As is the case in developed and developing countries throughout the world, local governments in the Philippines are dependent upon the central government for a significant share of the resources at their disposal. For example, in 1977 the 98 municipalities within the Provinces of Albay, Bulacan, Iloilo and Sorsogon obtained an average of 35.2 percent of their general fund revenue from government grants. Cities ( excluding those in Metropolitan Manila), with their more extensive tax base, had an analogous 24.2 percent reliance on grants. In light of this importance, it would seem useful to consider the possibilities for evaluating the performance of this intergovernmental system.

Three purposes underlie this paper. One is to outline how any intergovernmental grant system might be evaluated. The second is to evaluate the system operating in the Philippines, with special emphasis on the Bureau of Internal Revenue (BIR) Allotment and Specific Tax Allotment (STA) programmes. The final section of the paper suggests policy directions that might improve the system.