PDP-Laban and Pimentel Jr.

’s Model of Federalism,
RA 9054, and HB 6475: An Assessment on its
Application of Fiscal Federalism

I. INTRODUCTION

The Philippines has long been exercising a unitary form of government. This, we can assign
a big percentage of responsibility to the country’s interactions and subjugation with the
Spanish and American colonizers. With the Spaniards’ great consideration upon instilling
impact for easier dividing and controlling of the Philippine lands, supreme authority was
made to focus on Manila, leaving portions of the country neglected. Even with the
formulation and implementation of the Maura Law, which is a tribute of the colonizers to the
self-government of localities in the Philippines, centralization continued to operate as if the
said legislation doesn’t even exist. Likewise, the United States of America’s entrance to the
scene caused the introduction of a number of policies recognizing local autonomy. However,
due to their observations that Filipino elites has the tendency to practice corruption (as what
they have adopted to the Spanish rulers), Americans have decided to disregard the prospect
of teaching the Filipinos of the concept of local autonomy and proceeded with the application
of the concept of centralization.

The unitary system of government has made good progress of the Philippines to a certain
level. The particular legislation that was approved during the 3rd quarter of 1991 and was
enacted on January 1, 1992 called the Local Government Code of 1991 contributed to this as
there have been an increase of powers and functions given to the localities through
decentralization, thus disempowering the national government a little. While this may be true
and operational, issues of unequal development among the local governments, and unfair
distribution of power among the national and local governments still exists.

In the implementation of the Local Government Code of 1991, LGUs were given fiscal
autonomy through this provision, “Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically released to them.”
However, according to Manasan (2017), the present system gives the LGUs a weak fiscal
federalism resulting to a weak fiscal autonomy because the stated law owned several
deficiencies in terms of Expenditure (or Functional) Assignment, Tax (or Revenue)
Assignment, Intergovernmental Fiscal Transfers, and Subnational Government Borrowing.

The theory of fiscal federalism, as originally developed by Musgrave (1959) and Oates
(1972) involves the logical way of dividing public sector functions and finances to each of
the multiple layers of government (King 1984). Some scholars, experts and political analysts
suggested that the solution of these issues is a better implementation or the strengthening
through revision, of the already instituted laws. On the other hand, some of them want a
system change – they are advising the Philippines to shift to the federal system of government
as they have reasoned out that it can be more efficient and effective in bringing more
economic stability through the provision of solutions involving the just distribution of income
and the allocation of resources.

During the 2016 presidential elections, Rodrigo Roa-Duterte, a presidential candidate who
promised that if he wins the elections, he will push for the country’s shift to federalism. Now,
the government is in possession of 2 models of federalism – the model of the veteran
lawmaker Aquilino “Nene” Pimentel Jr. and that of PDP-Laban, a political party of which
has been a promoter of federalism since the 1980s.

Meanwhile, there were also legal initiatives coming from the Congress, one of them is
Republic Act no. 9054 entitled: “An Act to Strengthen and Expand the Organic Act for the
Autonomous Region in Muslim Mindanao, amending for the purpose Republic Act no. 6734,
entitled "An Act Providing for the Autonomous Region in Muslim Mindanao," As
Amended”. Another one is the House Bill no. 6475 entitled: “An Act Providing for the Basic
Law for the Bangsamoro And Abolishing the Autonomous Region in Muslim Mindanao,
Repealing for the Purpose Republic Act No. 9054, entitled “An Act to Strengthen and
Expand the Organic Act for the Autonomous Region in Muslim Mindanao, amending for the
Purpose Republic Act No. 6734, entitled "An Act Providing For The Autonomous Region In
Muslim Mindanao," and for other purposes.

II. OBJECTIVES AND LIMITATION OF THE STUDY

This paper focuses on assessing the fiscal federalism of PDP Laban and Aquilino Pimentel
Jr.’s model of federalism, RA 9054, and HB 6475. Its objectives shall include: (1) To discuss
the theory of fiscal federalism; (2) To give an overview of the nature of federalism that each
of the 2 models has to bring the Philippines; (3) To highlight the fiscal features of each of the
2 models of federalism, RA 9054 and HB 6475 and lastly, to assess the fiscal federalism of
the 2 models, RA 9054, and HB 6475 to possibly determine which among them is more
effective in bringing greater fiscal autonomy upon the local governments and Bangsamoro
Government. Literature on fiscal federalism and fiscal autonomy as well as the releases of
the models of federalism and copies of the legal initiatives from Congress (RA 9054 as it is
and HB 6475 original version without the amendments proposed by the Congress) by the
proper authority shall guide the researcher in working with the paper.

