PDP-Laban and

Pimentel Jr.’s Model

of Federalism, RA
9054, and HB 6475:

An Assessment on its
Application of Fiscal
Federalism

Daryl Mae S. Cruz

INTRODUCTION
• The Philippines has long been exercising a unitary
form of government.
• Spaniards’ supreme authority was made to focus on
Manila.
• Americans’ introduced a number of policies
recognizing local autonomy.
• Local Government Code of 1991 increased the powers
and functions of local governments
 “Local government units shall have a just share, as
determined by law, in the national taxes which shall
be automatically released to them.”

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.

(Manasan, 2017)
THE THEORY OF FISCAL FEDERALISM

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.

(King 1984) originally developed by Musgrave (1959) and Oates (1972)

THE FOUR (4) PILLARS OF
INTERGOVERNMENTAL FISCAL RELATIONS
(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

(4) Subnational Borrowing and Debt Management - the

question on what rules should be put in place with
respect to subnational borrowing to ensure the fiscal
sustainability of the government as a whole
OBJECTIVES AND LIMITATION OF THE STUDY
(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.
(4) 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.
The assessment shall be based on the compliance
with the 4 pillars that are guided by the Theory of
Fiscal Federalism.

The 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).
AQUILINO “NENE” Q. PIMENTEL’S MODEL
• Presidential Federal Government with stricter
educational qualifications for the President and Vice
president
• 12 Federal States and a Federal government
• Federal Congress would still have two Houses
• 80% of the national government revenues are
allocated to the Federal States, and 20% to the
Federal Government.
FUNCTIONAL OR EXPENDITURE ASSIGNMENT
Article X, New Section (6). State Legislatures - Powers
and Duties.

The State Legislatures shall have the exclusive

jurisdiction to enact laws relative to:

5. Taxes and duties - except those that are reserved to

the Federal 25 Congress - all kinds of agricultural
income, businesses of all types, the 26 generation,
consumption and distribution of electricity, oil, gas and
other 27 energy products, luxuries, entertainments and
amusements.
TAX ASSIGNMENT
Article VI, New Section (6). Powers of the Federal
Congress

In addition to the powers enumerated hereunder, the

Federal Congress shall continue to exercise the powers
vested upon the Senate and House of Representatives
by the Constitution excepting those powers that are
reserved to the States or the people.
The Federal Congress shall have exclusive jurisdiction
over:

6. The federal currency, fiscal and monetary system,

taxation, budget and audit
INTERGOVERNMENTAL TRANSFERS
Article XII, New Section (2). Sharing of Taxes

The sharing of taxes between the National government

units as stated in the Local Government No.7160, is
hereby revised as follows:

2. All revenues and taxes collected by the local

government units or by national government agencies
in accordance with the Local Government Code of
1991, Republic Act No. 7160, shall be divided in the
following manner: twenty percent (20%) shall accrue
to the Federal Government and eighty percent (80%)
to the States.
PDP-LABAN’S MODEL
• Semi-presidential Federal System of Government
• 11 Regional Governments and a Federal Government
• Retain the bicameral 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.
FUNCTIONAL OR EXPENDITURE ASSIGNMENT
Article X, Section 26. Each region shall have exclusive
legislative powers applicable within the territorial
jurisdiction of the region over the following:
1. Create its own sources of regional revenues and to
levy taxes, fees and charges subject to the limits of this
constitution and consistent with the basic policy of
regional autonomy. Such taxes, fees, and charges shall
accrue exclusively to the region, provided that regional
legislation shall not diminish the federal revenue
collection and the revenue measure shall be uniform,
equitable, and progressive.
TAX ASSIGNMENT
Article VI, Section 29 (1).

1. The rule of taxation shall be uniform and equitable.

The FEDERAL ASSEMBLY shall evolve a progressive
system of taxation.
INTERGOVERNMENTAL TRANSFERS
Article X, Section 12 (1).

1. The regional government shall have a just share, as

determined by federal law, in the national federal
taxes and revenues which shall be automatically
released to them provided that the share of regional
governments shall not be less than 60 percent (60%)
of all national taxes and revenues.
SUBNATIONAL BORROWING
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 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.
REPUBLIC ACT NO. 9054
• 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.
FUNCTIONAL OR EXPENDITURE ASSIGNMENT
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.
TAX ASSIGNMENT
Article IX, Section 1. Revenue Source.

The regional government shall have the power to create

its own sources of revenues and to levy taxes, fees and
charges, subject to the provisions of the Constitution and
this Organic Act.
INTERGOVERNMENTAL TRANSFERS
Article IX, Section 4. Regional Economic and Financial
Programs.

The regional government may formulate its own

economic and financial programs, subject to the
provisions of the Constitution.
SUBNATIONAL BORROWING
Article IX, Section 14.

The Regional Governor may be authorized by the

Regional Assembly to contract foreign or domestic loans
in accordance with the provisions of the Constitution.
The loans so contracted may take effect upon approval
by a majority of all the members of the Regional
Assembly.
HOUSE BILL NO. 6475
• Basic Law for the Bangsamoro (BBL) and abolish the
Autonomous Region in Muslim Mindanao (ARMM)
• Bangsamoro territory shall remain a part of the Philippines.
• It retains the central government’s power and control over
defense and external security.
• 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.
FUNCTIONAL OR EXPENDITURE ASSIGNMENT
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.

TAX ASSIGNMENT
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.
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.
SUBNATIONAL BORROWING
Article V, Section 3 (3). Exclusive Powers

3. 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.
DATA ANALYSIS, RESULTS
PIMENTEL JR.’S MODEL
Total of checks on compliance:
• Functional or Expenditure Assignment = 2
• Tax Assignment = 1
• Intergovernmental Transfers = 2
• Subnational borrowing = 0

Grand total: 5 CHECKS ON COMPLIANCE

PDP LABAN’S MODEL

Total of checks on compliance:

• Functional or Expenditure Assignment = 3
• Tax Assignment = 2
• Intergovernmental Transfers = 5
• Subnational borrowing = 1

Grand total: 11 CHECKS ON COMPLIANCE

REPUBLIC ACT NO. 9054

Total of checks on compliance:

• Functional or Expenditure Assignment = 2
• Tax Assignment = 2
• Intergovernmental Transfers = 6
• Subnational borrowing = 2

Grand total: 12 CHECKS ON COMPLIANCE

HOUSE BILL NO. 6475

Total of checks on compliance:

• Functional or Expenditure Assignment = 2
• Tax Assignment = 1
• Intergovernmental Transfers = 11
• Subnational borrowing = 2

Grand total: 16 CHECKS ON COMPLIANCE

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

As to the quality of the provisions, 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 has provisions creation of

Financial Institutions. (Article XII, Section 3, the
creation of Bureau of Local Government Finance and
Article XII, Section 2, the creation of Bangsamoro
Commission on Audit.)
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.
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.