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Fiscal Decentralization and Local Finance Reforms in the Philippines


  • Llanto, Gilberto M.


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.

Suggested Citation

  • Llanto, Gilberto M., 2009. "Fiscal Decentralization and Local Finance Reforms in the Philippines," Discussion Papers DP 2009-10, Philippine Institute for Development Studies.
  • Handle: RePEc:phd:dpaper:dp_2009-10

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    References listed on IDEAS

    1. Anwar Shah, 2006. "A Practitioner´s Guide to Intergovernmental Fiscal Transfers," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(2), pages 128-186, July.
    2. Jean-Paul Faguet, 2005. "GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests," STICERD - Political Economy and Public Policy Paper Series 12, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    3. World Bank, 2001. "Philippines : Filipino Report Card on Pro-Poor Services," World Bank Other Operational Studies 14022, The World Bank.
    4. Richard M. Bird, 2008. "Tax Assignment Revisited," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0805, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
    6. Shah, Anwar, 2005. "Fiscal decentralization and fiscal performance," Policy Research Working Paper Series 3786, The World Bank.
    7. King, David & Ma, Yue, 2001. "Fiscal decentralization, central bank independence, and inflation," Economics Letters, Elsevier, vol. 72(1), pages 95-98, July.
    8. Joseph J. Capuno, 2005. "The quality of local governance and development under decentralization in the Philippines," UP School of Economics Discussion Papers 200506, University of the Philippines School of Economics.
    9. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
    10. Isabelle Joumard & Per Mathis Kongsrud, 2003. "Fiscal Relations across Government Levels," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 155-229.
    11. Shah, Anwar, 1998. "Balance, accountability, and responsiveness : lessons about decentralization," Policy Research Working Paper Series 2021, The World Bank.
    12. Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
    13. John Joseph Wallis & Wallace E. Oates, 1988. "Decentralization in the Public Sector: An Empirical Study of State and Local Government," NBER Chapters,in: Fiscal Federalism: Quantitative Studies, pages 5-32 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Verena Fritz & Brian Levy & Rachel Ort, 2014. "Problem-Driven Political Economy Analysis : The World Bank's Experience," World Bank Publications, The World Bank, number 16389, June.

    More about this item


    internal revenue allotment; fiscal decentralization; local government code; intergovernmental fiscal transfers; tax-expenditure assignment;

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