This paper does not intend to provide absolute conclusions as to the level of fiscal autonomy
of the 2 proposed models of federalism especially since these models are evolving for the
better as the decision towards the shift or non-shift becomes final (same is true with the RA
9054 (that will be repealed when HB 6475 is implemented). This paper is significant in
studies of relationship with fiscal federalism, fiscal autonomy and in the improvement of the
present models of federalism and legal initiatives from Congress in terms of its fiscal
features.

III. THE THEORY OF FISCAL FEDERALISM

Fiscal Federalism, according to King (1984), involves the logical way of dividing public
sector functions and finances to each of the multiple layers of government so as to provide
the balance and stability the local governments needed which eventually effects the
overcoming of issues like uneven distribution of wealth and lack of widely available
resources. Theoretically, fiscal federalism, assists in understanding: (i) the factors in knowing
the optimal level of fiscal decentralization; (ii) principles causing the designation of functions
and finance of governments; and (iii) to design suitable inter-governmental transfer schemes
to realize the objectives of ‘equity’ and ‘efficiency’ (Rao and Singh, 2005). It can also serve
as basis upon the creation or revision of a fiscal constitution of a federal or turning federal
governments or even multi-tiered unitary governments (Blöchliger and Kim 2016).

Intergovernmental Fiscal Relations have four pillars:

(1) Functional or Expenditure Assignment (the question on which level of government

should have the power to define and implement policies in the delivery of public service in
specific areas)

(2) Tax Assignment (the question on which level of government should levy different types
of taxes)

(3) Intergovernmental Transfers (the question on what policy instruments and mechanisms
should be used to address the gap in expenditure responsibilities and revenue powers
assigned to subnational governments and regional imbalances in the fiscal capacity of
subnational governments)

(4) Subnational Borrowing and Debt Management (the question on what rules should be
put in place with respect to subnational borrowing to enforce hard budget constraints on all
levels of government and ensure the fiscal sustainability of the government as a whole).

These 4 pillars are guided by the theory of fiscal federalism. Later on, the application of
fiscal federalism on PDP-Laban and Aquilino Pimentel Jr.’s model of federalism, RA 9054
and HB 6475 using these 4 pillars of intergovernmental fiscal relations shall be discussed.
IV. THE TWO MODELS OF FEDERALISM (PDP-LABAN’S MODEL AND
AQUILINO “NENE” PIMENTEL JR.’S MODEL) RA 9054 AND HB 6475:
THE ASSESSMENT ON ITS APPLICATION OF FISCAL FEDERALISM

The shift to federalism has become a hot topic especially since the win on the 2016
presidential elections of PDP-Laban’s standard bearer and a supporter of federalism. In fact,
even without a firm assurance of system swap from the present administration, there has been
a continuing study of the 1987 Constitution for purposes of determining the possible changes
it might undertake for the system shifting.

a. AQUILINO “NENE” Q. PIMENTEL’S MODEL

For a start, this model is proposing a presidential federal government with stricter
educational qualifications for the president and vice president as they should at least
be baccalaureate degree holders from colleges recognized by the government.

Apart from the current setup of national government, the country would have
individual federal states with their own federal legislature and local governments.
There will be creation of 12 federal states, five of which are in Luzon, four in the
Visayas and three in Mindanao.

The federal Congress would still have two Houses—the Senate and the House of
Representatives.

The revenue shares of the Federal States and the LGUs (local government units)
would increase. In allocating resources, all revenues, not only taxes collected by the
Bureau of Internal Revenue (BIR) would be the basis. 80 percent of the overall
revenues are allocated to the states, and 20 percent to the federal government.

In terms of technicalities, it features a change in the number of articles (from 17 to

19) as there were two (2) new articles being inserted (Article X: State Legislatures;
Article XI: The State Executive Department). This also caused the renumbering of the
articles starting from Local Government up to the Transitory Provisions.
Questionably, the article on Amendments and Revisions from the 1987 Constitution
got listed out which, if we are going to include this, the proposed amendments should
contain twenty (20) articles due to the inclusion of 2 new articles.

Most of the changes from Article 1 (National Territory) to Article 5 (Suffrage) were
limited to word/ phrase/sentence cancellations, word/phrase/sentence additions and
paragraph additions. The same is true for articles 13 (Accountability of Public
Officers) to 19 (Transitory Provisions). However, in articles 6 to 12, we can see the
 constitution’s transformation from that providing statements discussing how a unitary
government shall operate to that providing how a federal system shall be.

