Speech of Sen. Koko Pimentel before the Conference of the Visayas Island Cluster of the League of Municipalities of the Philippines (LMP)
With the Theme: "Chasing Destiny: Establishing the Visayas Economic
and Tourism Growth Quadrangle" Oxford Hotel Convention Hall

Maayong buntag kaninyong tanan. Good morning to all of you.

I heard that my father, former Senate President Nene Pimentel, was also invited to speak before your cluster. Unfortunately, he could not make it, which, in a way, is favorable to me. When you leave this room and you will have - hopefully - good words about Senator Pimentel, then it's clear to whom - which Senator Pimentel - you are referring to.

Both Tatay Nene and I really do appreciate your kind invitation. Your theme: "Chasing Destiny: Establishing the Visayas Economic and Tourism Growth Quadrangle" is pro-active and dramatic.

By stating this as a goal, you are not just chasing destiny; you are shaping it. As William Shakespeare once wrote: "It is not in the stars to hold our destiny, but in ourselves." Congratulations to the mayors of the Visayas Island Cluster for setting such a clear and lofty goal for your region!

I admire your determination to achieve economic self-reliance and I completely understand your plan to achieve this by tapping your region's strengths in tourism and trade and commerce.

Of course, you are confronted with this fundamental question: How can you obtain the funds needed to achieve the VisGrow dream? Wala ng DAP. Wala ng PDAF.

Is your Internal Revenue Allotment (IRA) enough? Recent tragedies tell us that no, it's not enough because there are so many complex challenges that didn't even exist a few years ago.

Typhoon Yolanda taught us in the most tragic way imaginable how insufficient our resources are when natural disaster strikes. All it took was a single storm surge to wipe out what took decades to build. All the experts are saying that such effects of climate change comprise the "new normal" - so disaster risk reduction should already be a factor when we source, use, and manage our funds.

Next year, the ASEAN Economic Integration begins. Some sectors in your municipalities may or may not be able to compete, with their counterparts in Singapore, Thailand, Malaysia, and the rest of our neighbors. Some of them will look up to you, as local leaders, for credit support, safety nets, and livelihood opportunities including immediate economic relief.

Given the enormous and continuously expanding role of local governments, you will need a bigger budget. The Constitution itself is very clear - you are entitled to a fair share in government revenues.

Our Constitution in Article X, Section 6, provides that "Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them."

The Local Government Code of 1991, authored by former Senate President Nene Pimentel, in Sec. 284 provides that the Local Government Units shall have a share in the "national internal revenue taxes". But, I have observed that the Constitution states very clearly that the sharing should be based on "national taxes."

The constitutional phrase "national taxes" was limited to "national internal revenue taxes" in the Local Government Code of 1991 as a result of compromise, the give-and-take in the law-making process. Without that compromise, however, we would not have the Local Government Code of 1991, and without that Code, we would not have the progress that we are seeing all around us, outside of "imperial Manila".

My position is for us to optimize the full meaning of the constitutional phrase "national taxes" and no longer limit this to "national internal revenue taxes". Why settle for less when the Constitution clearly mandates our LGUs to have more?

If the use of the term "national internal revenue taxes" in the LGC is constitutional, then changing this to "national taxes" is all the more constitutional, meaning more compliant with the Constitution, because "national taxes" is the phrase itself used in the Constitution.

Hence, my proposal, the "Bigger Pie, Bigger Slice Bill".

It must be emphasized here that the right of LGUs to receive their rightful share of the "national taxes", is a right that accrues to local government units owing to the additional responsibilities that they bear under the Constitution and does not flow from and should not be dependent on the generosity of the national government.

This was recognized by the Supreme Court in the case of Alvarez v. Guingona, Jr., [G.R. No. 118303, January 31, 1996, 252 SCRA 695] when it stated that:

"The practical side to development through a decentralized local government system certainly concerns the matter of financial resources. With its broadened powers and increased responsibilities, a local government unit must now operate on a much wider scale. More extensive operations, in turn, entail more expenses. Understandably, the vesting of duty, responsibility and accountability in every local government unit is accompanied with a provision for reasonably adequate resources to discharge its powers and effectively carry out its functions." The IRA, through the Local Government Code, has capacitated the LGUs to pursue their development objectives with the grant of greater financial muscle.

A study noted that the IRA has accounted for at least 56% of the total LGU revenues, and that in lower income municipalities, the IRA has contributed from a low of 65% to a high of 90% of the total LGU revenues. Totoo ba ito? Itaas ang inyong kamay kung malaki ang tulong ng IRA sa inyo.

But, I now propose that we abolish the IRA. That's right! Alisin na natin ang IRA! Now na! Pero huwag kayong kabahan.

With your help, we will replace this with the "SNT" or the "Share in the National Taxes". From I-R-A to S-N-T!

The Bigger Pie, Bigger Slice Bill or Senate Bill 2045 aims to amend Section 284 of the Local Government Code (Republic Act No. 7160) in two ways: first, by expanding the tax base from where the sharing is made between the National and Local Governments; and second, by giving LGUs a bigger share or slice of the expanded tax base.

