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This is the second hearing of the special ad hoc committee. It was previously agreed upon that in order to have a more comprehensive understanding of the BBL, resource persons will be grouped together according to subject matter. Second hearing has finance matters scheduled in the morning. Constitutional bodies sat in the afternoon session (third hearing).

 

See attendance.

 

The following matters were discussed:

 

• There is general confusion over all the grants the Bangsamoro shall receive. Prof. Briones requested to have it tabulated where actual figures shall be indicated. Committee Chair Rodriguez asked the DOF, BIR and DBM who will be submitting a joint position paper to indicate such requested actual figures and all the grants. Nonetheless, Chair Ferrer adequately explained and enumerated such.

 

• There were a lot of questions on the block grant and the wealth sharing. It was clarified that the block grant is separate from the 75-25 sharing from the national revenue taxes and that there are different applications depending on the nature of the natural resource explored in the Bangsamoro. Chair Ferrer elaborated on this.

 

• Much deliberation was made on the Bangsamoro waters.

 

• As to concerns on diminution of powers of constitutional bodies, it was clarified that no power was diminished and that these independent bodies remain to be the final arbiter who may review the actions of the Bangsamoro-established bodies. The latter were only to assist and still under the constitutional bodies.

 

Sidelights, observations

           

Rep. Celso Lobregat is strongly opposing the bill and argues against it at every instance. He was always the first to sign up to interpolate and the only one who repeatedly asked for another 5-minute extension after his allotted time was used up.

           

Most representatives from contiguous areas do not expressly oppose the bill but remain apprehensive as there were a lot of confusion over what happens to their territories and constituents should they opt to vote to join the Bangsamoro.

 

Discussion


Issue/Question

Response

Observations

Atty. Capule: What is this “exclusive power” over banks? According to the Constitution, that is vested in the BSP.

 

All resource persons were initially asked to discuss their respective positions, and then the committee members asked questions. However some points, like this one, were left unanswered.

Atty. Capule: There is a requirement of approval and concurrence by the Monetary Board when contracting foreign loans.

 

Rep. Fortun later asks for a response on this, to which Sec. Bacani did respond (8th row below).

 

Prof. Briones: Having studied the experience of other countries, I have several concerns with regard to the block grant. It was never intended to operationalize an entire unit of government, usually for a specific purpose only. There has been an accountability issue in other countries’ experience.

Sec. Bacani: No less than the framers of the Constitution sought to strengthen local autonomy by making available to LGUs funds to finance their various projects and programs. I read a PLJ article saying that our IRA which we have long been using is actually a block grant. Since the IRA is automatically released to our LGUs, all the more reason a block grant must be allowed for the Bangsamoro as it is a superior entity than LGUs.

 

 

Prof. Briones: There is a provision on expenditure vouchers going to the audit body of the Bangsamoro. Constitution explicit on the powers of COA and such vouchers must be submitted to COA.

 

Sec. Bacani: As mentioned in the previous meeting, should there be a conflict between the national COA and the Bangsamoro audit body, COA shall prevail.

 

Prof. Briones: if the 4% requirement was computed based on previous ARMM budget, we need to know the actual numbers to evaluate its sufficiency.

Sec. Bacani: Just to cite an example, ARMM budget proposed for 2015 amounts to 24.4B. Remember that constituent LGUs cannot receive an IRA share lower than what they are receiving today.

Rep. Rodriguez manifested that since the DOF, BIR, and DBM have yet to submit their joint position paper, such actual figures being asked must be stated in their position paper.

 

 

Atty. Soberano?: DBP has acquired Al-Amanah for value and therefore any transfer must take into consideration this fact.

As to the operations of Islamic banking, there should be a regulatory and legal framework that will establish a supervisory board. I shall defer to the expertise of the BSP on this matter.

Is the Al-Amanah the only Islamic bank we will allow to operate? From its enabling law, it seems so. However that is not healthy for our economy and we are for ASEAN integration.

Chair Ferrer: All of the country shall benefit from a regulatory law that will govern a similar initiative but as it stands today, we have only relied on the law creating the Al-Amanah due to the absence of the former. What is being proposed here is the turning over of functions based on the current business practice (ex a private investor) but nevertheless, all supervisory powers of national government shall not be diminished. Based on Section 30 on the article on fiscal autonomy, there is actually no automatic transfer on the ownership and management of the Al-Amanah Bank to the Bangsamoro government. The Bangko Sentral and National Commission on Muslim Filipinos shall jointly promote Islamic banking. We call your attention to review the draft so the discussion can actually focus on the draft.