As for the fiscal provisions of the model (as related to the 4 pillars of
intergovernmental fiscal relations):

 Article VI, New Section: This enumerates the powers of the Federal Congress. It relates
to one of the four pillars of Intergovernmental Fiscal Relations, the functional/
expenditure assignment.

 Article, VI, New Section. (6): This states that the Federal Congress has the jurisdiction
over the federal currency, fiscal and monetary system, taxation, budget and audit. It
relates to one of the four pillars of Intergovernmental Fiscal Relations, the tax
assignment.

 Article X, New Section (5): This enumerates the powers and duties of the State
Legislatures. It relates to one of the four pillars of Intergovernmental Fiscal Relations, the
functional/ expenditure assignment.

 Article XII, New Section (2): This states the new mode or percentage of the sharing of
taxes (from 60-40, with the former reserved for the National Government and the latter
for the Local Governments, this new section provides the 20-80 mode, with the former
reserved for the Federal Government and the latter for the state governments.) It relates to
one of the four pillars of Intergovernmental Fiscal Relations, the Intergovernmental
Transfers.

 Article XVIII, New Section: This provides the creation of a Federal Equalization
Council which shall annually allocate the funds among the States, Autonomous or
Federal Administrative Regions which are qualified for equalization fund assistance to
enable the latter to provide basic government services and shall cause their respective
allocations to be paid to the special revenue funds of the States concerned. It relates to
one of the four pillars of Intergovernmental Fiscal Relations, the Intergovernmental
Transfers.

b. PDP-LABAN’S MODEL

This model is proposing a semi-presidential federal system of government for the

Philippines – a system wherein the government is required to have both a president
and a prime minister. The president shall be elected by the public and when finally,
into power, the system shall grant him/her of the capacity to nominate a prime
minister which will be subjected to the confirmation of the parliament. Most of the
powers of the president under the current form of government will also be transferred
 to the prime minister, as the former will serve as head of state and shall deal with
concerns on foreign affairs and national defense. Meanwhile, the position of vice
president is optional.

Under the proposed system, there are 2 constitutionally established orders of

government primarily accountable to its respective electorates – (1) The Federal
Government, which has powers that ‘concerns the entire nation’ (defense, national
security, foreign policy, currency, banking and monetary policy, customs and national
taxation and international trade) and the (2) Regional Government, which has
powers that concerns the provision of basic services to its people. In this model, there
shall exist 11 Regional Governments.

It would retain the bicameral system in the legislative with a Senate and a federal
assembly in parliament to maintain a system of checks and balances.

The 60% of the national government revenues will be allocated to the Regional
Governments and only 40% will be allocated to Federal Government.

In terms of technicalities, most of the changes from Article 1 (National Territory) to

Article 5 (Suffrage) were limited to word/ phrase/sentence cancellations,
word/phrase/sentence additions and paragraph additions. The same is true for articles
13 (Accountability of Public Officers) to 18 (Transitory Provisions). However, in
articles 6 to 12, we can see the constitution’s transformation from that providing
statements discussing how a unitary government shall work and operate to that
providing how a federal system shall be.

As for the fiscal provisions of the model (as related to the 4 pillars of
intergovernmental fiscal relations):

 Article VI, Section 29: This section states that the rule of taxation shall be uniform and
equitable. The Federal Assembly shall evolve a progressive system of taxation. Further,
The Parliament may, by law, authorize the Prime Minister to fix within specified limits,
and subject to such limitations and restrictions as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government. It relates to one of
the four pillars of Intergovernmental Fiscal Relations, the Tax Assignment.

 Article X, Section 12: The provision stating the right of the regional governments to
have a just share in the national federal taxes and revenues was still incomplete as they
left the percentage of just shares blank. A paragraph under this also stated the retention of
specific national taxes collected within the territorial jurisdiction of each region. It relates
to one of the four pillars of Intergovernmental Fiscal Relations, the Intergovernmental
Transfers.
 Article X, Section 13: This provides the enactment of a comprehensive regional and
local government code which shall define the powers, functions and responsibilities of
each aforementioned level of government. It shall also include provisions on “fiscal
equivalence and good governance”. By “fiscal equivalence”, the code is expected to
include provisions which shall comply with all the pillars of Intergovernmental Fiscal
Relations, thus determining the level of fiscal federalism.

