Article 12

Fiscal Autonomy

Section 1. Fiscal Autonomy

The Bangsamoro:

  • shall earn all the fund mentioned here
  • can create its sources of revenues as provided in this law

It shall prepare its budget according with an annual appropriations law by the Bangsamoro Parliament.

Section 2. Auditing

Bangsamoro Commission on Audit (BCA) is created to audit the public funds of the Bangsamoro. It can examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the public funds utilized by the Bangsamoro.

The utilization of the revenue generated by the Bangsamoro Government and block grants or subsidies from foreign or domestic donors shall be subject to the auditing rules and regulations of the Bangsamoro Government and to auditing by the BCA auditors.

The BCA’s power, authority and duty shall be without prejudice to the power, authority and duty of the Commission on Audit (COA) to examine, audit and settle all accounts, pertaining to the revenues and the use of funds and property owned and held in trust by any government instrumentality, including GOCCs.

With due regard to the BCA’s responsibility to ensure the judicious use of funds within the Bangsamoro, disbursement vouchers of the Bangsamoro Government shall be submitted immediately to the BCA.

Section 3. Local Government Finance

The Bangsamoro Government shall create a mechanism for coordinating, assisting, and monitoring the finances of the constituent local government units in pursuance of good governance and local autonomy.

Section 4. Central Government Assistance

The Central Government shall extend assistance to the Bangsamoro Government in the matter of tax administration and fiscal management. This assistance shall include capacity building and training programs, in accordance with a needs assessment and capacity building plan developed by the Bangsamoro Government in consultation with the Central Government.60

Section 5. Assistance to Other Regions

The Bangsamoro Government may also assist the development efforts of other regions once the Bangsamoro has attained financial self-sustainability.

Sources of Revenue

Section 6. Revenue Sources

The Bangsamoro Government shall have the power to create its own sources of revenues and to levy taxes, fees, and charges, subject to the provisions of this law and consistent with the principles of devolution of powers, equalization, equity, accountability, administrative simplicity, harmonization, and economic efficiency, and fiscal autonomy. Such taxes, fees, and charges shall accrue exclusively to the Bangsamoro Government.

The sources of revenue of the Bangsamoro Government shall include, among others, the following:

  • Taxes
  • Fees and charges
  • Annual block grant coming from Central Government
  • Revenues from the exploration, development and utilization of natural resources derived from areas/territories, land or water, covered by and within the jurisdiction of the Bangsamoro
  • Revenues from Bangsamoro government-owned and/or –controlled corporations (GOCCs), financial institutions and other corporations, and shares from the revenues of national GOCCs and its subsidiaries operating in the Bangsamoro, as may be determined by the intergovernmental fiscal policy board
  • Grants from economic agreements entered into by the Bangsamoro Government and conventions to which the Central Government is a party;61
  • Grants and donations
  • Loans and Overseas Development Assistance (ODA).

Section 7. Taxation

The Bangsamoro Government can shall exercise the power to levy taxes, fees or charges that were already given to the ARMM and/or allowed under Republic Act 6734 and Republic Act 9054, and other legislations, as well as those that are provided herein.

In enacting revenue-raising measures, the Bangsamoro shall observe the principles of uniformity and equity in taxation. Revenues shall inure solely to the benefit of, and be subject to the disposition by, the Bangsamoro Government.

Taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to public policy. The collection of Bangsamoro taxes, fees, charges and other impositions shall not be let to any private person.

The power to impose a tax under this Basic Law shall be exercised by the Bangsamoro Parliament, through an appropriate legislation, which shall not be enacted without any prior public hearing conducted for the purpose. The Bangsamoro Government shall, as far as practicable, evolve a progressive system of taxation.

Section 8. Tax Incentives

To encourage investments and other economic activities, the Bangsamoro Government shall have the power to grant tax exemptions, rebates, tax holidays and other incentives including those granted to the Regional Board of Investment of the ARMM. As part of incentives to investors, the Bangsamoro may opt instead to impose a flat rate lump sum tax on small and medium enterprises.

