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MONEY MATTERS THE GOLDEN RULE: Comparative Philippine and China Central and Local Government Share in Revenue and Expenditure The Philippines China (2007; in Million Pesos) (2004 ; 100M Yuan) Central* REVENUE % to Total Expenditure % to Total Local** Central Local 1,096,875.01 234,760.08 14,503.10 11,893.37 82.37% 17.63% 54.90% 45.10% 1,023,071.18 194,736.81 7,894.08 20,592.81 84.01% 15.99% 27.70% 72.30% Net of IRA of P146,591.95 million **Inclusive of IRA of P146,591.95 million Sources: Philippine Commission on Audit 2007 Financial Reports; National Bureau of Statistics of China United States Central and Local Government Share in Revenue and Expenditure United States (2007; in $Billion) Central Revenue % to Total Expenditure % to Total Source: usgovernmentexpenditure.com Local 2.568 2.165 54.26% 45.74% 2.568 2.196 55.41% 44.59% The federal government plays a small overall role in raising revenues and expenditures compared to the average OECD country. Not including social security funds, the bulk of spending on programmes and policies occurs in the Länder and municipalities. Administrative Divisions The Philippines Regions (17)* Provinces (80) /Cities(120) Districts (219)* Towns (1,514) Villages (Barangays) (46,000) 1,956 people per China Regions (Provinces) (33) Provinces(Prefect ure)/ City Level (333) Districts (County Level) (2,872) Township Level (40,544) Sources: Wikipedia; National Statistical Coordination Board; Country Reports-United Nations Economic and Social Commission for Asia and the Pacific *Under the National Government General Functions of Local Governments The Philippines Efficient Service Delivery Provide Agricultural and Fishery Support Promote Health and Social Welfare Local Business Development Small Infrastructure Construction and Development Tourism Development Sources: Country Report-United Nations Economic and Social Commission for Asia and the Pacific; Philippine Local Government Code General Functions of Local Governments China Carry out laws and resolutions of higher-level governments Govern the economy, education, science, culture, health, sport, environment, natural resource protection, finance, civil administration, public security, minority nationality, judicature, supervision and family planning Exercise personnel appointment and dismissal, training, performance evaluation, reward and punishment in administrative organizations Maintain social stability Source: Protect citizens’Nations civil Economic rightsand Social Commission for Asia and the Pacific-China Country Report-United Protect public and legal private property Protect the lawful rights and interests of economic Organizations Maintained/Run at the Regional Level China Agriculture and Forestry Justice Department Department Land and Resources Department Audit Department Labour and Social Security Civil Affairs Department Department Construction Department Legislative Affairs Office Communications Department Local Taxation Bureau Culture Department Oceanic and Fishery Bureau Commerce Department Provincial Overseas Chinese Affairs Office General Office Public Security Department Culture Heritage Bureau Personnel Department Development Planning Commission Population and family planning Drug Administration Commission Economic and Trade Commission Press and Publication Bureau Environmental Protection Prices Bureau Department Prison Affairs Bureau Education Department People’s Air Defense Office Finance Department Quality Supervision Bureau Source: Country Report-United Nations Economic and Social Commission for Foreign Trade and Economic Radio and Television Bureau Asia and the Pacific-China Cooperation Department Science and Technology The Philippines China Local Taxes such as: Local Taxes such as: Business Tax Business Tax Real Property Tax Income Tax of enterprises subordinate to the Transfer Tax local government Franchise Tax Personal income tax Printing and Publication Tax Tax on the use of urban land Amusement Tax Tax on the adjustment of the investment in fixed Community Tax assets Share in National Taxes Tax on town maintenance and construction Internal revenue Allotment (IRA) representing Tax on real estates 40% of internal revenue collections based on the Tax on the use of vehicle and ships, stamp tax, third preceding year (Regional distribution is as slaughter tax follows: Provinces 23%; Cities 23%; Municipalities Tax on agriculture and animal husbandry 34%; and Barangays 20% Tax on special agriculture products Non-Tax Revenue Tax on the occupancy of cultivated land, contract Share in national wealth exploitation in their tax area Shared Taxes Share in the earnings of government agencies or 25% of the value added tax government-owned or controlled corporations 50% of the tax on stock dealing (stamp tax) engaged in the utilization and development of Tax on resources other than the ocean national wealth in their area based on the petroleum resources following: 1% of the gross sales or receipts of the Non-Tax Revenue preceding calendar year or 40% of mining taxes, State-owned