Strengthening the internal revenue allotment system towards greater equity in the Philippines

The internal revenue allotment, or IRA, is a major aspect of intergovernmental relations in the Philippine government. The IRA brings alive many local government units (LGUs) that depend on the transfer up to 98% of their budget. The importance of the IRA is highlighted by the fact that it is the largest source of funding for many LGUs. At the same time, the central government has required certain mandatory expenditures to be funded out of the IRA. On the premise that the central government knows better where the IRA must be spent, the mandatory expenditures must contribute to the collective and overall societal growth of the country. Data show that economic growth has not happened where it was intended. Among provinces, IRA dependence remains significant. Poverty incidence is similar in provinces that have high IRA dependence. Thus, while the Philippines has achieved economic growth in general, growth has not spread in areas as desired. Provincial governments continue to generally have insufficient resources due in part to their own limited administrative capacities or limited resources, and the limited resources afforded them or the over-assigned expenditure responsibilities they must undertake.