BRIEFER: Annex on Revenue Generation and Wealth Sharing

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ANNEX ON REVENUE GENERATION AND WEALTH SHARINGJULY 13, 2013

The Bangsamoro shall be vested with the power and responsibility todeliver basic services to its constituents and to administer matters that arewithin its competence.In order to effectivelydischarge itspowers andtocarryout its functions, the Bangsamoro must be equipped with adequate resources.Thus, the Framework Agreement on the Bangsamoro (FAB) acknowledged thatwealth creation is important for the operation ofthe Bangsamoroand provided,among others,thatthe Bangsamoroshall have 1)the power to create itsownsources of revenueand to levy taxes, fees, and charges; 2) an equitable sharein the revenuesfromthe utilization and development of the natural resourceswithin its territory; and 3) the authority to receive grants and donations from

domestic and foreign sources, as well as block grants and subsidies from the

Central Government.1The Annex on Revenue Generation and Wealth Sharing, which forms

part of the FAB, outlines and elaborates additional details regarding revenuegeneration and wealth sharing.

Revenue GenerationThe Bangsamoro will have several means of generating revenues:

1. TaxationAll powers over taxes and revenue generation already devolved to theAutonomous Region for Muslim Mindanao (ARMM) through R.A. No.

9054 and other legislations shall be exercised by the Bangsamoro.

In addition to these taxing powers, the Bangsamoro shall also have the

power to levycapital gains tax, documentary stamp tax, donor's tax,andestate tax where all taxable elements are within the Bangsamoro.

The Bangsamoro Government shall have the power to grant tax

exemptions, rebates, tax holidays and other incentives. It will alsoexercise powers and functions devolved to the ARMM Regional Board ofInvestments.

1 FAB, Part IV on Revenue Generation and Wealth Sharing. Note also that the power to levy taxes, fees, andcharges, as well as the right to a share in revenues from natural resources, are found in Article X of the

Constitution.


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2. Fees and ChargesThe Bangsamoro will have the power to levy fees and charges inconnection with the powers and functions that it shall exercise.

3. Grants and DonationsThe Bangsamoro may receive grants from donors, and such grants willbe received by it directly.

4. Loans, Credits,and Other Forms of IndebtednessThe Bangsamoroshall have the authority to contract loans, credits, andother forms of indebtedness with any government or private bank andother lending institutions. Loans requiring sovereign guaranty wouldrequire the approval of the Central Government.

5. Fund Transfers from Central GovernmentThe Central Government shall provide ablock grant to the Bangsamoro.This block grant shall be based on a formula, which shall be provided in

the Bangsamoro Basic Law. This formula will take into account the costof government functions to be devolved to the Bangsamoro and willensure that the block grant will be no less than the last budget received

by the ARMM immediately before the establishment of the BangsamoroTransition Authority.

The Bangsamoro Basic Law shall provide a system for the automaticappropriation for and regular release of the block grant. In order toadjust to the Bangsamoros actual needs, as well as the amount ofrevenues it generates on its own, the formulashall be subject to reviewby the Central Government and the Bangsamoro Government after ten(10) years.

The Central Government shall also provide for a Special Development

Fund to the Bangsamoro for rehabilitation and development purposesupon the ratification of the Bangsamoro Basic Law.

Once the Bangsamoro attains financial self-sustainability, it will alsoassist other regions in their development efforts.


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6. Other Sources of RevenueGovernment income derived from the operations of Bangsamorogovernment-owned and -controlled corporations, financial institutions,economic zones, and freeports operating therein shall go to theBangsamoro Government.

The Bangsamoro may receive grants derived from economic agreements

entered into or authorized by the Bangsamoro Assembly (donations,endowments, and other forms of aid.

The Bangsamoro shall also be entitled to benefits resulting fromconventions to which the Central Government is a party.

Wealth SharingThe Bangsamoro and the Central Government will share in the followingrevenues generated within the Bangsamoro:

1. Shares in National TaxesCentral Government taxes, fees and charges collected in theBangsamoro, other than tariff and customs duties, shall be shared asfollows:

a. Twentyfive (25%) percent to the Central Governmentb. Seventy five (75%) percent to the Bangsamoro, including the shares

of the local government units.

The Bangsamoro Basic Law may provide that the twenty-five percent(25%) due to the Central Government will be remitted to the Bangsamorofor a limited period of time.

2. Revenues from the Exploration, Development, and Utilization of

Natural ResourcesGovernment income derived from the exploration, development andutilization of natural resources within the Bangsamoro shall be allocated

as follows:


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1. With respect to non-metallic minerals (sand, gravel, and quarryresources) within the Bangsamoro, such revenues shall pertain tothe Bangsamoro and its local government units.

2. With respect to metallic minerals within the Bangsamoro, seventy-five percent (75%) of such revenues shall pertain to the

Bangsamoro.3. With respect to fossil fuels (petroleum, natural gas, and coal) and

uranium, the same shall be shared equally between the Central

and Bangsamoro governments. Both Parties shall endeavor toprovide for a review mechanism in the Basic Law with regard to

this sharing arrangement.

The shares of the Bangsamoro above shall include those for itsconstituent local government units, as shall be provided by law.

Deductions from the AnnualBlock Grantreceived by the BangsamoroThe following amounts will be deducted from the amount comprising theannual block grant:

1. Revenues from additional taxes beyond those already devolved to theARMM2. The Bangsamoros share in revenues derived from exploration,development and utilization of natural resources

These deductions shall be suspended for four years from the full

operation of the Bangsamoro.This deduction will not affect the just share of the Bangsamoros

constituent local government units in the national taxes.

Fiscal AdministrationThe Bangsamoro Governments annual block grant shall undergo internalbudget processes and shall be allocated by the BangsamoroGovernment in anappropriations act.The Bangsamoro shall also have the power to establishoffices for the purpose of assessing and collecting its taxes.

There shall be an intergovernmental fiscal policy board composed of

representatives of the Bangsamoro and the Central Government. Among othertasks, it shall undertake a periodic review of the taxing powers, tax base and

rates of the Bangsamoro Government, wealth sharing arrangements, andsources of revenues, vis-a-vis the development needs of the Bangsamoro. It


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shall also address problems regarding the Bangsamoros power to levycapitalgains tax, documentary stamp tax, donor's tax, and estate tax where alltaxable elements are not situated entirely within the Bangsamoro.

There shall be a Bangsamoro auditing body, which shall have auditingresponsibility over public funds utilized by the Bangsamoro. The BangsamoroBasic Law shall provide for a clear delineation of the Bangsamoro auditingbody.This should be without prejudice to the power, authorityand duty of thenational Commission on Audit to examine, audit and settle all accounts

pertaining to the revenues and the use of funds and property owned and held

in trust by any government instrumentality, including GOCCs.

The Bangsamoro shall formulate its development plans, consistent withnational development, to address, among others, post-conflict rehabilitation,reconstruction, and development in the region.The Bangsamoro shall alsoensure that the needs of women and men are adequately addressed in theutilization of public funds.The Bangsamoro Sustainable Development Bodyshall get funding support from the proceeds of the revenues collected fromthese sources.

Documents

BRIEFER: Annex on Revenue Generation and Wealth Sharing