 

This is a representative from the DBP and Al-Amanah, however he was not previously mentioned as one of the guests.

Rep. Lobregat: I am not anti-peace, I just want the Bangsamoro Basic Law to be fair, just, feasible and consistent with the Constitution and our laws. We want to pass a law that can stand legal scrutiny. I think it is fair to say that we are all for a just and lasting peace. Now I’d like to ask, were the agencies of our respective resource persons actually consulted? The reactions from our resource persons are worrisome. Had they been consulted, why are these provisions still there? Can we ask for a copy of the position papers the agencies submitted during the earlier consultation?

Chair. Ferrer: Consultations were done as a matter of fact as early as 2011, we had several meetings with the Deputy General of the BSP, Al-Amanah President, and DBP and DOF representatives.

Cong. Hataman: I would think what we’re doing here is part of the consultation. This encompasses the process of refining the law. The submission of position papers in the prior consultations is not necessary.

Sec. Abad: The draft BBL is the government’s position on this subject. We can’t have any adverse position against the draft the President himself handed to the Congress. Asking for a position paper is redundant and a futile exercise, in my opinion.

Sec. Deles: There were many discussions the result thereof did not find their way to the final draft. What we must look into is the text before you, the draft BBL. The text you do not find there is therefore irrelevant.

 

Rep. Hataman then moved for suspension. There was a 10-minute break.

Rep. Lobregat: According to the BBL, the Bangsamoro shall have exclusive power over their budget, does that mean this shall not be subjected to the same rigorous process every LGU goes through under the DBM? This is a matter pertaining to DBM because your power to review is at issue here. It is not the panel’s task.

Sec. Abad: I believe this will entail an explanation of the “asymmetric” organization and therefore should be left to the Panel to discuss.

Chair Ferrer: The notion of autonomy we are granting to the Bangsamoro essentially allows for much wider powers with regard to their budget. Specific features on how the budget shall be spent – like the 5% allocation for GAD were reiterated in the BBL. The parliament shall pass its own appropriation bill.

 

 

Rep. Zarate: Is the block grant a new feature in this agreement, absent in the previous agreements? Can we have the actual figures on how much we have given for the past three years to ARMM? This is so we’ll know how much the Bangsamoro will need for the next few years.

Sec. Abad: ARMM does not receive IRA share, rather a subsidy from the national government. ARMM received 20.5 billion peso subsidy in 2014, 14.8 in 2013, 13.2 in 2012, an average of 9 billion from 2006-2010, and around 5.7 billion from 2002-2005. There has been a very significant increase in the subsidy given to ARMM when the present administration took over. The IRA share of constituent LGUs like Basilan, Sulu, Tawi-tawi, Lanao del Sur, and Maguindanao is about 15.8 billion for this year, the biggest of which is Lanao del Sur at 5.7. Next year, it is at 18 billion.

 

 

Rep. Fortun: I would like to hear the response to BSP’s initial position about foreign loans requiring prior approval from government through BSP – not only those needing sovereign guaranty.

Bacani: BBL draft is indeed silent on that. Should it be necessary to be added, it is for the committee to decide. What we have for now is that we have no problems on domestic loans.

 

 

Rep. Almonte: I don’t see any mention on the right to information. I see no harm in adding such.

Rep. Rodriguez: The reason he might be emphasizing this is as you know, that constitutional provision is not self-executing which is why we have the FOI bill pending.

 

Sec. Deles: There are many references in the BBL on accountability and transparency. There are specific stress on some basic rights however this does not mean those omitted which are actually guaranteed by the Constitution are diminished. No problem in adding should you deem it necessary as that is a constitutionally guaranteed right anyway.

 

Rep. Oaminal: I would just like clarifications on the financial provisions and on wealth-sharing. We are providing for the local IRA share, the 4% of the net internal revenue collection of the BIR, and then the 75-25% wealth sharing from their own collection, and lastly the block grant. Am I correct?