 Article X, Section 14: This states the provision of regional and local governments of an
equalization fund (which shall comprise of unconditional general grants to serve as
incentives and conditional and matching grants for the purpose of funding federal
priorities) and the creation of a national finance commission. It relates to one of the four
pillars of Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article X, Section 15: This states that regional governments shall receive a 50% share in
the proceeds of utilization and development of national wealth within its territory. It
relates to one of the four pillars of Intergovernmental Fiscal Relations, the
Intergovernmental Transfers.

 Article X, Sections 16-22: These sections clearly states and defines the exclusive
legislative powers of the Federal Government (unlike the enumeration of powers of the
Federal Government in Aquilino Pimentel Jr.’s model which is labelled the “legislative
powers of the Federal Congress.”). It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the functional/ expenditure assignment.

 Article X, Sections 23-27: These sections clearly states and defines the exclusive
legislative powers of the Regional Government/s (unlike the enumeration of powers of
the State (Regional) Government/s in Aquilino Pimentel Jr.’s model which is labelled the
“powers of the State Legislatures.”). It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the functional/ expenditure assignment.

 Article X, Section 38: The provision stating the right of the local governments to have a
just share in the national federal taxes and revenues was still incomplete as they left the
percentage of just shares blank (take note that the just share of regional governments and
local governments in the national federal taxes are separate.). It relates to one of the four
pillars of Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

c. RA 9054

This Act amended the RA 6734 (The Organic Act for the Autonomous Region in
Muslim Mindanao) in 2001. The amended law expanded ARMM's area of
 autonomy. In a plebiscite, Basilan and Marawi City (in Lanao del Sur) opted to
join ARMM.

In this Act, ARMM shall remain an integral and inseparable part of the national
territory of the Republic. The President exercises general supervision over the
Regional Governor. The Regional Government has the power to create its own
sources of revenues and to levy taxes, fees, and charges, subject to Constitutional
provisions.

In July 2008, the Supreme Court declared unconstitutional a section in RA 9054

which granted the ARMM Regional Assembly the power to create provinces and
cities. The court held that creating provinces and cities is a power that only
Congress can exercise.

As for the fiscal provisions of the Republic Act (as related to the 4 pillars of
intergovernmental fiscal relations):

 Article IV- Article VIII: These articles including all of its corresponding sections and
subsections provide the Powers of the Regional Government, Inter-Governmental
Relations, Legislative Department, Executive Department and Administration of Justice.
It relates to one of the four pillars of Intergovernmental Fiscal Relations, the functional/
expenditure assignment.

 Article IX, Section 1: This section states the power of Regional Government to create its
own sources of revenues and to levy taxes, fees and charges. It relates to one of the four
pillars of Intergovernmental Fiscal Relations, the Tax Assignment.

 Article IX, Section 2: This provides the right of Regional Government to enjoy fiscal
autonomy in generating and budgeting its own sources of revenue, its share of the
internal revenue taxes and block grants and subsidies remitted to it by the central
government or national government or any donor. This relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article IX, Section 3: This provides that the Regional Assembly may enact a regional
government tax code. The code is expected to include provisions which shall comply
with all the pillars of Intergovernmental Fiscal Relations, thus determining the level
of fiscal federalism.

 Article IX, Section 4: This section states that the Regional Government may formulate
its own economic and financial programs, subject to the provisions of the Constitution. It
relates to one of the four pillars of Intergovernmental Fiscal Relations, the
Intergovernmental Transfers.
 Article IX, Section 5-8: These sections provide for the rights of Regional Government to
have a uniform and equitable taxation. These also set the extent and exceptions of tax
powers, payment of taxes, and the sources of Regional Government Revenue. It relates to
one of the four pillars of Intergovernmental Fiscal Relations, the Intergovernmental
Transfers.

 Article IX, Section 9: This section states the percentages of the distribution of collected
revenue taxes, fees, and charges of the province or city. It relates to one of the four pillars
of Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article IX, Section 14: This section states that the Regional Director may be authorized
by the Regional Assembly to contract foreign or domestic loans in accordance with the
provisions of the Constitution. It relates to one of the four pillars of Intergovernmental
Fiscal Relations, the Subnational Borrowing

 Article IX, Section 15: This section provides the percentages of the collection and
sharing of Internal Revenue Taxes by the central and regional government. It relates to
one of the four pillars of Intergovernmental Fiscal Relations, the Intergovernmental
Transfers.

d. HOUSE BILL 6475

This bill seeks to provide for the Basic Law for the Bangsamoro (BBL) and
abolishing the Autonomous Region in Muslim Mindanao (ARMM). If enacted
into law, it would repeal Republic Act No. 9054, entitled “An Act to Strengthen
And Expand the Organic Act for the Autonomous Region in Muslim Mindanao”
and RA No. 6734, entitled “An Act Providing for An Organic Act for the
Autonomous Region in Muslim Mindanao”. Further, it seeks to establish a
political entity, provide for its basic structure of government in recognition of the
justness and legitimacy of the cause of the Bangsamoro people and their
aspiration to chart their political future through a democratic process that will
secure their identity and posterity and allow for a meaningful self-governance.

