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Tobacco tax share: P392m for Claveria

By Lina Sagaral Reyes
Special Correspondent .

FOR producing the bulk of the province’s Brightleaf Virginia tobacco in 2015, Claveria town gets P392,255,275 of the more than  P775 million allocated for the province from the tobacco excise taxes for the year 2016, the Department of Budget and Management (DBM) disclosed in a Local Budget Memorandum issued on June 14, this year.

This amount is more than double the actual Internal Revenue Allotment of P155 million the municipality received in 2016.

Meanwhile, the province of Misamis Oriental takes about P232 million, and two other tobacco-producing local governments, Balingasag and Gingoog City, get P7 million and P6 million, respectively.

The remaining 30 percent is distributed evenly among the rest of Misamis Oriental’s 22 towns and two other cities, including Cagayan de Oro and El Salvador,  at P5,965,253 each.

The DBM Local Budget Memorandum 79 showed that the total earmarked funds reached some P775,482,916 for the entire Misamis Oriental, the only province in Mindanao to get a share from the Virginia tobacco excise taxes. This amount represents only 6.02 percent of the total amount of P12.887 billion that DBM released to five provinces, four of which are from Region 1. Almost 60 percent of the national funds went to Ilocos Sur, P7.676 billion; Abra got P1.922 billion; and La Union, P1.449 billion.

In 2015, the Brightleaf or Virginia-type of tobacco was grown in 1,231 hectares by 1,375 contract growers in Claveria, 71 kilometers southeast of this city, according to Ma. Mercedes Ayco, tobacco production and regulation officer for Mindanao of the National Tobacco Administration (NTA). 

The Phillip Morris Fortune Tobacco Corp. (PMFTC) had invested $50 million for establishing the production systems and on-site processing of the crop in this town since 2012.

The entire province of Misamis Oriental qualified as a beneficiary as its annual production of Virginia leaf tobacco reached more than one million kilos in 2015.

The NTA noted that the annual production in 2015 hit 1,388,469.88 kilos, or more than 1,388 metric tons, thus qualifying the province as a recipient of the share of the excise taxes. Claveria produced 99.63 percent of this total, at 1,383,272.40 while the remaining .38 percent were harvested in Balingasag (3,712.49 kilos) and Gingoog City, (1,484.99 kilos).

According to the DBM memorandum, the individual shares of the local governments were pro-rated based on their respective volumes of production and trade acceptances, as reflected in the certifications issued by the National Tobacco Administration and endorsed by the Department of Agriculture. The funds will be sourced from 2018 general appropriations budget

Under Republic Act 7171, which promotes the development of farmers in Virginia-tobacco producing provinces, Misamis Oriental is entitled to “the special support fund for developmental projects to be implemented by the local governments of the provinces concerned.”

According to DBM memorandum signed by Jane Abuel, officer-in-charge, based on RA 7171, the special support fund to the Virginia tobacco-producing provinces shall be utilized to advance the self-reliance of the tobacco farmers through:

• Cooperative projects that will enhance better quality of products, increase productivity, guarantee the market and as a whole increase farmers’ income;

• Livelihood projects particularly the development of an alternative farming system to enhance farmers’ income;

• Agro-industrial projects that will enable tobacco farmers in the Virginia tobacco-producing provinces to be involved in the management and subsequent ownership of these project such as post-harvest and secondary processing like cigarette manufacturing and by-product utilization; and

• Infrastructure projects such as farm-to-market roads.

The tobacco excise funds come from the proceeds of fifteen percent of the excise taxes on locally manufactured Virginia-type of cigarettes.

The RA 7171 provides that the funds allotted shall be divided among the beneficiary provinces pro rata according to the volume of Virginia tobacco production. Towns, where tobacco is grown, get a 40-percent share, while the province gets a 30-percent share and the congressional districts claim the rest of the 30-percent share. But the DBM guidelines say that instead of giving the amount to the congressional districts, the funds were channeled directly to individual local governments. The guidelines were issued after the Supreme Court had prohibited legislative “pork barrel” and budgetary intervention as these are unconstitutional.

Under Republic Act 10351 passed in 2013, the sin tax reform law, taxes on cigarettes and tobacco products increased by about 117 percent. The 2013 tax policy is a legislative measure to fulfill the country’s commitment to reduce the demand for tobacco under the World Health Organization Framework Convention on Tobacco Control, of which the Philippines is a signatory.


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TREND MAKER. Mindanao Gold Star Daily was established in 1989 to set ablaze a new meaning & flame to the local newspaper business. Throughout the years it continued its focus and interest in the rural areas & pioneered the growth of countryside journalism.

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