Chair Ferrer: That’s right, but the annual block grant of 4% is actually 4% of the 60% national revenue collection which is basically 2.4%, because the 40% goes to LGUs. In addition to what you said, all income generated from natural resources shall be deducted from the block grant. This stems from our desire for less dependency from the national government as soon as the Bangsamoro can generate its own resources but we do know that will take some time. Moreover, we have the 7 billion special development fund the first year and 2 billion for the next 5 years on top of the block grant. This is to provide resources to the Bangsamoro to catch up in terms of development with the rest of the country.

 

 

Rep. Oaminal: We’re raising financial assistance to the bangsamoro government. Won’t this affect future annual budget of the national government?

Sec. Abad: It will not be affected. The region is the poorest in the country and the policy of government is to focus social services program to allow them to catch up. We will benefit as well since once peace reigns in the region, it will be attractive for investments and allow it to contribute to national revenue. This is actually good investment.

 

 

Rep. Ilagan: We’re aware that within the identified jurisdiction of bangsamoro, there’s a lot of mining activities going on. What will be the sharing scheme?

Sec. Bacani: The BBL draft remained consistent with the CAB. The share on non-metallic resources is 100%, similar to other LGUs; 75-35 on metallic resources, which is an improvement from the old 70-30 sharing of RA 9054; and 50-50 on fossil fuel and uranium, the same as the one provided for in RA 9054.

 

 

Rep. Ilagan: I am concerned for the IPs because this repeatedly came up when we conducted our consultations. At present, they get 1%share, could this possibly be diminished? We don’t want our cultural minorities to be deprived.

Rep. Rodriguez: That can’t be, I would think it could even get higher than 1%.

Chair Ferrer: The current framework is 1%which comes in the form of royalties, do not pass through the government and is directly given to the IP communities. This was reiterated in the BBL in Section 6 of basic rights and also a provision on the article on economy talks about the share of the barangays in the income generated from exploration, on top of the royalty fees. However, the BBL will pass its own mining law and the actual percentage shall be determined by the parliament. Yes, it could get higher.

 

 

Rep. Ilagan: Does this mean the IPs have to wait for a concrete law before they get their just share? Moreover, the role of NCIP should be defined here.

Chair Ferrer: In the interim, the existing laws as passed by the ARMM and the national government shall govern.

Sec. Deles: Section 13 on the rights of IPs state that the Bangsamoro shall create an office for IPs, a ministry. Nevertheless, we have reiterated the recognition of all rights emanating from national and international laws.

 

 

Rep. Bello: Isn’t the 4% of 60% block grant too small what with all these responsibilities and functions we are giving them? Wouldn’t it be possible to increase our budgetary support to say 8% maybe?

Sec. Abad: 8% was actually the original number we considered, as proposed by the MILF. However we looked at historical subsidies extended to ARMM and the projection of increases in net national internal revenue, and both panels agreed that this 4% is a reasonable amount. That's not the only level of subsidy that they will receive. They will have Special Development Fund for transition. I think this is quite substantial already. Notwithstanding the attractiveness of the region now for investment and business.

 

 

Rep. Bello: I am concerned because I know for a fact that when you are a new government, you have a lot of needs. I know of LGUs that receive more than 40 billion pesos, and this is a state which will be starting from scratch. Amount should be commensurate to its contribution to national. They have been deprived since time immemorial.

Sec. Abad: It is the policy of the government to extend full support and help this region.

There’s inter0governmenttal policy board which will look at sufficiency of support and it is empowered to make recommendations and adjustments. The law is not totally close on this.

Prof. Briones: This 4% we are talking about pertain to trillions of money. It may seem a small percentage, but it amounts to a huge amount of money.

Comm. Henares: Just to comment, ARMM only contributes about 1.8B to the internal revenue.

Rep. Sema: you are talking about collection only, but think of the savings this government will have when peace reigns in Mindanao.

Rep. Rodriguez: what about those companies doing business in Bangsamoro but have their headquarters in Makati and then pay taxes in Makati?

Comm. Henares: Even considering such, it is not that much.

Sec. Abad: Just a point of information, from 2012-2013, collection in ARMM grew 45%.

 

The other Representatives were quick to jump and correct Rep. Bello that it is not a state. Laughing, he corrected himself that indeed this is not a state.

Rep. Yu: Clarification on the 75% share, will it be deducted to the block grant? Provision states that revenues will be deducted from block grant, what revenues?