Under the bill, the Bangsamoro territory shall remain a part of the Philippines.
Moreover, to ensure the widest acceptability of the BBL in the core areas, a
popular ratification shall be conducted among all the Bangsamoro within the areas
for their adoption. It retains the central government’s power and control over
defense and external security. It also provides that the defense of the Bangsamoro
shall be the responsibility of the Central Government. The Central Government
shall create a Bangsamoro Military Command of the Armed Forces of the
 Philippines for the Bangsamoro, which shall be organized, maintained, and
utilized in accordance with national laws.

As for the fiscal provisions of the House Bill (as related to the 4 pillars of
intergovernmental fiscal relations):

 Article V, Sections 1-4: These provisions state the Powers of the Government namely;
(1) Reserved powers, (2) Concurrent powers, (3) Exclusive Powers, and Other Exclusive
Powers. It relates to one of the four pillars of Intergovernmental Fiscal Relations, the
functional/ expenditure assignment.

 Article V, Section 3 (3): This section states the exclusive power of the Bangsamoro
Government to contract loans, credits and other forms of indebtedness with any
government or private bank and other lending institutions, except those requiring
sovereign guaranty, which require Central Government approval. It relates to one of the
four pillars of Intergovernmental Fiscal Relations, the Subnational Borrowing.

 Article VI, Section 4: This states that the Central Government and the Bangsamoro
Government shall establish a mechanism at the highest levels that will coordinate and
harmonize their relationships. For this purpose, a primary mechanism shall be a Central
Government – Bangsamoro Government Intergovermental Relations Body to resolve
issues on intergovernmental relations. It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article VII, Sections 2-4: These provisions state the Powers of Government, Legislative
Authority and Executive Authory – Bangsamoro Parliament. It relates to one of the four
pillars of Intergovernmental Fiscal Relations, the functional/ expenditure assignment.

 Article XII, Section 1: This provision states the right of the Bangsamoro to enjoy the
maximum form of fiscal autonomy with the end in view of attaining economic self-
sufficiency and genuine development. Further, it states their right to all funds sources
enumerated in the Article. It shall also have the power to create its sources of revenues. It
relates to one of the four pillars of Intergovernmental Fiscal Relations, the
Intergovernmental Transfers.

 Article XII, Section 2: This section states the creation of Bangsamoro Commission on
Audit. It shall have the primary power, authority and duty to examine, audit and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to the public funds utilized by the
Bangsamoro. It relates to one of the four pillars of Intergovernmental Fiscal Relations,
the Intergovernmental Transfers.
 Article XII, Section 3: This section provides for the creation of Bureau of Local
Government Finance under the Ministry of Finance, a mechanism for coordinating,
assisting, and monitoring the finances of the constituent local government units in
pursuance of good governance and local autonomy. It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article XII, Sections 4-5: These sections mandated the Central Government in the
assistance of Bangsamoro Government in the matter of tax administration, fiscal
management and development efforts. It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article XII, Sections 6-10: These sections provide the Bangsamoro Government the
power to create its own sources of revenues, tax incentives and taxing powers. It relates
to one of the four pillars of Intergovernmental Fiscal Relations, the Tax Assignment.

 Article XII, Section 11-13: These sections provide the percentages of share in taxes of
the Central Government, assessment and collection of taxes and payment of taxes by
corporations, partnerships or firms. It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article XII, Section 14: This provides the percentage of shares of the Constituent Local
Government Unites in Taxes within Bangsamoro. It relates to one of the four pillars of
Intergovernmental Fiscal Relations, the Intergovernmental Transfers.

 Article XII, Section 15: This section states that the Bangsamoro Parliament shall enact a
Bangsamoro Tax Code which shall cover the taxing powers of the Bangsamoro
Government. It relates to one of the four pillars of Intergovernmental Fiscal Relations,
the Intergovernmental Transfers.

 Article XII, Section 16: This provides the Bangsamoro the power to levy fees and
charges pursuant to the powers and functions that it shall exercise in accordance with this
Basic Law. It relates to one of the four pillars of Intergovernmental Fiscal Relations, the
Intergovernmental Transfers.

