10 FAQs on Wealth Sharing Annex between Philippines, MILF

Posted to InterAksyon (Jul 16): 10 FAQs on Wealth Sharing Annex between Philippines, MILF

The Office of the Presidential Adviser on the Peace Process (OPAPP) came out with these 10 frequently asked questions on the historic Revenue Generation and Wealth Sharing Annex between the Philippine government and the Moro Islamic Liberation Front (MILF).

1. What is the concept of Revenue Generation and Wealth Sharing in the GPH- MILF peace process? Why is it important?

In the context of the GPH-MILF peace process, revenue generation and wealth sharing pertains to the summation of the wealth creation and sourcing powers granted to the envisioned Bangsamoro region to finance its government. It involves the division between the Central Government and the Bangsamoro Government of government revenues generated within the region from taxation, natural resources, and other government operations. It likewise includes other forms of financial assistance that would be rendered by the Central Government and received by the Bangsamoro Government.

2. Are the contents of the Revenue Generation and Wealth Sharing Annex within the confines of the Philippine laws?

Yes, the arrangements in the annex are in accordance to Philippine laws. As a matter of fact, local and regional governments are conferred with, as shown below:

“…a just share in national taxes which shall be automatically and directly released to them without need of any further action; to have an equitable share in the proceeds from the utilization and development of the national wealth and resources within their respective territorial jurisdictions including sharing the same with the inhabitants by way of direct benefits…” (Sec. 18 of the Local Government Code on Power to Generate and Apply Resources)

“…an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas, in the manner provided by law…” (Sec. 7, Art. 3 of the Philippine Constitution on Declaration of Principles and State Policies)
On the other hand, Republic Act (RA) 9054, which is the law strengthening and expanding the Organic Act for the Autonomous Region in Muslim Mindanao (ARMM), states the existing wealth sharing setup between the National Government, City, or Provincial Government, and the ARMM.

The laws mentioned above had been taken into account by the GPH and the MILF peace panels when they drafted the Framework Agreement on the Bangsamoro (FAB) signed in October 2012. As stated in Sec. IV of the FAB on Revenue Generation and Wealth Sharing, the parties have agreed that the “Bangsamoro will have the power to create its own sources of revenues and to levy taxes, fees, and charges, subject to limitations as may be mutually agreed upon by the Parties” and that the “Bangsamoro shall have a just and equitable share in the revenues generated through the exploration, development, or utilization of natural resources obtaining in all the areas/territories, land or water, covered by and within the jurisdiction of the Bangsamoro, in accordance with the formula agreed by the Parties.”

They have also recognized “that wealth creation (or revenue generation and sourcing) is important for the operation of the Bangsamoro.”

3. What is the relationship of the Revenue Generation and Wealth Sharing Annex to the FAB and the Bangsamoro Basic Law?

The Revenue Generation and Wealth Sharing Annex is one of the four annexes, which, together with the FAB, shall comprise the Comprehensive Peace Agreement between the GPH and the MILF.

This annex will serve as a guide to the Transition Commission in the drafting of the wealth sharing and revenue generation provisions of the Bangsamoro Basic Law (BBL).

4. What are the arrangements that the Parties agreed to?

Given the importance of revenue generation and sourcing for the operation of the Bangsamoro, the Bangsamoro Basic Law – as guided by the Revenue Generation and Wealth Sharing Annex – shall provide for powers of the Bangsamoro to create its own sources of revenues, as well as to have a just share in the revenues derived from natural resources.

On taxation:

The Bangsamoro Government shall have the power to levy capital gains tax, documentary stamp tax, donor’s tax, and estate tax where all the taxable elements are within the Bangsamoro. This means that the revenues collected from these taxes shall pertain entirely to the Bangsamoro.

For other taxes, fees and charges collected by the Central Government within the Bangsamoro, excluding tariff and customs duties, 75% shall be shared with the Bangsamoro and its constituent local government units while 25% shall remain with the Central Government.

In addition, all the taxing and revenue generation powers already granted to the ARMM under R.A. No. 9054 and other earlier laws shall be transferred to the Bangsamoro.

On natural resources:

Government income derived from the exploration, development and utilization of natural resources within the Bangsamoro shall be allocated in the following manner:
For non-metallic minerals (sand, gravel, and quarry resources), 100% of the revenues shall pertain to the Bangsamoro and its constituent local government units;

For metallic minerals, 75% shall pertain to the Bangsamoro while the remaining 25% shall pertain to the Central Government; and,

For fossil fuels (oil, natural gas, coal) and uranium, there shall be equal sharing of government income from this economic activity.

With regard to the sharing arrangement in number 3, the BBL shall provide a review mechanism.

The share of the Bangsamoro from the above shall include those for its constituent local government units.

We will hold a wide information campaign to ensure that all stakeholders are fully aware of these arrangements.

5. What are “annual block grants”?

The GPH considers this as the most important feature of the new fiscal arrangement for the Bangsamoro because it will free them from the limitations in current budgetary processes of the government in that the actual budget allocation is negotiated on an annual basis.

The annual block grants constitute the annual financial assistance to be extended by the Central Government to the Bangsamoro Government. It is comparable to the internal revenue allotment of other local government units as it shall be automatically appropriated and regularly released to the Bangsamoro. These block grants shall not be less than the last budget received by the ARMM immediately before the establishment of the Bangsamoro Transition Authority.

Revenues from the additional taxes beyond those already devolved to the ARMM and the Bangsamoro share in revenues derived from exploration, development, and utilization of natural resources will be deducted from the amount comprising the annual block grant. This is without prejudice to the just share of the Bangsamoro’s constituent local government units in the national taxes.

These deductions shall be suspended for four years from the full operation of the Bangsamoro.

This proposed revision came from the MILF and reflects their aspiration to be increasingly less dependent on national government support.

6. Are the revenue generation and wealth sharing arrangements constitutional?

Yes, all arrangements in the annex are constitutional as these have been framed within the bounds and flexibilities of the Constitution and other pertinent laws. Similarly, the Bangsamoro Basic Law, which itself will undergo a constitutional process – from certification as an urgent bill by the President and passage by Congress, to the conduct of plebiscite in FAB-covered areas for its ratification, shall be consistent with these wealth sharing arrangements.

7. Is there a check and balance/accountability mechanism over the revenues and funds generated by the Bangsamoro government?

Yes. As provided in the FAB, an Intergovernmental Fiscal Policy Board shall be created to serve as a mechanism for partnership and coordination between the Central Government and the Bangsamoro toward building a strong fiscal foundation and sustainable development in the region. Further, the Bangsamoro government shall create its own auditing body and procedures for accountability over revenues and other funds generated within or by the region from external sources, without prejudice to the power and duty of the national Commission on Audit.

8. How will these arrangements benefit the Central Government and the country as a whole?

These arrangements will facilitate political and fiscal autonomy which is important for the Bangsamoro to operate and deliver to its constituents, thereby contributing to the achievement of peace and progress in the south.

All Filipinos will benefit because the peace and developments in the south will pull the entire nation upward. With the MILF as partners in government, both will jointly be able to address other security concerns, opening the door for bigger trade and tourism opportunities.

9. Will the Revenue Generation and Wealth Sharing Annex ensure better tax collection in the Bangsamoro region?

Yes. Together with administrative mechanisms to monitor performance, assistance from the Central Government shall also be extended to improve the capability of the Bangsamoro government to ensure efficient tax administration and fiscal management.

10. What are the next steps after the signing of the Revenue Generation and Wealth Sharing Annex?

The panels have agreed to convene again after the Ramadhan to continue work on the two remaining annexes – the Annexes on Power Sharing and Normalization.

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