Sec. Bacani: The 75% share is over and above the subsidy. The taxes to be deducted from the block grant are the collections from the four devolved: capital gains tax, estate tax, donors tax, and the documentary stamp tax plus the share of the Bangsamoro in the wealth sharing. Deductions start after four years of establishment of Bangsamoro.

Chair Ferrer: We are talking about three different matters here. First, there’s the share in national taxes which is 75-25. Second the share from government revenues from mineral resources where the split is according to the nature of the natural resource. Lastly, the other new taxes previously not devolved but now are actually devolved. Each has its own application. The deduction mentioned in the block grant pertains to revenues generated from new taxes devolved. Those from natural resources, you deduct what you only collect – for example, 70%; but then again there is a provision on “excluding the share of local governments” because we don’t want the LGUs to be deprived of what other LGUs outside the Bangsamoro are getting.

 

 

Rep. Yu: Another tax mentioned here is on aquatic resources. The Joint Cooperation Zone which is a big fishing ground for Zamboanga Peninsula, are they granted the power to collect taxes also from the big fishing companies once they fish within this zone?

Sec. Bacani: In the draft BBL, there is a proposed body that will regulate such joint cooperation zones. The operational details shall be resolved by this body which will have representatives from LGUs. We have no answer yet as to its operational details.

Chair Ferrer: It is very clear that Bangsamoro will not collect income taxes, excise taxes, and customs taxes as these are national taxes which are not devolved. The fishing vessels which will then fish within these zones will still be required to pay national taxes to the national government. It can happen that every time they fish, they may be required to secure a license from the municipality, or province, or region. That shall be part of the regulation that may be exercised at the level of the municipality, or province, or region.

 

 

Rep Yu; I am worried this will affect the Zamboanga peninsula as it is now the “Sardines Capital” and should we grant this regulatory body the power to tax fishing companies, there must be a limit provided for in the law.

Rep. Hataman: The fishing vessels from Navotas have their fishing grounds actually in Sulu. However the Bangsamoro areas have not benefited from such for so long.

Rep. Rodriguez: What possible taxes could then be levied by the bangsamoro parliament? You mentioned landing fees, what else?

 

Chair Ferrer: This can come in the form of license and fees to be imposed at any of the level of the LGUs. It could be say, an environmental protection fee within the territories of the Bangsamoro or LGUs. Nonetheless, those not within its boundaries are not within their taxing power except maybe for what would alter be agreed upon by the national government and the joint cooperation body.

 

Rep. Yu: What about this preferential right? The ones from Bangsamoro who then fish first?

Rep. Hataman: What I’m previously referring to are those within the municipal waters of our locality.

Chair Ferrer: It is very clear that as far as municipal waters are concerned, the municipalities have the preferential right. What we are introducing here on the matter of joint cooperation are beyond the jurisdiction of the bangsamoro but certainly still part of national waters where some regulatory function may be instituted. General principles on free passage and the like are of course upheld. The situation at present has been problematic as it entails payment of huge amounts for security and we wish to institutionalize such in the form of licenses.

 

 

Rep. Rodriguez: Can you elaborate on the jurisdiction of these bangsamoro waters?

Chair Ferrer: Municipal waters are those waters that extend 15km from coast and the primary LGU living resources are the jurisdiction of the respective municipalities. Non-living resources like fossil fuel are governed by the Mining Law and PD 87. What we’re saying here is beyond the municipal jurisdiction, we are extending the territorial jurisdiction of the bangsamoro by another 17.2 km equivalent to 12 nautical miles to effectively be within the waters of bangsamoro. This jurisdiction shall be defined in accordance with what will later be passed. Therefore as to living resources they will have full jurisdiction and non-living there shall be joint and concurrent jurisdiction between bangsamoro and the national government. Beyond all that, these will be the national waters, of course within is actually national waters the regulation of which was only devolved, except what may later be agreed upon.

 

A map was then shown as Prof. Ferrer reiterates her explanation.

Rep. Lobregat: The giving of waters started with MOA-AD; before that, they were never given territorial jurisdiction. Should it be included, like in the case of municipal waters, jurisdiction is granted only on living resources and no jurisdiction is granted on non-living resources. Right away, it is evident that this amends the Local Government Code and the Fisheries Code. The map is putting it to 22, not from general coastline but from each island and islet. Originally, it was just 15km from coastal. There’s a big difference here.

