating that it be used exclusively to cover local development initiatives directly targeting human development—i.e., education and health.

Admittedly, this will be a drastic upgrade from the present constitutional prescription. But consider the trajectory of our population growth: Filipinos will be close to 110 million by 2020.

More critically, the school-age population (0-19 years old) will be around 44 million. By 2045, the same demographic will be around 41 million. This means that Filipinos who are currently in school will be responsible for roughly the same number of citizens 25 years down the line.

Unavoidably, therefore, the state of the Philippines in 2045 depends entirely on the quality of mental and physical formation that 44 million young Filipinos will receive from 2020 henceforth. More importantly, the future of the Filipino youth of 2045 will also be determined by it.

We can project the status quo to 2045 by doing absolutely nothing now and just blindly hope that we can overcome the challenges that are sure to come. But the fact that the number of elementary and high school dropouts is steadily rising is a serious cause for alarm.

Or we can institute radical reforms through the new charter to ensure a higher level of human development for the Philippines in 2045 and beyond. The right to education and health must not be mere declarations this time around. They can be sterner constitutional mandates so that the next generation of Filipinos can have a genuinely more comfortable life.

Michael Henry Ll. Yusingco, a practicing lawyer, is the author of the book “Rethinking the Bangsamoro Perspective.” He conducts research on current issues in state-building, decentralization and constitutionalism.