WebClick Tracer

RIVERMAN’S VISTA: The Revenue Generation and Wealth Sharing Annex: Constitutional Issues

 QUEZON CITY (MindaNews/21 July) — After initial setbacks, the Government of the Philippines (GPH) and the Moro Islamic Liberation Front (MILF) have finally agreed on the arrangement on Revenue Generation and Wealth Sharing. In formulating the Annex the parties took cognizance of the parameters set by existing laws, e.g., the 1987 Constitution and the Local Government Code of 1991.

Specifically, it takes into account section 18 of Republic Act 7160 also known as the Local Government Code of 1991 on Power to Generate and Apply Resources which mandates “…a just share in national taxes which shall be automatically and directly released to them without need of any further action; to have an equitable share in the proceeds from the utilization and development of the national wealth and resources within their respective territorial jurisdictions including sharing the same with the inhabitants by way of direct benefits…”

This is also in keeping with Sec. 7, Art. 3 of the 1987 Constitution on Declarations of Principles and State Policies which provides“…an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas, in the manner provided by law…”

In line with the above provisions of law, the parties set the following taxation principles namely: devolution of powers, equalization, equity, accountability, administrative simplicity, harmonization, economic efficiency and fiscal autonomy. A reading of the Annex will show a preferential treatment to the Bangsamoro vis-a-vis the national government in the sharing of revenues and creates a larger revenue base than its predecessor, the Autonomous Region in Muslim Mindanao (ARMM) giving it powers already devolved to the ARMM.

Recognizing that revenue generation is very important in the operation of the Bangsamoro, the parties agreed on the following revenue and wealth sharing arrangements described below.

Revenue generation

On taxes. All taxes levied on capital gains tax, documentary stamp tax, donor’s tax, and estate tax shall pertain entirely to the Bangsamoro. For other taxes, fees and charges collected by the Central Government within the Bangsamoro, excluding tariff and customs duties, the sharing is 75%-25% in favor of the Bangsamoro and its constituent local government units. In addition, all the taxing and revenue generation powers already granted to the ARMM under R.A. No. 9054 and other earlier laws shall be transferred to the Bangsamoro.

Compare this with those granted to LGUs by the Local government Code which only includes real property taxes, business taxes and other non-tax revenues; of course other than the IRA and other external revenues. While the Annex does not grant the Bangsamoro power to collect income tax, taxes however from capital gains tax, documentary stamp tax, donor’s tax and estate tax within the Bangsamoro will accrue entirely to the Bangsamoro.

While the Annex clearly grants additional share and powers to the Bangsamoro, from the constitutional perspective this is justified by the overall concept of regional autonomy granted to Muslim Mindanao. There is nothing in the Constitution which prevents Congress from granting such share and powers.

On minerals, oil and gas

On natural resources. Government income derived from the exploration, development and utilization of natural resources within the Bangsamoro shall be allocated in the following manner:

For non-metallic minerals (sand, gravel, and quarry resources), 100% of the revenues shall pertain to the Bangsamoro while for metallic minerals, the sharing is 75%-25% in favour of the Bangsamoro. However, there shall be equal (50%-50%) sharing for fossil fuels (oil, natural gas, coal) and uranium.

At present the sharing arrangement in the ARMM is 70-30 in its favour except for strategic minerals which is 50-50. However while the ARMM law provides for the sharing arrangement on taxes imposed on natural resources (here the all-inclusive term “natural resources” should be understood to all land and water natural wealth including forestry, aquatic and land resources), there seems to be no counterpart provision in the Annex which specifies only the sharing of non-metallic and metallic resources. Does this mean that the Bangsamoro shall exercise taxing power already vested in the ARMM insofar as aquatic, forestry and land resources are concerned? After all, there is already a catch-all provision in the Annex which states that “All taxing powers already devolved to the ARMM by R.A. No. 9054 and other legislations shall be exercised by the Bangsamoro.”

Under the Local Government Code, LGUs are given an equitable share in the proceeds derived from the utilization and development areas at 40% of the gross collection derived by the national government from the preceding year from mining taxes, royalties, forestry, and fishery charges in addition to the internal revenue allotment.

The 75%-25% sharing arrangement is decidedly favourable to the Bangsamoro insofar as metallic minerals are concerned. However with respect to strategic resources such as oil and natural gas the Aceh peace accord grants the Acehnese a much higher share at 70% than the 50% for the Bangsamoro.

Fund transfers

As regards, fund transfers from the national government the Annex speaks of 1) block grants and 2) the special development fund.  The annual block grants constitute the annual financial assistance to be extended by the Central Government to the Bangsamoro Government for its operation. Noteworthy, revenues from the additional taxes beyond those already devolved to the ARMM and the Bangsamoro share in revenues derived from exploration, development, and utilization of natural resources will be deducted from the amount comprising the annual block grant. This is without prejudice to the just share of the Bangsamoro’s constituent local government units in the national taxes.