 Article XII, Section 17-23: These sections provides for the annual block grant, formula
of the block grant, automatic appropriation and regular release. These also provide for the
deductions from the block grat and its exceptions. Further, there is a need to review the
Block Grant Formula. These relate to one of the four pillars of Intergovernmental Fiscal
Relations, the Intergovernmental Transfers.

 Article XII, Section 24: This section provides for the power of the Bangsamoro
Government to contract foreign and domestic loans, bills, bonds, notes and obligations. It
 relates to one of the four pillars of Intergovernmental Fiscal Relations, the Subnational
Borrowing.

 Article XII, Sections 37-42: These sections provide for the creation of
Intergovernmental Fiscal Policy Board that shall address revenue imbalances and
fluctuations in regional financial needs and revenue-raising capacity of the Bangsamoro.
These relate to one of the four pillars of Intergovernmental Fiscal Relations, the
Intergovernmental Transfers.

e. DATA ANALYSIS, RESULTS

Table 1 presents a checklist on the compliance of Aquilino Pimentel Jr.’s model of federalism
with the four pillars of Intergovernmental Fiscal Relations

Aquilino Q. Pimentel Jr.’s Functional Tax Inter- Subnational

Model of Federalism or Assignment Borrowing
governmental
Expenditure and Debt
(Fiscal Provisions) Transfers
Assignment Management
 Article VI, New Section:
Powers of the Federal
Congress /
 Article, VI, New Section.
(6): Federal Congress
jurisdiction over the /
taxation.
 Article V, New Section (5):
Powers and Duties of the
State Legislatures /
 Article XII, New Section
(2): New mode or percentage
of the sharing of taxes /
 Article XVIII, New
Section: Creation of a
Federal Equalization Council /
TOTAL NUMBER OF
CHECKS: 2 1 2 -
GRAND TOTAL: 5 CHECKS

Table 2 presents a checklist on the compliance of PDP-Laban’s model of federalism with the
four pillars of Intergovernmental Fiscal Relations

PDP-Laban’s Model of Functional Tax Inter- Subnational

Federalism or Assignment Borrowing
governmental
Expenditure and Debt
(Fiscal Provisions) Transfers
Assignment Management
 Article VI, Section 29:
Federal Assembly shall
evolve a progressive system
/
of taxation.
 Article X, Section 12: Right
of the regional governments
to have a just share in the /
national federal taxes and
revenues
 Article X, Section 13:
Enactment of a
comprehensive regional and / / / /
local government code (shall
also include provisions on
“fiscal equivalence and good
governance”)
 Article X, Section 14:
Equalization Fund of
Regional and Local /
Governments
 Article X, Section 15: 50%
of local shares on the
proceeds of utilization and /
development of national
wealth of regional
governments
 Article X, Sections 16-22:
clearly stated and defined the
exclusive legislative powers /
of the Federal Government
 Article X, Sections 23-27:
clearly stated and defined the
exclusive legislative powers /
of the Regional
Government/s
 Article X, Section 38: Right
of the local governments to
have a just share in the /
national federal taxes and
revenues (take note that the
just share of regional
governments and local
governments in the national
federal taxes are separate.).

TOTAL NUMBER OF
CHECKS: 3 2 5 1
GRAND TOTAL: 11 CHECKS

Table 3 presents a checklist on the compliance of RA 9054 with the four pillars of
Intergovernmental Fiscal Relations

Republic Act no. 9054 Functional Tax Inter- Subnational

or Assignment Borrowing
(Fiscal Provisions) governmental
Expenditure and Debt
Transfers
Assignment Management
 Article IV- Article VIII:
Powers of the Regional
Government, Inter-
/
Governmental Relations,
Legislative Department,
Executive Department and
Administration of Justice.
 Article IX, Section 1: Power
of Regional Government to
create its own sources of
/
revenues and to levy taxes,
fees and charges

 Article IX, Section 2: Right

of Regional Government to
enjoy fiscal autonomy in
/
generating and budgeting its
own sources of revenue, its
share of the internal revenue
taxes and block grants and
 subsidies remitted to it by
the central government or
national government or any
donor.

 Article IX, Section 3:

Regional Assembly may
enact a regional government
/ / / /
tax code. The code is
expected to include
provisions which shall
comply with all the pillars
of Intergovernmental
Fiscal Relations, thus
determining the level of
fiscal federalism.

