The Philippine Local Fiscal Administration in a Decentralized Setup

Last Updated: 27 Mar 2020
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Decentralization in the Philippines took three forms- devolution, deconcentration and delegation. As Carino affirms, the framers of the 1987 Constitution institutionalized decentralization with the end-view of realizing democracy and development especially at the grassroots level. Devolution paved way for the transfer of political power from the central government to the local government units.

This transfer of power and functions was accompanied by the provision of a higher Internal Revenue Allotment (IRA), broader tax base and a just share in the national wealth to finance devolved responsibilities and provision of various goods and services. This was accompanied by deconcentration which is the transfer of administrative powers and functions from central offices of government agencies to the field offices at the regional, provincial, and municipal/city level.

In consonance with the concept that local government units are more responsive to the needs of their communities, deconcentration was institutionalized vis-a- vis devolution as a means for national government agencies (NGAs) to provide assistance to LGUs by setting standards in the implementation of various programs and monitor the operation and services of the LGUs along the different socio-economic and political dimensions.

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Contrary to the past practices wherein the central government through the national government agencies (NGAs) exercises a degree of control in the implementation of programs at the LGU level, deconcentration aims to lessen, if not remove, the control from the national government and replace it with supervisory functions. Ideally, through deconcentration, NGAs set standards and supervise LGU’s provision of various services to the community (i. e. DOH and LGU health services).

Decentralization in the Philippines also took the form of delegation, or what other author calls as “debureaucratization”. This was the result of the surmounting clamor for participatory governance and active citizenship during the ouster of the late President Ferdinand Marcos through the People’s Power Revolution and even prior to and after the said historic event. The author of the Consitution saw it fit, as a response to the call of the times, to put greater emphasis on the involvement of non- government organizations, people’s organizations, and the private sector in governance.

In this way, democracy and development was believed to be realized when the voices of the marginalized, poor and other people aggrupations are heard and considered in decision-making at the different government level. In contrast to the experience of other countries, decentralization in the Philippines took a complete form. This may be attributed to the political atmosphere in the 1980’s- 1900’s conducive to decentralization and democratic form of government. Colombia deconcentrated its state services but placed a limit in the delegation and devolution of powers.

Same can be said with the experiences of Mexico and Togo. The Philippines also has a legal framework conducive to democratic decentralization. Decentralization throbs in the Article X of the 1987 Constitution where the Congress is mandated to enact a Local Government Code which “shall provide for a more responsive and accountable local government structure instituted through a system of decentralization”. Countries like Spain and China lack this legal framework despite substantial decentralization.

This means that decentralization in the Philippines possesses a degree of “permanency” that would ensure the continuity in LGUs’ exercise of devolved powers and functions. In the words of Katorobo, decentralization in the Philippines has a “more stable environment” (Katorobo, 2004). The system of decentralization in the country is also more responsive to the needs of the local community. Unlike the experiences of India, China and Russia where powers and functions were only devolved at the state and regional levels, decentralization in the Philippines reaches down to the basic unit of government, the barangays.

Due to our country’s bent towards democracy, the Philippines has a “higher form of decentralization” as compared to other countries (Ibid. ). The central government has transferred more powers and functions to the local governments and has provided more avenues for civil society engagement in local governance. Role of Local Fiscal Administration in a Decentralized Setup The transfer of powers and functions to local government units (LGUs) necessitates the transfer and redistribution of financial resources. LGUs need sources and means to finance devolved services.

Thus, the Local Government Code of 1991 provided LGUs with an increase in the IRA share, broader tax base, and a just share in the national wealth. The redistribution of financial resources is essential for LGUs to realize local development as more responsive services are provided to the community. Local fiscal administration plays an important role in the attainment of local development as well as in the attainment of national goals. LGUs have to maximize powers and functions particularly their taxing powers and other functions in line with revenue generation and resource allocation to hasten development at the local level.

A good local fiscal administration is needed to realize inclusive growth and poverty reduction as outlined in the Philippine Development Plan 2011- 2016. Improvements in the different aspects of local fiscal administration- systems, structures, processes, officials and personnel, and policy environment- is a means for the local government to obtain higher income levels to finance local government operations and services intended to uplift living conditions in the communities.

As stated in the Handbook of Local Fiscal Administration in the Philippines by Celestino, et. al. , these improvements may come in the form of new technology, good staffing patterns, adequate skills of personnel, heightened awareness of LGUs of available credit facilities, enhanced capacity of LGU for development planning, and the presence of political will among others.

These contribute to increased LGU revenues and improved delivery of services to the community. Ultimately, poor living conditions and issues on human development (i. e. health diseases, malnutrition, illiteracy, unemployment, underemployment, environmental degradation, etc. ) are addressed when LGUs are able to provide more than adequate services. Improvements along these areas have an intrinsic value to the society. A healthier and educated population is a way of eradicating poverty. Same is true with the provision and generation of jobs at the local level. Same can be said with efforts to protect and preserve ecological balance in any given community. These contribute to the achievement of inclusive growth and eradication of poverty.

Local Fiscal Administration 20 Years after the Code’s Enactment A closer look at the 20- year Philippine experience of decentralization,however, shows that the country has succeeded only to a certain extent in its decentralization efforts. Llanto, in his discussion paper, “The Assignment of Functions and Intergovernmental Fiscal Relations in the Philippines Twenty Years after Decentralization”, has observed that expenditure responsibilities with benefits confined within the territorial jurisdiction of local governments were correctly assigned to LGUs.

By these, he means that the Code correctly devolved functions and responsibilities on social demands and concerns that LGUs are in the best positions to respond to. He also mentioned that the Code ensured a clear tax- expenditure assignment. Nonetheless, despite success stories on decentralization particularly on local fiscal autonomy, Llanto observed pressing issues that need to be addressed if the country has to succeed in its decentralization efforts. These issues are:
1. The conduct of regular local public expenditure review
2. The use of poverty index, human development index, or resource indicator instead of the equal sharing criteria.
3. The improvement of local tax administration.
4. The review and updating of local tax codes.
5. The institutionalization of a monitoring and reward system to recognize good local government performance in fiscal administration.
6. The avoidance of the imposition of unfunded mandates by the identification of source of funding apart from the coffers of the local government units
7. The alliance building/ resource pooling among LGUs for activities and services with inter-jurisdictional spillovers.

There is still a lot of work to be done in our pursuit of successful decentralization and the attainment of local development. Legislators and other policy makers have to pause and seriously consider the issues which surfaced in our first 20 years of decentralization. I believe that if we are to make any progress, incremental steps have to be taken towards countering these issues and challenges. And there is no importune time than the present to start providing interventions to the multiple concerns that confront the Philippine decentralization system.

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The Philippine Local Fiscal Administration in a Decentralized Setup. (2016, Jul 16). Retrieved from

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