Shortchanging Imperial Manila

A column I wrote about the Metro Manila commuter rail drew an email from a reader who thinks Metro Manilans are being shortchanged in the allocation of tax money for infrastructure.

“Boo… I read your article today on the commuter rail.  I would like to make the following comments, firstly Metro Manila contributes almost 40 percent to the nation’s GDP and collects 60 percent of total income taxes of the country…

“Why then are there no major infrastructure developments in Metro Manila funded by the government? As far as I know all the major infrastructure developments are done by private corporations like San Miguel, Ayala, First Pacific of MVP, etc.

“Where are all the taxes we pay going? We need a MASS TRANSPORT SYSTEM around Metro Manila. I understand that most of the money collected in Metro Manila is going to the provinces. I googled income tax collection and internal revenue collection and was shocked.

“The province of Abra, for example, had only an income tax collection of a little over P355 million, but had an IRA of P3.2 billion in 2018.  Abra has a population of only a little over 241,160. Probably some barangays in Metro Manila have a bigger population than the entire province of Abra.

“How is the IRA of Abra being spent? Perhaps this is why the politicians in that province have been killing each other in the past. I think the IRA of most cities in Metro Manila is smaller than that of Abra. This is just one example.

“In the meantime, the hardworking people of Manila have to wake up at 4 a.m. and get home very late at night that they have only a few hours of sleep, thereby affecting their health and family life.  People in Metro Manila pay huge taxes, but get nothing in return.

“I suspect most of the money ends up in the pockets of politicians. An article by Benjamin Punongbayan of Punongbayan & Araullo reveals there are no parameters… the local governments can spend the money on whatever they want.

“The formula for the allotment is very faulty. I used Abra as an example because Abra comes first among the provinces after the cities of Metro Manila.

“In 2018, Abra received an IRA of P3.2 billion and only has a population of 241,000 or P13,278.00 on per capita basis, I just rounded the figures to make it easier.

“Quezon City received P 4.6 billion and has a population of 2.9 million or P1,603.00 on a per capita basis. You can see right away how lopsided the IRA is in favor of LGUs in the provinces compared to LGUs in Metro Manila, which pays 60 percent of all income taxes collected by the BIR nationwide.

“When the IRA started in 1992, many local governments had a windfall, their budgets increased as much as 10 times what it used to be before the IRA.  Most of them did not know what to do with the money and so most of the money possibly ended up in the pockets of politicians.”

In case you want to see the IRA of the cities of Metro Manila and all the provinces just google:  COMPARISON OF ALLOCATION TO LOCAL GOVERNMENT UNITS, 2016 – 2018.

Benjamin Punongbayan, founder of Punongbayan & Araullo, one of the Philippines’ leading auditing firms, stated in a Business World article published Aug. 27, 2019, that most of the people in the provinces do not know that their local governments were getting so much money.

The Local Government Code of 1991 decentralized some government functions to LGUs. For this purpose, LGUs were given an annual allocation (allotment) of 40 percent of national tax collections (Internal Revenue Allotment or IRA).

The IRA is in addition to the local taxes that the LGUs already impose and may impose in their respective jurisdictions.

Mr. Punongbayan observed: “We are now seeing that after 28 years, this decentralization does not seem to have improved the lives of our people, the supposed reason for its adoption. Decentralization is a failure.”

Another example of failure is agricultural extension. Punongbayan pointed out that “judging by the continuing poor performance of the agriculture sector, this decentralized important government service makes absolutely no difference in agricultural development.”

“Why is decentralization a failure? Is it because the amount of IRA is inadequate? Offhand, probably not, judging by the prevalence of lampposts along the town roads, some of them so elaborately designed that they look grotesque.”

Punongbayan wrote that in 2018, “the total IRA was P522 billion, of which P281.3 billion (54 percent) was the combined IRA for municipalities and barangays.”

Citing Region VI (Western Visayas) as an example, Punongbayan pointed out its total IRA in 2018 was P41.8 billion. Bringing this down to the province level, the IRA for each province in that region ranged from P1.3 billion to P17 billion. The low end was for a small province…

“Based on the numbers cited, it can be discerned and it is fair to say that the separate IRA of each province, city, municipality, and barangay is not a small amount of money and may meet their respective needs…

“For 28 years to 2019, the cumulative power of these available funds should have made a big difference in the development of the provinces, cities, and towns. But this supposed big difference does not show.

“If LGUs around the country just focused on farm-to-market roads, they could have built a lot of them during the last 28 years. That, by itself, would have been a convincing exhibit of the success of decentralization. But the LGUs did not build many of those roads because they were largely looking for somebody else to build them. So where did the money go?”

Punongbayan calls decentralization a missed great opportunity. For Metro Manila, we are not getting our money’s worth in taxes we pay because we still have to pay the private sector to use infrastructure the government should have built.

Something is wrong and yet politicians want to make things worse by federalization. Nuts!

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco