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PIA Press Release
2009/02/10

Tough love: Mindanao LGUs generate revenue from local sources

Pagadian City, Zamboanga del Sur (10 February) -- "No one should be exempted from paying taxes," Mayor Nacianceno Pacalioga of Dumingag said firmly.

Those are bracing words from the mayor of a small Zamboanga del Sur municipality, where 90 percent of the population of 46,000 live below the poverty line.

But for Dumingang and other Mindanao municipalities which are determined to provide better services for their communities, poverty is in fact the impetus for maximizing local sources of revenue provided under the Local Government Code.

These potential revenue streams include taxes on ownership transfers of real property, business permit and license fees, and charges for the use of municipal fishery resources and public utilities, to name just a few.

When Pacalioga assumed office, he instructed local water district staff to cut off the connections of users who hadn't been paying their water utility dues.

"People got angry because they believed the service should come free," recalled the mayor. "I explained to them that you can't run government without money."

Many local government units (LGUs) rely almost solely on central government funding, in the form of the Internal Revenue Allotment (IRA). In 2002-2006, for example, 65 percent of the municipalities in conflict-affected areas of Mindanao derived less than 10 percent of their total income from local revenue sources.

Yet virtually all of them need additional revenues in order to improve the delivery of services to their community.

"Our IRA won't be enough for implementing our planned projects to develop local agriculture, for example," Pacalioga said.

Four LGUs in western Mindanao-Dumingag, Lamitan in Basilan, Molave in Zamboanga del Sur, and Buug in Zamboanga Sibugay-are determined to substantially increase their "own-source" income, as a means of providing improved services to residents.

Recently, each of these municipalities signed an agreement with USAID's Growth with Equity in Mindanao (GEM) Program, committing to raise their annual revenues from local sources by 30 to 50 percent over the average of the past five years. These targeted increases would be over and above increases due to inflation or population growth.

If these four LGUs are able to attain their targets, the GEM Program, through its incentive-based Revenue Enhancement and Progress (REAP) Project, will provide each of them with an infrastructure facility desired by the municipality.

Each of the four also submitted a detailed local revenue generation plan approved by the municipal council. The plan includes target increases, the commitment of LGU funds, staff and other resources for carrying out the plan, and step-by-step implementation guidelines.

"The added revenue will not just enable LGUs to provide better services," said Emma Salmani, GEM program manager for workforce preparation and governance. "The consultative process involved in setting up an efficient revenue generation system promotes transparency and accountability, and helps ensure greater public support for local revenue collection."

The participating mayors said a good information drive and regular communication are essential to gaining widespread support for own-source revenue generation.

Mayor Flavio Saniel of Molave, which is the commercial hub for 12 municipalities, has a daily community radio program on which he discusses new LGU programs and ordinances.

"When we remind people to renew their business permits, there is no resistance, they just do it," said Saniel. "It's because we are open regarding transactions. We explain over the radio why we have to increase taxes, and what is accomplished [with those funds]."

In Dumingag, Pacalioga conducted a broad-based tax information campaign regarding the REAP initiative, starting with a meeting with the municipality's executive officials, followed by a finance conference attended by heads of municipal offices, barangay treasurers, and tax collectors.

"The REAP seminar provided by the GEM Program was a big help in getting our officials and staff to understand local revenue generation. It gave them the technical capability to come up with a good plan," said Pacalioga.

Pacalioga and executive officials also traveled to Dumingag's 44 barangays to distribute a primer on local taxation and to explain to residents what they stood to gain from paying increased revenues to the municipality.

The result of this, say municipal officials, is that they've had to install a numbered queuing system in order to accommodate the growing numbers of residents coming in to pay their taxes.

Under the agreement with the GEM Program, Dumingag municipality has targeted a 55-percent increase in own-source revenue over a year, but Pacalioga said that this was just the start.

He recalled that after his municipality allowed people to pay their accumulated water bills in installments, before restoring their connections, water revenues rose from almost zero to a million pesos in a year

"They understood then that what they paid was being used to improve their quality of life," said the mayor. "Ang buwis ay parang gasolina para sa sasakyan [taxes are like gasoline for the engine of government]." (GEM-PIA XI) [top]

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