Funding health in 2023

The relaxation of China’s zero-COVID policy is drawing mixed reactions. Some say that it is time to move to the endemic phase while others fear a spike in fresh cases and the emergence of new variants.

Reuters reported on Dec. 26 that ICUs in Beijing are full.

How China’s policy transition will impact global public health remains to be seen but the pandemic has shown that health systems need to be strengthened in order to avert outbreaks and confront other equally pressing health concerns.

Investments will be crucial to strengthen the devolved health system that has been overwhelmed and sidetracked due to coronavirus disease 2019 (COVID-19).

In the early 2000s, Batangas Governor Hermilando I. Mandanas performed an audit of the provincial government’s finances. A certified public accountant (CPA) by profession, he discovered that the national internal revenue tax base that was being used for computation was undervalued.

“Collections of VAT, percentage tax, excise tax, and documentary taxes were not included. When this understated computation is multiplied by 40% as stipulated by law, then you shortchange the local government. This means that LGUs do not have enough funds to deliver much needed basic services to the people,” said Mandanas.

Mandanas shared the story during a forum organized by Cancer Coalition Philippines, Cancer Warriors and the Pharmaceutical and Healthcare Association of the Philippines (PHAP).

In 2013, together with other local government executives, then congressman Mandanas and the late former Bataan governor and congressman Enrique Garcia, Jr., filed two separate petitions before the Supreme Court (SC).

Both petitions challenged the manner in which the NG computed the Internal Revenue Allotment (IRA) shares of LGUs. In particular, Mandanas and Garcia pleaded with the SC to mandate the NG to compute the IRA based on the “just shares” of the LGUs.

In its July 3, 2018, Decision, the SC granted the Mandanas-Garcia petition, declaring as unconstitutional the phrase “internal revenue” appearing in Section 284 of the Local Government Code (LGC) of 1991. As such, the SC ordered the deletion of the said phrase.

The SC ruled that the determination of the just share of the LGUs should not be based solely on national internal revenue taxes but on all national taxes.

It also ruled that any mention of “internal revenue allotment” in the 1991 LGC shall be understood as pertaining to the allotment of the LGUs derived from the national taxes.

It ordered the Secretaries of Finance and Budget and Management, Commissioners of Internal Revenue and Customs, as well as the National Treasurer to include all collections of national taxes in the computation of the base of the just share of the LGUs, based on the ratio provided in the now-modified Section 284 of the LGC. The Mandanas-Garcia SC Ruling became final and executory on April 10, 2019.

The landmark SC decision significantly increased the tax base on which the share of the LGUs is computed from, and thus, strengthened fiscal decentralization, explained the Department of Budget and Management (DBM). It clarifies the distinction between “national internal revenue taxes” and “national taxes” as base in the computation of the IRA of LGUs.

“The SC ruling basically says that the NG cannot issue memorandums and executive orders to reduce or withhold LGU share of taxes, which can really affect the ability of LGUs to deliver basic services, particularly health, social welfare, education, agriculture, housing, among others,” Mandanas said.

Meanwhile, he described the Universal Health Care (UHC) Act as an excellent law that truly addresses an urgent need.

“It’s one of the best pieces of legislation. Integration is there. The decentralization of functions which could really be done by the LGUs is included. And, very important, the realization of LGUs’ need for a just share of national tax revenues to be able to provide basic services for all their constituents through the creation of the Special Health Fund. There are very clear sources of funds — where these would come from and who are the ones responsible,” he said.

With laws, policies and rulings in place for UHC, Mandanas stressed that the focus must now be on their implementation. And certainly, there is catching up to do to secure funds for the health of the people in 2023.

Teodoro B. Padilla is the executive director of the Pharmaceutical and Healthcare Association of the Philippines (PHAP), which represents the biopharmaceutical medicines and vaccines industry in the country. Its members are at the forefront of research and development efforts for COVID-19 and other diseases that affect Filipinos.