The Philippines shifting from a parliamentary to a federal form of government could result in poor tax collection, endangering federal states so created in the process, according to an American aid expert.
Bill Gardner of the US Agency for International Development (USAID) spoke on Friday at a forum organized by the Local Government Development Foundation that tackled prospects of the country becoming a federal government as espoused by the Duterte administration.
Gardner, for one, cited the Philippine government being able to collect only 40 to 60 percent of taxes that it is supposed to scoop up, according to the World Bank.
The poor performance, he said, should prompt the government to first evaluate the existing regions’ potential to collect taxes before making the big move to federalism.
“Creating competition among states [regions]is a good thing but people have to believe that they are getting what they want. If we rush into something, we will be at the risk of creating more problems on the revenue side.
That’s not going to help anyone,” Gardner pointed out.
The Duterte administration is envisioning a Philippines divided into 12 independent states or regions each with the authority to manage its resources and craft its laws, including taxation.
Congress is planning to change the Constitution for the shift to federalism by January 2017.
“Don’t change for the sake of change because it isn’t worth it. It should be a change to achieve something. For one, you don’t want to make things more difficult for taxpayers. You don’t want to be spending the same amount of money for the same things,” Gardner said.
He pitched the centralization of tax laws.
“Don’t make [the tax laws]more complicated than [they]should. The taxpayers deserve a break. You need to assemble the data first… a tremendous amount of data, for that matter. This could take forever,” Gardner said.
“Everybody likes the shift of policy-making to the local level of government. But would the LGUs [local government units]be ready to administer the local tax laws, especially collecting the corporate taxes? That would be extremely difficult to do in a short period of time. You need to develop a capacity to do that,” he added.
Senate President Aquilino Pimentel 3rd earlier proposed a P100-billion equalization fund sourced from both the federal government and the wealthy states as a starter fund for the shift to federalism.