US$139 million rebate

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Industry Spotlight

Philippines

Local government units that grow tobacco, including those in the provinces of Ilocos Norte, Ilocos Sur, Abra, La Union, Pangasinan, Cagayan, Isabela, Capiz, Iloilo, Cebu, Negros, Zamboanga del Sur, North Cotabato and Maguindanao, stand to benefit from a PHP6.37 billion (US$139 million) tax rebate due to be released by the government, according the website of the National Tobacco Authority (NTA).

Republic Act 8240, an amendment of the National Internal Revenue Code, mandates that 15% of the incremental revenue collected from the excise tax on tobacco products be returned to tobacco growing communities.

President Gloria Macapagal-Arroyo signed Executive Order (EO) 843 on November 5, 2009, ordering the release of the funds to provinces, cities and municipalities that produce burley and native tobacco. The funds represent the accumulated rebates due to the provinces from 1997 to 2009.

The law stipulates that the LGU’s share the rebate based on the volumes of leaf tobacco produced. The proceeds are to be invested in income enhancement, productivity and livelihood projects that benefit tobacco farmers, particularly developing alternative farming systems.

The lack of rules and regulations governing the implementation of the law since it was enacted in 1997 has meant the LGU’s have yet to receive any funds until now, according to the president.

The beneficiaries are to receive the funds in installments over the next seven years to 2016, payments to be overseen by the Departments of Finance, Budget and Management (DBM), the Bureau of Internal Revenue and NTA. The DBM has been charged with the responsibility of determining the actual shares due to individual LGUs.

The president has tasked the DBM to determine the shares of the LGUs as well as provide an annual appropriation cover.

Luckily, LGUs can choose to parlay their shares in advance if they opt to enroll in a "monetization program" - some readers may remember that it was the anomalous ‘disbursement’ of tobacco tax refunds that led to the downfall and impeachment of former president Joseph ‘Erap’ Estrada, who has now been pardoned and is reportedly running for president again.

Quarter 4, 2011

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