assets profit Reportssubsidies China andto the Philippines-United Nations royalties, forestry or fishery charges andSources: such Country Planning loss-suffering state-owned Economic and Social Commission for Asia and the Pacific other taxes, fees or charges including related enterprises Comparative Local Government Revenue –Share (in Percent) Tax China Philippines Central Taxes Domestic Excises 0 0 Customs Duties 0 0 VAT and Excises on Imports 0 0 Local Taxes City and Township Land Use Tax 100 100 Farmland Occupation Tax 100 n.a. Fixed Assets Investment Orientation Tax 100 n.a. Land Appreciation Tax 100 100 House Property Tax 100 100 Urban Real Estate Tax 100 n.a Vehicle and Vessel Use tax 100 0 Vehicle and Vessel License Plate Tax 100 0 Deed Tax, Slaughter Tax, Banquet Tax 100 100 Shared Taxes Domestic VAT 25 40 Business Tax – if paid by railroads, head ofcs of 0 100 banks 100 100 Business Tax, otherwise 40 (IRA) 40 Personal Income Tax 40 (IRA) 40 Corporate/Enterprise Income Tax 0 (IRA) 40 Income Tax on Foreign Banks 100 (IRA) 40 Income Tax on Foreign Non-Banks 0 40 Resource Tax – if paid by off-shore oil companies 100 40 Resource Tax –Otherwise 0 0 Sources: Intergovernmental Fiscal Relations in China, Analisa City Maintenance – if paid by railroads 100et.al (2002); Phil. 0 Fedelino and Teresa Ter-Minnassian; Ahmad City Maintenance – Otherwise 12 0 Local Government Code United States : Sources of State Revenue Source Percentage (US Average) General Sales Tax 23.5% Selective Sales Tax Source: Tax Foundation Report : stateline.org 10.9% Property Taxes 30.1% License and Other Fees 8.2% Bureau of Internal Revenue Organizational Structure Per EO No. 306 return to original image. Expenditure Allocation The Philippines China The general expenditure which local The local financial expenditure governments incur is consist of: covers many areas shown in the Personal Services (45-55% of the next slide: China Local Financial total budget) Expenditure Infrastructure development and maintenance The cost of delivering basic services out of local government existence Payments of debts and other mandatory obligations Sources: Country Reports China and the Philippines-United Nations Economic and Social Commission for Asia and the Pacific Expenditure Allocation China Expenditure for armed police Expenditure for operating troops expenses of education Expenditure for capital Expenditure for operating construction expense s of department of Expenditure for sciences comprehensive development Expenditure for operating of agriculture expenses of department of Expenditure for circulating tax, etc. funds Expenditure for price subsidies Expenditure for city Expenditure for public security maintenance agency, procuratorial agency Expenditure for developing and court of justice. Source: Country Report China-United Nations Economic land and sea area Expenditure for public healthand Social Commission for Asia and the Pacific Expenditure for foreign affairs Expenditure for pensions and China Central and Local Government Main Items Revenue Breakdown (in percent) Revenue Item Central Local Governm Governme ent nts Total Taxes 58.62% 41.38% Consumption Tax 100.00% 0.00% Value Added Tax 73.34% 26.66% Business Tax 3.10% 96.90% Consumption Tax and Value Added 100.00% 0.00% Tax on Imports Resource Tax 0.00% 100.00% Urban Maintenance and 0.64% 99.36% Development Tax Company Income Tax 59.67% 40.33% Personal Income Tax 40.00% Source: 60.00% National Bureau of Statistics of China Urban Land Using Tax 0.00% 100.00% China Central and Local Government Main Items Revenue Breakdown (in percent) cont. Revenue Item Central Local Governm Governme ent nts Tax Rebate to Foreign Trade 84.28% 15.72% Company Stamp Tax on Security Exchange 97.00% 3.00% Vehicle Purchase Tax 100.00% 0.00% Subsidies for the Losses of the State-owned Enterprises 16.50% 83.50% Industry Enterprises 51.87% 48.13% Commercial Enterprises 0.00% 100.00% Grain Enterprises 0.00% 100.00% Foreign Trade Enterprises 71.24% 28.76% Source: National Bureau of Statistics of China Agriculture, Forest, Aquaculture 84.65% 15.35% Comparative Revenue Effort as % of GDP REVENUE EFFORT (% of GDP) 2008 United States United Kingdom Australia Malaysia Japan 28.20% 39.00% 30.50% 15.50% 27.40% Philippines 15.40% Source: Wikipedia; Department of Finance CHINA: Yes USA: Philippines: None for ave. LGU Yes Philippine National Government Main Expenditure Items (2007) Expenditure Item P000 Amount % to Total Total Expenditure 1,023,071,1 100.00 78.80 % Regions 1-13, CAR and ARMM 198,319,77 0.23 19.38% Central Head Offices and NCR 282,262,10 4.37 27.59% Source: Philippine Commission on Audit 2007 Financial Reports LGU Income Breakdown Per LGU Component Local Government Units IRA % to Total Local Taxes % to Total Local Taxes IRA and Income & Income TOTAL Local Provinces Government Units Cities Municipalities TOTAL 146,591,94 8.40 82,349,413 .05 43,011,998 8,963,717. .49 Subsidies 29.34% 84 10.88% % to From % to Total TOTAL Total 55,972,204 Subsidies Total 29.36% .00 67.97% LGUs etc From INCOME Income NGAs, 17,453,490 