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Flypaper effect

/ 12:12 AM December 16, 2014

How well did the county’s 1,477 municipalities manage your tax peso?

Of the 286 first-class towns, 116 remain chained to the begging bowl of internal revenue allotments from national government, says a full-page ad by the Department of Finance, Bureau of Local Government Finance, and Tax Watch.

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Another 199 towns shirk collecting real property taxes. They make up less than 15 percent of their income. Guess why.

Start with obsolete rates that do not reflect today’s market value. Towns pattern their collection after provinces, and 60 out of 80 provinces have obsolete rates.

To cap these crippling of LGU capacity to serve, 59 out of the 345 did not even bother to submit their reports.

Not everyone is a deadbeat. The top five first-class towns that generated from 64 to 81 percent of local taxes are: Malay, Aklan; Limay, Bataan; Carmona and General Trias in Cavite and Cabuyao, Laguna.

The tailenders are those who raised less than 2 percent of local income; Nagtipunan, Quirino; Pagalungan, Maguindanao; Sibuco, Zamboanga del Norte; Sumisip, Basilan and Talipao, Sulu.

Instead of collecting taxes, towns and provinces scramble for IRA slabs from a stretched national treasury, Prof. Benjamin Diokno of UP School of Economics noted earlier. Their delivery of service has stagnated. So has their governance.

Remember the ancient folk tale of “Juan Tamad”? Today, it is the motif of local government units that prefer the begging bowl to self-reliance.

Juan Tamad bucks climbing a guava tree. Instead, he lies down below the fruits, waiting with open mouth for gravity to work. Buy mud crabs at the market, his mother ordered. Tamad frees them in a ditch, instructing them to go ahead while he snoozed.

More than half of 80 provinces dodge the requirement to update taxes on real property valuation every three years. The IRA share of LGUs is 40 centavos out of every peso of national internal revenue taxes. The municipalities get the biggest IRA slab.

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There were 60 cities in 1960. By 2014, that had more than doubled to 144, many of them infected by the Juan Tamad virus. It affects even the 20-percent Local Development Fund (LDF).

The fund was supposed to address the needs of the most deprived: nutrition, healthcare, medicine, potable water, sanitation, primary schooling, etc. Instead, LDF is the “most abused,” the late interior secretary Jesse Robredo insisted. Of 182 profligate LGUs, 80 splurged on junkets (lakbay aral), etc.

Today, it is the widow of Jesse Robredo who is emerging as a woman to watch. People were amazed when they saw a photo of Camarines Sur Rep. Maria Leonor “Leni” Gerona Robredo alone at night waiting along the highway in Makati City for a bus. She was traveling to her family’s simple home in Barangay Tabuko in Naga.

Friend Keisha del Castillo posted the photo she took on Facebook—and it went viral. The lawmaker, a lawyer and widow of former secretary Jesse Robredo, is seen clad in striped long-sleeved top and jeans and carrying two bags.

Leni got her economics and law degrees from the University of the Philippines. He applied for a job with the Bicol River agency. The boss, who turned out to be Jesse Robredo, brushed away the recommendation from an uncle politician. She is now one of the rising future leaders. “It is not enough for a public official to do good. There has to be a system which compels integrity,” she insists.

“Revisit IRA redistribution.” That’s the League of Cities’ long-standing call. Indeed, the IRA system is “horrendously complicated,” wrote former finance undersecretary Milwilda Guevara earlier. It is also “grossly inequitable.”

IRAs are national government grants. They’re not “begging bowls” for LGUs. They’re supposed to budge local officials into crafting sturdy tax structures.

It hasn’t worked out that way.

IRAs are blank checks without performance criteria. Officials are not held to account. Slabs from this de-facto pork barrel go to junkets, honoraria, extra hires, fiestas, etc.

The Philippines and 182 other countries pledged to achieve, by 2015, Millennium Development Goals for health, education, poverty, among others. But “MDGs” elicit blank stares from most local officials, oblivious of the irony that they could do most for the neediest.

“Local governments have become more dependent on grants,” Guevara notes. “IRA accounts for about 64 percent of their total revenues compared to 39 percent before devolution.

“There are no clear rules and no transparency in how (IRAs) are disbursed,” she adds. “Lack of an ‘efficient transfer system’ insulates LGU officials from bearing costs of underutilizing their taxing powers.”

The National Tax Research Center found that IRAs “tend to flow heavily to more developed regions” like Regions 3 and 4, plus Metro Manila. World Bank’s “Development Report” makes the same point.

The system locks resources into theoretical “equal lots,” regardless of actual need. The result is a paradox: IRA withers as an equalizer, Guevara observed. The system instead spawns “perverse incentives for LGUs to convert into cities to receive additional IRA.”

“Cities are changing the social fabric and culture of nations,” the Asian Development Bank notes. “It has the elements of unpredictability and chaos”—and opportunity.

But money sticks where it hits; this is known as the “flypaper effect.” It stems from “monopolistic, budget-maximizing local politicians and bureaucrats.” Overdue reforms of the IRA and LDF should avoid “unconditional grants.”

“Man has enough for his needs,” as Mohandas Gandhi put it. “But not enough for his greed.”

* * *

E-mail: juanlmercado@gmail.com

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