Fiscal Imbalance?: Assessing the Revenue-Sharing Mechanisms of Bayanihan Federalism

ASOG Working Paper 18-06

24 Pages Posted: 16 Nov 2018

See all articles by Ronald U. Mendoza

Ronald U. Mendoza

Ateneo De Manila University - Ateneo School of Government

Jerome Patrick Cruz

Department of Economics, Ateneo de Manila University; Ateneo de Manila University

Michael Henry Yusingco

Ateneo de Manila University - Ateneo School of Government

Date Written: October 5, 2018

Abstract

The release of the final draft of the Consultative Committee (Con-Com) to Review the 1987 Constitution, officially designated as “Bayanihan Federalism”, has spurred vigorous debate, with much discussion focusing on the fiscal repercussions of moving towards a federal form of government. This paper contributes to this discussion through an analysis of the revenue-sharing mechanisms of the Bayanihan Federalism draft, and the likely political acceptability levels of adopting them among existing local governments. While much remains inconclusive given ambiguities hounding the said draft, our analysis highlights several issues and trade-offs embedded in the revenue-sharing and functional assignment proposals of Bayanihan Federalism — especially when compared with the potential impacts of the July 3, 2018 Supreme Court decision on the Mandanas et al. v. Ochoa et al. case on the determination of local governments’ internal revenue allotments. In particular, heightened federal-regional transfers are likely to strain the federal government’s ability to sustainably fund its considerable expenditure responsibilities, while securing fiscal gains for local governments that are comparable to those of the Mandanas ruling could bring about major viability challenges for proposed regional governments.

Keywords: Bayanihan Federalism, Revenue Sharing, Local Public Finance, Philippines

JEL Classification: H71, H72, H77, O53

Suggested Citation

Mendoza, Ronald U. and Cruz, Jerome Patrick and Yusingco, Michael Henry, Fiscal Imbalance?: Assessing the Revenue-Sharing Mechanisms of Bayanihan Federalism (October 5, 2018). ASOG Working Paper 18-06. Available at SSRN: https://ssrn.com/abstract=3261680 or http://dx.doi.org/10.2139/ssrn.3261680

Ronald U. Mendoza (Contact Author)

Ateneo De Manila University - Ateneo School of Government ( email )

Katipunan Road
Loyola Heights
Quezon City, 1108
Philippines

Jerome Patrick Cruz

Department of Economics, Ateneo de Manila University ( email )

P.O. Box 154
Manila
Philippines

Ateneo de Manila University ( email )

P.O. Box 154
Manila
Philippines

Michael Henry Yusingco

Ateneo de Manila University - Ateneo School of Government ( email )

Pacifico Ortiz Hall, Fr. Arrupe Road
Social Development Complex, Loyola Heights
Quezon City, Manila 1108
Philippines

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