Bigger Pie

Why "Bigger Pie"?

At present, LGUs only get their IRA, as their share from the taxes collected by the Bureau of Internal Revenue (BIR). Hindi kasama ang kita ng gobyerno mula sa Bureau of Customs sa pinaghahatian ng LGUs at national government.

Under my proposal, the "Bigger Pie, Bigger Slice Bill", I have expressly stated in Section 2 of Senate Bill No. 2045 that "National Taxes shall refer to and include the national internal revenue taxes collected by the Bureau of Internal Revenue, and the tariffs, duties, fees, and charges, as well as the national internal revenue taxes, if any, collected by the Bureau of Customs". And I have also made it unmistakably clear that "National Internal Revenue Tax" shall include the value-added tax.

Our bill is flexible. In the future, we can expand the scope of the term "National Taxes" by simply amending Section 2 and possibly adding the "collections, fees, revenues, and other inflows" coming from other agencies like the Department of Environment and Natural Resources, the Department of Foreign Affairs, the Philippine Ports Authority, among others.

This is the BIGGER PIE portion of our proposed bill. Essentially, we are increasing the size of the pie to be divided between the National Government and the Local Governments Units.

Bigger Slice

Let us move on to the BIGGER SLICE portion of our proposal. At present, the National Government gets 60% of the "national internal revenue taxes" collected while the LGUs get 40%.

Our proposed bill seeks to equalize the division of the "national taxes" collected, 50-50, or simply put, hating kapatid!

Section 1 of Senate Bill No. 2045 states that: "xxx local government units shall have a fifty percent (50%) share in the national taxes ("SNT") xxx".

Kung baga sa isang pizza pie - yung dating regular size na pizza, ginawa nating family-size, para mas pabor sa LGUs; tapos ang hatian na dati ay anim na hiwa kay national government tapos apat lang na slice para sa LGUs, ipapantay naman natin para 50-50 sharing. Ngayon yung family-size na pizza na yan ay maaari pang maging party-size, kung higit pang lumaki at dumami ang pananagutan at obligasyon ng mga LGUs sa hinaharap.

In essence, this is our BIGGER PIE, BIGGER SLICE BILL.

The Benefits

Under our Bill, the IRA for 2014 of over P341 Billion will increase to over P600 Billion in 2015 but no longer as IRA but as SNT.

The increase is made possible by (1) increased BIR collections from which the LGUs, under our bill, will be allotted 50%, and (2) the inclusion in the computation of the roughly P290 Billion that the Bureau of Customs is expected to collect, from which the LGUs, under our bill, will also be allotted 50%.

Using conservative estimates, our Bigger Pie, Bigger Slice Bill would translate to P120 Billion SNT for Barangays in 2015, up from P68.309 Billion IRA in 2014; P204 Billion SNT for Municipalities in 2015, up from P116.125 Billion IRA in 2014; P138 Billion SNT for Cities in 2015, up from P78.555 Billion IRA in 2014; and P138 Billion SNT for Provinces in 2015, up from P78.555 Billion IRA in 2014.

Can you just imagine how much the SNT per LGU can reach in 2016 and beyond? The passage of Senate Bill No. 2045 means the realization of your plans and programs not just for your localities but also for a prosperous Visayas and the rest of the Philippines!

Good Governance Challenge

These substantial increases in funding will result in more resiliently-constructed schools with better trained teachers, modern health care services and professionally run local hospitals and even health centers, and more sustainable livelihood projects and job opportunities for our people, so that they need not go to war-torn countries like Libya, Syria, and Iraq.

But, let us be honest - corruption remains one of the biggest obstacles to national progress and development. Kalaban ng Bigger Pie, Bigger Slice ang korapsyon na siyang sumisira sa tiwala ng tao sa ating pamahalaan.

If we are to empower our LGUs financially, we also must make sure that there are sufficient safeguards against fiscal abuses like wasting public funds and corruption.

This is why I accepted the offer to chair the sub-committee formed by the Senate Blue Ribbon Committee to look into the alleged overpriced Makati City Hall 2 Parking Building. My sole responsibility is to determine the truth, based on credible evidence.

As sub-committee chair, I can assure you that these hearings are in aid of legislation, specifically on how we can further strengthen the system of checks and balances for local government projects. Since I am proposing a Bigger Pie, Bigger Slice for LGUs, I have an obligation to look into how good governance principles can be more deeply ingrained in all Local Government Units.

I now appeal to the Visayas Island Cluster of the LMP.

If you believe, as I do, that it is about time to entrust a bigger slice of a bigger pie of taxes to LGUs, then please support Senate Bill No. 2045. Do this by passing a resolution addressed to the chairs of the Senate and House Committees on Local Governments. Together, let us make the LGUs' voices be heard.

Kung di natin papalakasin ang LGUs ngayon, kailan pa pala? Magka-isa po tayo. Magtulungan po tayong lahat.

Thank you very much.