Section 9. Taxing Powers.

The following taxes in the Bangsamoro shall be levied by the Bangsamoro Government.62

  • a Capital Gains Tax: Tax on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets, including pacto de retro sales and other forms of conditional sale;
  • b Documentary Stamp Tax: Tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation rights or property incident thereto
  • c Donor’s Tax: Tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible
  • d Estate Tax: Tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition
  • e Income tax on financial institutions
  • f Registration fees of vessels which are registered by their owners with the Bangsamoro Government and wharfage on wharves constructed and maintained by the Bangsamoro Government or the local government unit concerned
  • g Tolls on bridges or roads constructed and maintained by the provinces, cities, municipalities, or barangays concerned or by the Bangsamoro Government
  • h Taxes, fees, or charges on agricultural and aquatic products, except when sold by marginal farmers or fisherfolk
  • i Excise taxes on articles that are not enumerated under the National Internal Revenue Code;63
  • j Taxes, fees, or charges on countryside, barangay enterprises and cooperatives not registered under Republic Act No. 6810, the “Magna Carta for Countryside and Barangay Business Enterprises” and Republic Act No. 6938, the “Cooperatives Code of the Philippines,” respectively
  • k Such other taxes that were allowed to be levied by the Government of the ARMM under RA 6734, RA 9054, and other legislations and executive issuances.

Where all taxable elements are within the Bangsamoro territory, taxes under letters (a) to (d) above shall no longer be imposed by the BIR of the Central Government.

The Intergovernmental Fiscal Policy Board shall promulgate rules on the determination of taxable elements in relation to taxes (a) to (d) above and on the sharing of revenues from the collection of such taxes where the taxable elements are found within and outside of the Bangsamoro territory.

Any dispute between the Bangsamoro Government and the Central Government arising from the imposition of taxes under (a) to (d) above shall be addressed by the Intergovernmental Fiscal Policy Board.

Section 10. Share in Taxes of the Central Government

Central Government taxes, fees, and charges collected in the Bangsamoro, other than tariff and customs duties, shall be shared as follows:

  • 25% to the Central Government
  • 75% to the Bangsamoro, including the shares of the local government units

The aforementioned 25% share of the Central Government shall, for a period of 10 years, be retained by the Bangsamoro Government. The period for retention may be extended upon mutual agreement of the Central Government and the Bangsamoro Government.64

Section 11. Assessment and Collection of Taxes

The Bangsamoro Parliament shall, by law, establish the Bangsamoro Tax Office within the Bangsamoro for the purpose of assessing and collecting Bangsamoro taxes. The Bangsamoro Government and the Central Government may come to an agreement as to modalities for the collection and remittance of national taxes, including costs, in the Bangsamoro.

Until such time that the Bangsamoro Tax Office is established, the collection shall be done by the Bureau of Internal Revenue (BIR). The share of the Bangsamoro Government shall be directly remitted to it.

Corporations, partnerships, or firms directly engaged in business in the Bangsamoro shall pay their corresponding taxes, fees, and charges in the province or city, where the corporation, partnership, or firm is doing business.

Corporations, partnerships, or firms whose central, main, or head offices are located outside the Bangsamoro but which are doing business within its territorial jurisdiction by farming, developing, or utilizing the land, aquatic, or natural resources therein, shall pay the income taxes corresponding to the income realized from their business operations in the Bangsamoro to the city, or municipality where their branch offices or business operations or activities are located.

The BIR and the Bangsamoro Tax Office shall agree on modalities for the filing of income tax returns through the Intergovernmental Fiscal Policy Board.

Section 12. Share of the Constituent Local Government Units in Taxes within the Bangsamoro

The Bangsamoro Parliament shall enact a law detailing the shares of constituent local government units in the 75% share of the Bangsamoro Government in the taxes, fees and charges collected in their jurisdiction by the Central Government in the Bangsamoro.

