Comparative Practices in Fiscal Management Between Governments: Experiences for the Philippines – A Policy Brief

This Policy Brief was produced with the generous financial support of Global Affairs
Canada and produced by the Forum of Federations through the Supporting Decentralized

and Inclusive Governance in the Philippines Programme. The views expressed here are

those of the author and do not reflect the views of the Canadian Government.

This policy brief provides an overview of the theory and practice of fiscal federalism and
draws some implications for the evolution of decentralization in the Philippines. This policy

brief is organized into two sections. The first section analyzes the design of intergovernmental

fiscal arrangements and the nature of horizontal and vertical relations in federal and

decentralized systems by exploring three important drivers of intergovernmental conflict:

insufficient regional self-rule, high vertical imbalances and prominent regional economic


The discussion of each dimension includes some takeaway lessons for the
case of the BARMM region and, more generally, for the territorial model in the Philippines.

The second part of the policy brief analyzes the gap between the theory and practice of

fiscal federalism. It describes the distance between some of the normative principles of

fiscal federalism in three crucial areas – the allocation of transfers, the correspondence

between tax and spending powers and equalization transfers – and the perils associated

to a design of fiscal arrangements that deviates from those principles. This section

includes a reflection on the implications of the mismatch between theory and practice

for the Philippines as well as references to comparative cases to illustrate some of the

arguments in the discussion.