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The brass tacks on federalism

Cielito F. Habito
Commentaries
07 February 2018
Comments:DISQUS_COMMENTS
I’m glad state think tank Philippine Institute for Development Studies (PIDS) has moved into the needed objective and research-based analysis of detailed design elements associated with federalism, with a study tackling what could well be the most critical element of the proposed governmental shift. I refer to the fiscal aspects of federalism—that is, the delineation and nature of taxing, spending and borrowing by the national (federal) and subnational (state) levels of government.

PIDS just released the discussion paper “Designing the Fiscal Features of a Federal Form of Government: Autonomy, Accountability, and Equity Considerations” by Dr. Rosario Manasan, its resident public finance expert who has studied government finances over the last four decades. The study merits the attention of all who would shape the fiscal configuration of the federal form of government now being pursued by our legislators, who have made the move toward amending the Constitution by themselves as a constituent assembly.

The fiscal federalism literature defines four important considerations pertaining to the fiscal configuration under a federal system: One, how must functions and corresponding expenditures be assigned between the national and subnational governments? Two, how should tax and revenue powers be delineated between the two (e.g., what kinds of taxes must be reserved for one or the other)? Three, what should be the nature of financial transfers from the national to the subnational government units? And four, what conditions should govern borrowing by the subnational units? Space constraints allow me only to touch on some of Manasan’s key points here; the full paper has to be read to grasp the rationale behind them.
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