Section 13. Bangsamoro Taxes and Revenue Code

The Bangsamoro Parliament shall enact a Bangsamoro Tax Code, which shall cover the taxing powers of the Bangsamoro Government

Section 14. Fees and Charges

The Bangsamoro can levy fees in accordance with this Basic Law and the powers already granted by Republic Act. No. 6734, RA 9054 and other executive issuances, and memoranda of agreement.

Block Grant

Section 15. Annual Block Grant

The Central Government shall provide an annual block grant which shall be the share of the Bangsamoro in the national internal revenue of the Government.

The amount shall be sufficient for the exercise of the powers and functions of the Bangsamoro Government under this Basic Law in no case to be less than the last budget received by the ARMM immediately before the establishment of the BTA.

Section 16. Formula of the Block Grant

For the budget year immediately following the year this Act takes effect, the block grant is 4% of the net national internal revenue collection of the Bureau of Internal Revenue (BIR) less the internal revenue allotment of local government units.

The net national internal revenue collection of the BIR is the sum of all internal revenue tax collections during the base year less the amount released during the same year for tax refunds, payments for informer’s reward, and any portion of internal revenue tax collections which are presently set aside, or hereafter earmarked under special laws for payment to third persons.


  • the computation shall be based on collections from the 3rd fiscal year preceding the current fiscal year
  • the above formula shall be adjusted if, after the effectivity of this Act, there occurs a change in the total land area of the Bangsamoro
  • in the event that the Central Government incurs an unmanageable public sector deficit, the President of the Philippines shall activate the intergovernmental relations body where both the President and the Prime Minister of the Bangsamoro will adjust the Bangsamoro’s annual block grant.
    • This adjustment shall only be during the deficit only.

Section 17. Automatic Appropriation

The annual block grant shall be automatically appropriated to the Bangsamoro Government and reflected in the General Appropriations Act.

The Bangsamoro Parliament shall pass an annual appropriations law that allocates the block grant to various agencies and programs, according to the powers and functions of the Bangsamoro Government. The Bangsamoro annual appropriations law may also include performance standards and targets for each sector. Any unspent amount in the current year’s block grant shall revert to the Bangsamoro general fund for re-appropriation.

Section 18. Regular Release

The block grant shall be released, without need of any further action, directly and comprehensively to the Bangsamoro Government, and which shall not be subject to any lien or holdback that may be imposed by the Central Government for whatever purpose.

Section 19. Deductions from the Block Grant; Exceptions

Four years from the operationalization of the regular Bangsamoro Government the following shall be deducted from the block grants:

a. Revenues from the additional taxes beyond those already devolved to the ARMM collected three (3) years before b. Share of the Bangsamoro in the government income derived from the exploration, development and utilization of natural resources, as provided in Section 32 below, collected three (3) years before.

Provided, that the amount allocated for the operation of the Bangsamoro Sustainable Development Board, as provided in Article XIII, Section 4,shall not be included in the amount herein to be deducted from the block grant; Provided, further, that the67 abovementioned deduction shall not include the shares of constituent local government units and of indigenous communities in government income derived from the exploration, development and utilization of natural resources, under Sections 33 and 34, respectively.

Section 20. Review of the Block Grant Formula

The formula for the Block Grant shall be reviewed by the Intergovernmental Fiscal Policy Board 10 years after its effectivity.

This is to consider the fiscal needs of the Bangsamoro and its actual revenues.

Aftewards, it shall be undertaken every 5 years as agreed upon in the Intergovernmental Fiscal Policy Board.

Should the Central Government no longer have any representative in the said Board, the review shall be undertaken by the Intergovernmental Relations Body, for enactment into law.

Section 21. Development programs and projects

Immediately after the ratification of this Basic Law, and for another five (5) years thereafter, the Central Government shall provide for additional funds that would subsidize expenditure for development projects and infrastructure in the Bangsamoro, including provincial and municipal roads, in accordance with a development plan formulated by the Bangsamoro Government.

Both Central and Bangsamoro Governments shall agree on:

  • the amount through the intergovernmental relations body
  • the manner of its release to the Bangsamoro Government.


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