Philippines: LGUs yet to Claim P747M in Tobacco Excise Tax Share

Source from:  BusinessWorld Online 03/13/2016

Budget Secretary Florencio B. Abad on March 8 issued Local Budget Memorandum No. 73 to prescribe the guidelines on the release of the remaining shares of the local government units (LGUs).

Based on the memorandum's attachments, the LGUs have yet to claim P239.1 million from their shares in excise taxes collected from locally manufactured Virginia-type cigarettes in 2008, 2009 and 2011.

Cabugao, Ilocos Sur and Balaoan, La Union have the biggest remaining shares of P32.9 million and P30.4 million in the previous years' excise tax collection from Virginia-type cigarettes.

San Juan, Ilocos Sur came in third with P26.7 million unclaimed share. Pilar, Abra and Magsingal, Ilocos Sur followed with P23.2 million and P12.9 million.

Meanwhile, more than P508.1 million of excise taxes levied on burley and native tobacco in 2008, 2009 and 2010 remain unutilized by the cities and municipalities.

Amulung, Cagayan and Aurora, Isabela registered the biggest remaining shares of P71.2 million and 67.1 million in excise taxes collected from burley and native tobacco in the previous years.

Alcala, Cagayan along with Pangasinan's San Fabian and Alcala complete the five provinces with the biggest remaining shares in the tax collection of P28.3 million, P27.7 million and P25.4 million respectively.

The LGUs are entitled to receive 15% of the national government's excise tax collection from locally produced tobacco products, as mandated by Republic Act (RA) No. 7171 for Virginia-type cigarettes and RA 8240, as amended by RA 10351 or the Sin Tax Reform Law of 2012, for burley and native tobacco.

Under previous guidelines, the Department of Budget and Management (DBM) divided the share of LGUs in excise taxes on Virginia-type cigarettes among provinces (40%), component cities and municipalities (40%) and congressional districts (30%).

Of the amount LGUs receive from excise taxes on burley and native tobacco, meanwhile, 10% was allocated to the provinces, 10% for cities and municipalities and 80% for the legislative districts.

Legislative consultation was further required prior to the release of the shares of congressional district shares in the excise taxes levied on tobacco products.

"he said process where legislators identify the programs and projects to be implemented prior to the release of the congressional district shares shall no longer be allowed having been declared by the SC (Supreme Court) as unconstitutional," the March 8 memorandum read.

The DBM memorandum cited the apex court's ruling on November 19, 2013 against the "Pork Barrel System" or the allocation of lump sums tagged as Priority Development Fund to members of Congress.

Accordingly, the Budget department released new guidelines to facilitate the release of the remaining LGU shares, which are charged against the annual national budget for 2010 to 2013, in accordance with the Supreme Court decision.

"The individual shares of the beneficiary cities and municipalities are computed based on the volume of production and trade acceptances of tobacco-producing LGUs per relevant certifications provided by the National Tobacco Administration," the DBM memorandum read.

Prior to the release of their shares, recipient cities and municipalities must submit to the concerned DBM Regional Office the list of programs and projects they intend to implement using funds from the excise tax collection.

Proposals must be supported by ordinance or resolution approved by the local legislative body, mechanism and period of implementation as well as projected and estimated number of beneficiaries.

"The recipient LGUs shall ensure that the programs and projects to be implemented are included in the approved Annual Investment Program," the memorandum read.

In case a cooperative implements a proposed program or project, the beneficiary LGU must receive first an authenticated or a certified true copy of the cooperative's Certificate of Registration from the Cooperative Development Authority.

The funds are earmarked for cooperative, livelihood, agro-industrial and infrastructure projects aimed at enhancing the productivity and advancing the welfare of tobacco farmers.

To ensure transparency and accountability, the new guidelines require recipient LGUs to prepare quarterly reports on fund utilization and status of program/project implementation.

The reports must be posted within 20 days from the end of each quarter on the Web site of LGUs and Web site established by the DBM for this purpose and at least three conspicuous public spaces.

"The responsibility and accountability in the implementation of programs and projects and proper utilization and disbursement of the LGU shares shall rest upon the local chief executive and other local officials concerned," the memorandum read.

"It is also the responsibility of the said local officials to ensure that the LGU shares are utilized strictly in accordance with applicable budgeting, accounting, and auditing rules and regulations, and pertinent provisions of RA No. 9184 (Government Procurement Reform Act)." Enditem