Chair Ferrer: I don't think we should confuse territorial coverage and the powers.This is just the territorial coverage where actual powers may be later defined. This does not mean that the territories identified here are automatically within 100% control of the Bangsamoro. Powers shall be defined because this is still the power of national government merely being devolved. For example, as to air space, we are a signatory to international conventions which means that it is still the sovereign state involved here and clearly, still within the jurisdiction of the national government.

 

 

Rep. Rodriguez: Since the Bangsamoro parliament may pass its own tax laws, is it possible for them to impose that for companies whose sole business operate within Bangsamoro, regardless of where contract is perfected – the situs of taxation be in Bangsamoro? In essence, ask them to pay the Bangsamoro government despite having their headquarters in say Makati where contract is perfected?

Bacani: I am not sure whether it is feasible to require them to have two books. Details are left out for the parliament to enact on. What is important is the concept that once they derive benefit from the Bangsamoro, they pay the Bangsamoro government.

Comm. Henares: I never actually agreed on these two paragraphs, as this is impossible to implement. The business decides where they are to be registered.

Rep. Rodriguez: This is important because of the 75-25 sharing.

Chair Ferrer: You are correct, this is critical due to the 75-25 sharing. It becomes particular. In other areas, the collection shall be immaterial as it goes into the totality of national revenue and no share is divided other than what is provided here in BBL.

Rep. Rodriguez: The Commissioner is saying the parliament cannot pass such a law. What are your thoughts?

Chair Ferrer: There is a provision in Section 11, last paragraph that makes a distinction where the taxes on income derived from operations in the Bangsamoro as against those derived from areas outside Bangsamoro. We acknowledge that operationally, this may be difficult. Nonetheless, there is no constitutional violation if that is the concern.

 

 

Rep. Acahron: Does the Panel believe that the provision in Article XII, Section 10, where after approval and 10 years thereafter, 100% of its taxes shall be retained by the Bangsamoro, and this can be later extended, still consistent with the Constitution? Does this not impinge on the Constitutional provision requiring just and equitable share when we’re giving 100% to Bangsamoro?

Sec. Abad: The President is a compassionate and just person so I believe so.

Rep. Rodriguez: If you would consider the historical injustices inflicted on our Muslim brothers and sisters, I would think it is about time we should be compassionate and give them the just share they so deserve. We are at such an opportune time in history where we can give them affirmative action.

 

Rep. Acharon: What is the wisdom behind this 100% retention?

Chair Ferrer: Revenue collection is very, very low in the area. If 100% will be given to the Bangsamoro, then it will help address the socio-economic problems in the area. Let me cite Section 13 of the Constitution which provides for social justice. I think this sector has for centuries been deprived of their just share.

 

 

Rep. Alejandro: clarification on the audit body as provided for in Article 12, Section 2, is this audit body independent of the Bangsamoro similar to our COA which is a constitutional and independent body?

Rep. Rodriguez: I think the concern here is the doctrine of primary jurisdiction in administrative law. Who then has primary jurisdiction over the vouchers – the COA or the bangsamoro audit body?

Chair Ferrer: We leave the details out to the parliament. We presume they shall follow national laws. Otherwise, they will require another set of vouchers because they cannot escape from the requirement of COA to submit to them the vouchers. It will then be difficult to keep two, having another set solely for their audit body. Be it their choice, so be it. Clarification also that the “primary” there means first, and not superior. It can also be simultaneous should they choose to have that system.

Rep. Rodriguez: I don’t see any Constitutional violation because COA can ask for these vouchers any time.

 

 

Rep. Lobregat: I would just like to end on a note that I disagree with the Panel that there were two sections separating autonomous government and the local government. If you look at the proceedings of the framers of our Constitution, you will see that there was indeed a proposal to have local governments and a separate autonomous government. However, the final decision as it appears in our Constitution is to have such autonomous government under that class of local government. Now we are having these tax problems, that parliament cannot in any way pass laws abrogating national laws or even the Constitution.

 

Chair Ferrer: Of course, we acknowledge that there can really be no law passed that shall abrogate the Constitution or our national laws.

 

 

Concluding statements

The Chairman repeatedly thanked everyone who came especially the members of the special ad hoc committee since session is actually in recess. A good number of the members showed up demonstrating the House’s commitment and interest in the Bangsamoro Basic Law.

 

Schedule of next hearing   

Next hearing is set the following day, October 8, 2014 in the same venue. Focus will be on trade and industry.