 Article IX, Section 4:

Regional Government may
formulate its own economic
/
and financial programs,
subject to the provisions of
the Constitution.
 Article IX, Section 5-8:
Rights of Regional
Government to have a
/
uniform and equitable
taxation. These also set the
extent and exceptions of tax
powers, payment of taxes,
and the sources of Regional
Government Revenue.
 Article IX, Section 9:
Percentages of the
distribution of collected
/
revenue taxes, fees, and
charges of the province or
city.

 Article IX, Section 14: This

section states that the
Regional Director may be
/
authorized by the Regional
 Assembly to contract foreign
or domestic loans in
accordance with the
provisions of the
Constitution.
 Article IX, Section 15:
Percentages of the collection
and sharing of Internal
/
Revenue Taxes by the
central and regional
government.

TOTAL NUMBER OF
CHECKS:
2 2 6 2
GRAND TOTAL: 12 CHECKS

Table 4 presents a checklist on the compliance of HB 6475 with the four pillars of
Intergovernmental Fiscal Relations

House Bill no. 6745 Functional Tax Inter- Subnational

or Assignment Borrowing
(Fiscal Provisions) governmental
Expenditure and Debt
Transfers
Assignment Management
 Article V, Sections 1-4:
Powers of the Government
namely; (1) Reserved
/
powers, (2) Concurrent
powers, (3) Exclusive
Powers, and Other Exclusive
Powers.
 Article V, Section 3 (3):
Exclusive power of the
Bangsamoro Government to
contract loans, credits and
other forms of indebtedness
with any government or
private bank and other
lending institutions, except
/
those requiring sovereign
 guaranty, which require
Central Government
approval.
 Article VI, Section 4:
Central Government and the
Bangsamoro Government
shall establish a mechanism
at the highest levels that will
coordinate and harmonize
their relationships. For this
/
purpose, a primary
mechanism shall be a
Central Government –
Bangsamoro Government
Intergovermental Relations
Body to resolve issues on
intergovernmental relations.
 Article VII, Sections 2-4:
Powers of Government,
Legislative Authority and
/
Executive Authory –
Bangsamoro Parliament.
 Article XII, Section 1:
Right of the Bangsamoro to
enjoy the maximum form of
fiscal autonomy with the end
in view of attaining
economic self-sufficiency
and genuine development.
/
Further, it states their right to
all funds sources enumerated
in the Article. It shall also
have the power to create its
sources of revenues.
 Article XII, Section 2:
Creation of Bangsamoro
Commission on Audit. It
shall have the primary
power, authority and duty to
examine, audit and settle all
accounts pertaining to the
revenue and receipts of, and
expenditures or uses of funds
 and property, owned or held
in trust by, or pertaining to
the public funds utilized by
/
the Bangsamoro.
 Article XII, Section 3: The
creation of Bureau of Local
Government Finance under
the Ministry of Finance, a
mechanism for coordinating,
assisting, and monitoring the
finances of the constituent
/
local government units in
pursuance of good
governance and local
autonomy.
 Article XII, Sections 4-5:
Assistance of Central
Government to Bangsamoro
/
Government in the matter of
tax administration, fiscal
management and
development efforts.

 Article XII, Sections 6-10:

Power of Bangsamoro
Government the power to
/
create its own sources of
revenues, tax incentives and
taxing powers.
 Article XII, Section 11-13:
Percentages of share in taxes
of the Central Government,
/
assessment and collection of
taxes and payment of taxes
by corporations, partnerships
or firms.
 Article XII, Section 14:
This provides the percentage
of shares of the Constituent
/
Local Government Unites in
Taxes within Bangsamoro.
 Article XII, Section 15:
Bangsamoro Parliament
shall enact a Bangsamoro
/
Tax Code which shall cover
the taxing powers of the
Bangsamoro Government.
 Article XII, Section 16:
This provides the
Bangsamoro the power to
/
levy fees and charges
pursuant to the powers and
functions that it shall
exercise in accordance with
this Basic Law.
 Article XII, Section 17-23:
Annual block grant, formula
of the block grant, automatic
/
appropriation and regular
release. These also provide
for the deductions from the
block grat and its exceptions.
Further, there is a need to
review the Block Grant
Formula.
 Article XII, Section 24:
This section provides for the
power of the Bangsamoro
/
Government to contract
foreign and domestic loans,
bills, bonds, notes and
obligations.
 Article XII, Sections 37-42:
Creation of
Intergovernmental Fiscal
/
Policy Board that shall
address revenue imbalances
and fluctuations in regional
financial needs and revenue-
raising capacity of the
Bangsamoro.
 TOTAL NUMBER OF
CHECKS:
2 1 11 2
GRAND TOTAL: 16 CHECKS

Using the tables, it can be inferred that as to the quantity of provisions complying with the 4
pillars of intergovernmental fiscal relations, the one that garnered the most number of checks is
the House Bill no. 6475 – 16 checks compared to Aquilino Pimentel Jr.’s Model – 5 checks,
PDP-Laban – 11 checks and RA 9054 – 12 checks.