60,536,344 LGUs etc.92 .81 41.30% 21.19% 43,043,605 NGAs, .14 Source: Figures are from the Philippine Commission on Audit 2007 5,701,210 234,642,57 Financial Reports and BIR website .13 1.58 Philippine LGU Total Income vs Central Govt. Expenditure per Region Local Government Total* Central Central P000 Govern Gover Income ment nment Expend Expen iture diture % to LG Total *Inclusive of IRA Source: Figures are from the Philippine Commission on Audit 2007 Financial Reports The official function/mandate of the RDCs is mainly coordination on PLAN and POLICY formulation, implementation, monitoring and evaluation. Its membership is 75% from government sector which includes, elected officials like Governor, Mayor, etc. and regional line agencies like the DPWH, DOH, etc. 25% is private sector which includes NGOs, POs, and other private sectors. 1. Directly Supervise BIR Agencies in area 2. Directly Retain Rev. Collections w/in IRA 3. Strictly Enforce People’s Participation and “bottom-up” Planning of LGC 4. Enforce E-Comm Law having all LGUs display in LGU websites: budgets / expens 5. Directly Supervise all PNP units 6. Ensure Prep of Land Use, Sus Dev. Plans 7. Directly Supervise Reg. Line Agencies The realization of local autonomy shall be facilitated through improved coordination of national government policies and programs and extension of adequate technical and material assistance to less developed and deserving local government units; IRA per Region vs BIR Regional Collection (in P000,000) Regions IRA BIR Collecti on Per Region 146,591. 717,233 95 .58 Grand Total Source: Figures are from the Philippine Commission on Audit 2007 Financial Reports and BIR website National Capital 622,234 Income Surplus/Deficit Analysis Based on Regional GDP Regions P000 Cordillera Autonomous Region Region 1- Ilocos Region Region 2- Cagayan Valley Region 3- Central Luzon Region 4- Southern Tagalog Region 5- Bicol Region Region 6- Western Visayas Region 7- Central Visayas Region 8- Eastern Visayas Region 9- Western Mindanao Region 10- Northern Mindanao Region 11- Southern Mindanao Region 12- Central Mindanao Region 13- CARAGA Autonomous Region of Muslim Mindanao National Capital Region Regional 2006 GDP 146,367,337 191,964,140 137,183,781 509,778,428 912,813,888 165,509,956 416,986,439 456,014,441 151,809,580 148,924,676 239,757,810 362,446,727 161,893,250 88,023,886 51,831,596 2,314,647,929 (9% of RGDP) Projected Local Revenue 13,173,060 17,276,773 12,346,540 45,880,059 82,153,250 14,895,896 37,528,780 41,041,300 13,662,862 13,403,221 21,578,203 32,620,205 14,570,392 7,922,150 4,664,844 208,318,314 Central 2007 Govt Spending Per Region 7,499,514 14,371,248 10,132,759 21,590,013 27,646,933 15,101,342 18,419,955 14,027,681 12,732,962 9,821,773 11,512,490 10,980,183 8,623,777 7,146,537 8,753,883 560,070,716 Local Govt 2007 Spending Per Region 5,185,528 9,672,847 7,451,138 17,995,140 29,918,985 9,218,111 14,788,679 12,425,986 7,357,960 6,622,651 10,074,680 9,073,613 7,275,475 6,494,503 6,900,452 34,275,920 Total Expenditure Per Region 12,685,042 24,044,095 17,583,897 39,585,154 57,565,918 24,319,453 33,208,634 26,453,667 20,090,922 16,444,425 21,587,170 20,053,796 15,899,252 13,641,040 15,654,335 594,346,636 Surplus/ (Deficit) 488,019 (6,767,322) (5,237,357) 6,294,905 24,587,332 (9,423,557) 4,320,146 14,587,633 (6,428,060) (3,041,204) (8,967) 12,566,410 (1,328,860) (5,718,890) (10,989,491) (386,028,323) Sources: Philip Medalla Paper and COA 2007 Figures LOCAL GOVERNMENT CODE OF 1991 SEC. 108. Representation of Non-Governmental Organizations. - Within a period of sixty (60) days from the start of organization of local development councils, the nongovernmental organizations shall choose from among themselves their representatives to said councils. The local sanggunian concerned shall accredit nongovernmental organizations subject to such criteria as may be provided by law. SEC. 109. Functions of Local Development Councils. - (a) The provincial, city, and municipal development councils shall exercise the following functions: (1) Formulate long-term, medium-term, and annual socioeconomic development plans and policies; (2) Formulate the medium-term and annual public investment programs; (3) Appraise and prioritize socioeconomic development programs and projects; (4) Formulate local investment incentives to promote the inflow and direction of private investment capital; (5) Coordinate, monitor, and evaluate the implementation of development programs and projects; and (6) Perform such other functions as may be provided by law or competent authority. (b) The barangay development council shall exercise the following functions: (1) Mobilize people's participation in local development efforts; (2) Prepare barangay development plans based on local requirements; (3) Monitor and evaluate the implementation of national or local programs and projects; and (4) Perform such other functions as may be provided by law or competent authority. Citizens directly allocating a portion of their taxes DEVOLVING REVENUES TO LOCAL UNITS RIGHT TO CREATE NEW TAXES