Alvarez: Poor areas won’t be left behind under federalism

Speaker Pantaleon Alvarez (Photo by NOY MORCOSO / INQUIRER.net )

None of the envisioned states would be left behind under a federal setup, as poor regions would be grouped with prosperous ones to share the burden, Speaker Pantaleon Alvarez said on Tuesday.

Also, he said, the states would no longer have need for Internal Revenue Allotment (IRA), or the share of tax revenues currently allocated to local governments, as they would already have access to 80 percent to 85 percent of the income they generate locally.

The rest, or the 15 percent to 20 percent, would go to the federal state.

In an interview with reporters, Alvarez said a formula could be adopted in creating the new states to ensure each one would have adequate resources for development.

Special fund

“Poor regions can be combined with rich regions [to create a new state] so the latter can lift the former up,” he said.

For instance, Alvarez said, the relatively poor Caraga region and the prosperous Davao region could be grouped as a state.

Alvarez said a special fund could also be created to assist less developed states or regions, similar to the system in Malaysia with its special equalization fund.

No need for IRA

As for the IRA, Alvarez said there might be no need for it anymore, considering the new states would already be able to tap the bulk of their income. “That would be more than enough, if you would still compute your IRA share,” he said.

The House committee on constitutional amendments on Tuesday began deliberating on the taxation scheme under the federal setup.

Figures from the Department of Finance show that Metro Manila generates 78 percent of its own income locally. In Calabarzon, the figure is 41 percent, while in Central Luzon, it is 32 percent.

But other regions make do with locally generated income, ranging from 12 percent to 29 percent with the rest supplemented by their share of the IRA.