Fiscal Decentralization and Local Finance Reforms in the Philippines

The paper examines the progress being made in local finance reforms and indicates pathways to advance those reforms. A summary of the effects of decentralization is given as a contextual background for the discussion of local finance reforms. The inefficient tax assignment has constrained the mobilization of local tax revenues even as local government units have become very dependent on the intergovernmental fiscal transfer, called the “internal revenue allotment.” The paper raises the importance of revisiting the internal revenue allotment formula. It identifies the local finance reforms currently being undertaken and reports the progress being made at the local and national level. The final section comments on the outstanding issues in local finance reform and gives some recommendations.