As in the case of the ARMM, block grant or government subsidy is likewise given to the Bangsamoro, the formula to be defined by the Bangsamoro Basic Law but in no case less than the last budget received by ARMM immediately before the establishment of the Bansamoro Transitional authority. The block grant is similar to the Internal Revenue Allotment automatically appropriated to the LGUs which typically averages around 90% of the total budget of the municipalities and ranges from 50% to 70% of cities’ total annual budget. Sadly, most LGUs fail to maximize their taxation powers and have to rely on the IRA to finance their operations and activities. With a broader tax base and higher share in the utilization of natural wealth, it is hoped that the Bangsamoro does not fall into the same fiscal trap and be able to generate income independent from the national government.

There is also the Special Development Fund coming from the national government transferred to the Bangsamoro for the purpose of rehabilitation and development of the territory. The amount shall be proposed by the Transition Committee.

Constitutional issues

One critical question is the provision on automatic appropriation for the budget of the Bangsamoro. For sure, this will be a contentious issue in Congress for both political (Congress is jealous of its power of the purse) and constitutional reasons (the provisions on the natonal budget). To implement this agreed provision, the Transition Commission and Congress must be cautious and draft the pertinent sections of the organic law in a manner that makes it immune from constitutional challenge.

Another question may be asked: Does the Annex violate the regalian doctrine as enunciated in sec. 2 Art. XII (National Economy and Patrimony) mandating that natural resources are owned by the State and with the exception of agricultural lands, all other natural resources shall not be alienated. Moreover, it provides that the exploration, development, and utilization of natural resources shall be under the full control and supervision of the State?  Simply stated, does the Annex provide for the full abdication by the State of its sovereign right to own and control the natural resources in favor of the Bangsamoro?

The answer hinges on a final determination by the High Court on the constitutionality of the Bangsamoro should a petition on this issue be raised before it; unless of course, Congress deems it fit to adjust the Constitution to conform to the agreement. To refresh us on the Bangsamoro constitutional debate – some believe that the Bangsamoro political entity is within the parameters or within the flexibilities of the existing Constitution; while others are of the contrary opinion that the agreement will not pass constitutional muster particularly because it creates a political entity not found in the basic charter. To the latter the Constitution does not provide for an asymmetrical relationship nor does it contemplate another autonomous region other than Cordillera and Muslim Mindanao. Should there be a judicial determination that the Bangsamoro is still part and parcel of the State, then of course, the necessary implication is that the grant under the Annex is not an abdication by the State’s right to own and control the natural resources found therein. If however the Bangsamoro shares the same fate as the Memorandum of Agreement on Ancestral Domain (MOA-AD) and subsequently found to be a new independent and separate political creature not within the ambit of the present constitution, then the Annex will be seen as an usurpation by the Bangsamoro of the ownership rights of the State.

Nonetheless, it is futile at this point to jump the gun on the High Court on whether it will sustain or not the legality of Bangsamoro. Neither is there a need to speculate on whether or not Congress will deem it fit to amend the Constitution to accommodate the Bangsamoro agreement.

Still on natural resources, one interesting observation that have been made about the Annex is that it is silent on the other, arguably more important natural resurces – land, forests, fisheries and wildlife. This is imprtant because there is already revenue from the utilization of those resources waiting to be shared while revenue from minerals, oil and gas are merely potential and theoretical at this stage.  Is this gap because of unresolved issues related to the regalian doctrine? I am not privy to the negotiations and will not speculate on the reasons except to say that at some point this has to be resolved. Perhaps, the right time would be when the parties negotiate the power-sharing agreement. For all its worth, my expert opinion is that the regalian doctrine is inapplicable to the lands and resources covered by the Bangsamoro being owned since time immemorial by the Bangsamoro people and indigenous peoples within that territory.

This constitutional issues aside, the Revenue and Wealth Sharing Annex is still a critical step towards achieving peace. The origin of many conflicts around the world is the issue on the allocation of control over natural resources management. If we may recall, the starting point for the conflict between The Free Aceh Movement (GAM) and the Indonesian government was the discovery of natural resources. The conflict was resolved only after the Indonesian government agreed to the 70-30 sharing arrangement. With a mutually acceptable agreement on how to share wealth and revenue, both the GPH and MILF have surmounted another difficult obstacle although there are still foreseen and unforeseen obstacles ahead. Because it’s a long road ahead, best to keep our fingers crossed and take one step at a time. (MindaViews is the opinion section of MindaNews. Dean Tony La Viña is a human rights and environmental lawyer from Cagayan de Oro City. He was a member of the Government of the Philippines Peace Panel that negotiated with the MILF from January-June 2010. He is currently the Dean of the Ateneo School of Government. Dean Tony can be reached at Tonylavs@gmail.com. Follow him on Facebook: tlavina@yahoo.com and on Twitter: tonylavs.)

Your perspective matters! Leave a comment below and let us know what you think. We welcome diverse viewpoints and encourage respectful discussions. Don't hesitate to share your ideas or engage with others.

Search MindaNews

Share this MindaNews story
[custom_social_share]
Send us Feedback