As to the quality of the provisions complying with the 4 pillars of intergovernmental fiscal
relations, the House Bill no. 6475 is still the one that gives more compliance because of the
following observations based on the analysis of the fiscal provisions:

(1) The Pimentel’s Model lack of provisions that shall present specific implementing rules and
regulations. Unlike in the HB 6475, it presents a separate article exclusive for the Fiscal
Autonomy that was able to bind all the necessary guidelines for Bangsamoro Government Fiscal
Administration.

(2) The Pimentel’s Model complied with the 3 pillars of intergovernmental fiscal relations.
However, it failed to comply with the Subnational Borrowing as there are no provisions created
for the guidelines in domestic loans, bills, bonds, notes and obligations. Unlike in HB 6475, it
has 2 provisions regarding subnational borrowing.

(3) The PDP Laban’s Model presents only a set of general provisions without enough specific
guidelines, and implementing rules and regulations unlike in the HB 6475. For example, in
Article VI, Section 29, it only provides for the mandate of Federal Assembly to evolve a
progressive system of taxation, but it does not exist with necessary subsections providing for its
implementing guidelines.

(4) Both models of federalism have 2 provisions/ sections stating the Functional/ Expenditure
Assignments of both the federal government and the state (in the case of Aquilino Pimentel Jr.’s
model) or regional (in the case of PDP-Laban’s model) governments. However, both also did not
specify the powers the federal government and the state/ regional governments deemed as
“shared”. This, in turn, could lead to the consequence of overlapping of functions which should
cause the ‘unnecessary’ spending of the limited revenues.

(5) The RA 9054 does not present provisions for creation of financial institutions or commissions
that shall provide assistance to the Regional Government. It only states in Article IX, Section 4
that the Regional Government may formulate its own economic and financial programs subject
to the provision of the Constitutions. Unlike in HB 6475, it is clearly provided in Article XII,
Section 3, the creation of Bureau of Local Government Finance under the Ministry of Finance, a
mechanism for coordinating, assisting, and monitoring the finances of the constituent local
government units in pursuance of good governance and local autonomy. Likewise in Article XII,
Section 2, the creation of Bangsamoro Commission on Audit. It shall have the primary power,
authority and duty to examine, audit and settle all accounts pertaining to the revenue.

V. CONCLUSION

Based on the data analysis and results, it was clear that the HB 6475 gives more
compliance to the 4 pillars of intergovernmental fiscal relations. Further, it shall also be
accounted that it is the one that offers a well-crafted and greater fiscal autonomy than the
2 models and RA 9054.

VI. BIBLIOGRAPHY

Blöchliger, Hansjörg and Junghun Kim, eds. 2016. Fiscal Federalism 2016: Making
Decentralization Work. Paris: OECD Publishing.

Boadway, Robin. 2007. “Grants in a Federal Economy: A Conceptual Perspective,” in

Boadway, Robin and Anwar Shah, eds. 2007. Intergovernmental Fiscal Transfers: Principles and
Practice. Washington, DC: World Bank.

Boadway, Robin and Anwar Shah, 2009. Fiscal Federalism: Principles and Concepts of Multi-
order Governance. Cambridge: Cambridge University Press.

Ivanyna, Maksym and Anwar Shah. 2010. “Decentralization (Localization) and Corruption:
New CrossCountry Evidence,” Policy Research Working Paper Series 5299. Washington, DC:
World Bank.

Martinez-Vazquez, Jorge, Charles McLure, and Francois Vaillancourt. 2006. “Revenues and
Expenditures in an Intergovernmental Framework,” in Bird, Richard and François Vaillancourt,
eds., 2006. Perspectives on Fiscal Federalism. Washington, DC: World Bank.

Oates, Wallace. 1972. Fiscal Federalism. New York: Harcourt Brace Jovanovich.

Olson, Mancur Jr., 1969. “The Principle of Fiscal Equivalence: The Division of Responsibilities
among Different Levels of Government,” American Economic Review, Vol.59, No. 2, pp. 479-
487.

Ministry of Finance and Economic Development. (2004). A New Approach to the Distribution of
Federal Budget Grant to the Regional State, MoFED: Addis Ababa.