Philippine (Metro Manila) Case Study on Municipal Finance

Transcription

1 Philippine (Metro Manila) Case Study on Municipal Finance NOV. 8, 2018 JUSTINE DIOKNO-SICAT, PHD ASSISTANT PROFESSOR UNIVERSITY OF THE PHILIPPINES (DILIMAN)

2 Research Question and Objective How does decentralization manifest in current fiscal performance and revenue mobilization of Philippine local governments? To understand how public financing, i.e. revenue mobilization, is carried out in Metropolitan Manila or the National Capital Region Metro Manila has 16 cities and 1 municipality which are all independent but also members of the Metro Manila Development Authority This case study will present the institutional arrangements and public financial management, governance and revenue mobilization aspects of the Philippines and Metro Manila. 2

3 OUTLINE Philippine Decentralization Metro Manila (National Capital Region) Profile Fiscal Statistics Metropolitan Manila Development Authority Mandate and Structure Fiscal Statistics 3

4 Philippine Local Government Structure National Government Local Government Units (18 Regions) Provinces (81) Cities (145) Municipalities (1,489) Barangays (42,045) 5

5 General Sources of Local Government Unit (LGU) Income, Average, In Percent LOCAL SOURCES EXTERNAL SOURCES

6 Sources of LGU Income: Local Source Revenues Tax Revenues Real Property Tax: on assessed value of real property 1% for provinces, 2% for LGUs in Metro Manila Special Education Fund Idle Lands Non-Tax Revenues Business Tax Location of the taxable business transaction Metro Manila LGUs can charge tax rates up to 50% higher Income from Economic Enterprises Service and User Fees 7

7 Sources of LGU Income: External Sources Intergovernmental fiscal transfers Share in proceeds from national wealth Share in the proceeds of Government Owned and Controlled Corporations (GOCCs) from the national wealth 13

8 Expenditures, Overall Fiscal behavior and Debt Local chief executives are mandated to draft a budget that would, at least, deliver devolved basic goods and services. Hard budget constraint: the aggregate amount appropriated shall not exceed the estimates of income LGUs may engage in debt financing up to 20 percent of income 15

9 Devolved Basic Services and Facilities of Philippine LGUs under LGC Sector Social Services Economic Services Other Services School building program Services Field health and hospital services and other tertiary health services Social welfare services such as programs and projects on rebel returnees and evacuees; relief operations and population development services Housing projects for provinces and cities such as low-cost housing and other mass dwellings Agricultural extension and On-site research Community based forestry projects Tourism facilities and tourism promotion and development Public works and infrastructure projects funded out of local funds Telecommunication services for provinces and cities Investment support and Industrial research and development 16

10 Philippines: Distribution of LGU Income, (average) Real Property Tax 10% Tax on Business 12% Other Taxes 1% Regulatory Fees (Permit and Licenses) 2% EXTERNAL SOURCES 67% Service/User Charges (Service Income) 2% Other Receipts (Other General Income) 2% Income from Economic Enterprises (Business Income) 4% 20

11 Metro Manila: Sources of LGU Income, (average) Regulatory Fees 5% External Sources 22% Business Income 3% RPT 24% Other Receipts (Other General Income) 3% Other Taxes 3% User Charges 2% Share of National Taxes 1% Business Tax 37% 21

12 Non-Income Receipts for Metro Manila LGUs, Metro Manila LGUs borrow but not much, averaging only 2.6% of LGU Income and Non-Income receipts TOTAL CAPITAL/ INVESTMENT RECEIPTS RECEIPTS FROM LOANS AND BORROWINGS Acquisition of Loans Issuance of Bonds 23

13 Comparison of Metro Manila LGUs to National Government Indicators Revenues Proportion of MM to Total LGU Income Proportion of NCR BIR Collection to Total BIR * Collection Proportion of Total MM LGU income to GDP Proportion of Total LGU income to GDP MEMO ITEMS: (all figures are in Philippine Pesos, PhP) MM = Metro Manila; NCR = National Capital Region where MM is; BIR = Bureau of Internal Revenue 25

14 Comparison of Metro Manila LGUs to National Government Indicators Expenditures Proportion of MM LGU to total LGU Expenditures Proportion of MM LGU to NG Expenditures Proportion of MM LGU Expenditures to GDP Proportion of LGU Expenditures to GDP MEMO ITEMS: (all figures are in Philippine Pesos, PhP) MM = Metro Manila; NCR = National Capital Region where MM is; BIR = Bureau of Internal Revenue 26

15 Metro Manila Development Authority: Mandate The Metropolitan Manila Development Authority (MMDA) is tasked to coordinate development plans and policies and capture externalities across the individual member LGUs. It has authority over certain basic services affecting or involving Metro Manila as metro-wide services more efficiently and effectively planned, supervised and coordinated by a development authority as created therein, without prejudice to the autonomy of the affected local government units. To implement their mandate, the MMDA has three sources of funds: (1) intergovernmental fiscal transfers from the national government; (2) contributions of member LGUs; and, (3) fines and levies. In 2017, they spent the most on traffic and transport management and waste disposal. 29

16 MMDA Expenditures by Source of Funds (in percent), FY 2017 Fines & Fees 3% IRA 13% 5% LGU contributions 84% 33

17 Preliminary Findings Real property taxes could play a larger role in local government revenues. Metro Manila has the advantage of a larger tax base (in terms of businesses and real property values) and higher tax rates. One of the issues is that some businesses, with operations outside of Metro Manila, benefit from goods and services provided in these locations but still pay taxes in Metro Manila. Infrastructure is another reason why businesses, residences and commerce are in Metro Manila, policy should be directed towards efforts of improving communications and telecommunications infrastructure as well as transportation infrastructure. 35

18 Thank you 36