Finance Secretary Carlos Dominguez III has called on local government units (LGUs) to embrace the switch to digital technologies to vastly improve their delivery of frontline services and generate more revenues under the New Economy in the post-pandemic era.
Dominguez said local executives should also start working with the national government in preparing for the seamless transfer to their offices of the additional devolved functions, services and facilities that they would have to assume with the implementation beginning 2022 of the Supreme Court (SC) ruling on the far higher revenue allotment (IRA) share of LGUs.
Under the high court’s Mandanas doctrine, the IRA share of LGUs should come from all national taxes, as mandated under the 1991 Local Government Code, and not from just the taxes collected by the Bureau of Internal Revenue (BIR) within the respective jurisdictions of LGUs.
This expanded revenue coverage means the IRA share of LGUs should also include other taxes such as those collected by the Bureau of Customs (BOC).
Dominguez said this sizable IRA increase for LGUs will let them pump-prime their respective local economies in the New Economy.
“As we anticipate a new economy in the post-pandemic era, we strongly encourage our LGUs to adopt digital technologies to efficiently deliver frontline services,” said Dominguez in Monday’s webinar hosted by the Union of Local Government Authorities of the Philippines (ULAP).
“This should include the processing of business registration and the collection of local taxes. Investments in information technology will not only make for more responsive governance, it will improve revenue generation of our LGUs,” he said.
Led by its president, Quirino Governor Dakila Carlo Cua, ULAP organized the online dialogue with the Departments of Finance (DOF) and of Interior and Local Government (DILG) to tackle the recovery of local economies from the devastation wrought by the COVID-19 pandemic.
During the webinar, Dominguez expressed confidence in the country’s ability to regain its growth momentum by next year, powered by several fiscally responsible economic stimulus measures and supported by a strong financial position resulting from President Duterte’s prudent economic policies and the game-changing reforms introduced by both the executive and legislative departments.
“We remain confident that we will win back our growth momentum by next year. A lot will depend on whether we can revive consumer confidence and domestic demand,” Dominguez said.
“Let us work hand in hand to beat this pandemic. We have a future to win,” he told the local chief executives during the online event.
Dominguez said that with the end of the public health emergency triggered by the pandemic remaining uncertain, the government should continuously build up its fiscal resilience by optimizing the revenue generation capacity at both the local and national levels, and improving tax administration.
He thanked the local chief executives for the “invaluable work” they have been doing in fighting the pandemic and assured them of the national government’s support in helping LGUs bounce back from this crisis.
“The national economy, after all, is the sum of all our local economies. LGUs are at the frontline of serving vulnerable communities. You are also catalysts for building a new economy while we do all we can to address this global health emergency,” Dominguez said.
He said the national government will continue to rely on LGUs for continued monitoring and contact tracing of possible COVID-19 infections even with the early signs of improvement in the public health situation, as well as in reviving economic activities in the coming months.
Dominguez said the national government demonstrated its commitment to help LGUs deal with the pandemic by granting them a one-time financial grant of P37 billion under the Bayanihan To Heal As One Act (Bayanihan 1) to boost the capability of their health care systems and provide relief assistance to affected households.
Under the Bayanihan to Recover as One Act (Bayanihan 2), Dominguez said LGUs can continue to count on several streams of support to restart their respective local economies and rescue businesses through the following:
· Extension of the carry-over period of net losses in 2020 and 2021 from three to five years for businesses.
· Dominguez said this extension will allow micro, small and medium enterprises (MSMEs) to deduct incurred losses from tax payments for a longer period, thus giving them more time to set their finances in order and return to profitability;
· Infusion of more capital to government financial institutions (GFIs) to dramatically expand their lending to MSMEs.
This will have a large multiplier effect in economic activity, he said, given that every peso pumped into GFIs will generate around 10 times its value in credit.
The additional capital of P24.47 billion to the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) and another P1 billion each to both of them for interest subsidies for new and existing loans secured by LGUs will be used to protect the productive parts of the economy and enable GFIs to provide wholesale financing to rural banks and microfinance institutions, he said;
· Allocation of P5 billion to the Philippine Guarantee Corp. (PHilGuarantee) for its credit guarantee program; and
· Making available P10 billion for the lending programs and interest rate subsidies of the Small Business Corp. (SBC).
Outside the Bayanihan 2 law, Dominguez said LGUs can access funds from the Municipal Development Fund Office (MDFO) under LandBank as the DOF-attached Bureau of Local Government Finance (BLGF) has already streamlined its process in issuing certificates on net debt service ceiling and borrowing capacity to LGUs by allowing applications and other requirements to be done electronically.
The Bangko Sentral ng Pilipinas (BSP), meanwhile, has agreed to count loans extended to MSMEs as part of the banks’ compliance with reserve requirements to continue freeing up more funds to support the revival of our small businesses, Dominguez said.
He said both the LandBank and DBP have designed several lending programs to promote the recovery of business enterprises and rebuild local economies, while the DOF has been investing in training programs that aim to raise the competencies of local government treasurers through the BLGF’s Standardized Examination and Assessment for Local Treasury Service (SEAL).
Both the BLGF and the Philippine Tax Academy (PTA) are also preparing online learning modules for local government treasurers and assessors, he added.
Dominguez said the national government is working closely with the Congress to swiftly pass several legislative imperatives vital to the country’s recovery from the pandemic.
These include measures:
· allowing banks to dispose of non-performing loans and assets;
· reducing the corporate income tax (CIT) rate from 30 to 25 percent and other investor-friendly reforms through the swift congressional approval of the recalibrated Corporate Recovery and Tax Incentives for Enterprises Act (CREATE);
· providing support to strategically important companies facing solvency issues; and
· amending the Agri-Agra Reform Credit Act to make it easier for banks to pump fresh capital into the farm sector.
“Many of you expressed support for these reforms. There is still time for LGUs to manifest to the Congress the urgency of enacting these measures within this year,” Dominguez said.
Dominguez further said the government’s economic recovery strategy remains anchored on sustaining the ‘Build, Build, Build’ program, which covers infrastructure projects outside Metro Manila to immediately create jobs, encourage investments and increase economic activity outside the national capital region.