Legal basis and governing rule
- R.A. 7171 is the statutory basis for promoting the development of farmers in the Virginia tobacco-producing provinces.
- The funding mechanism under the circular is tied to 15% of excise taxes on locally manufactured Virginia type cigarettes.
- The National Tobacco Administration (NTA) issues documentation, reporting, and certifications that feed into DBM and LGU funding.
- The Bureau of Internal Revenue (BIR) collects and sets aside the relevant excise tax amount and certifies collections for computation and budgeting.
Coverage and responsible entities
- The circular covers the Department of Budget and Management, the Bureau of Internal Revenue, the National Tobacco Administration, and provinces producing Virginia tobacco.
- The circular covers the local government units (including municipalities and cities) of each beneficiary province.
- The circular directs DBM and BIR actions to produce funding allotments and to support budget preparation and remittance timing.
- The circular directs NTA actions on production documentation, tobacco acceptances, and certification approvals.
Functional responsibilities by agency
- DBM must include in the Internal Revenue Allotment (IRA) portion of the National Expenditures Program (NEP) an amount equivalent to 15% of excise taxes on locally manufactured Virginia type cigarettes.
- DBM must base the IRA/NEP amount on actual BIR collection for the second calendar year preceding the year of distribution.
- DBM, based on NTA certification, must determine:
- qualified beneficiary provinces and their respective LGUs by considering average annual Virginia tobacco production of not less than one million kilos; and
- the corresponding amounts of shares based on adjusted Virginia acceptances.
- DBM must issue funding checks directly to the LGUs (provinces, cities, and municipalities) of beneficiary provinces monthly, using the Advice of Allotment released for this purpose.
- BIR must collect and set aside the equivalent of 15% of the excise tax collection on locally manufactured Virginia type cigarettes for the second calendar year preceding the year of distribution.
- BIR must submit to DBM a certification of the set-aside amount not later than April 15 of the current year.
- NTA must implement a documentation and reporting system for Virginia tobacco production and Virginia Tobacco Acceptances by trading centers in beneficiary provinces and collect other necessary information such as total production volume per province and breakdowns by district, cities, and municipalities.
- NTA must provide DBM and the concerned LGUs with a certification approved by the NTA Administrator of Virginia tobacco production and Virginia tobacco acceptances by province (including congressional districts, cities, and municipalities) for the immediate past year, submitted not later than the first quarter of the current year.
- The LGUs of each beneficiary province must receive distributions from the province’s share proportionately, record receipts and disbursements separately to account for balances, and ensure projects are approved by their legislative councils through an appropriation ordinance or resolution.
Computation and qualification rules
- The fund equivalent to 15% of excise taxes on locally manufactured Virginia type cigarettes must be computed based on actual collections, as certified by BIR, for the second calendar year preceding the year of distribution (budget year).
- Qualified beneficiary provinces are determined by DBM based on average annual production of not less than one million kilos for the immediate past two (2) years, using NTA Administrator–approved certification.
- The initial year for determining the average annual production starts in 1991 and onwards.
- Pro-rata shares among beneficiary provinces must be based on annual volume of adjusted Virginia tobacco acceptances for the immediate past year as certified by NTA.
- The “immediate past year” for pro-rata shares must be understood as two years preceding the budget year (e.g., if 1994 is the budget year, the two years preceding is 1992).
Financing, remittance, and cash release
- DBM must release each beneficiary province’s share directly to the LGUs on a quarterly basis through issuance of Advice of Allotment.
- DBM must issue a funding check on a monthly basis, using BIR certification of the excise tax amount actually collected and remitted to the Bureau of Treasury, subject to usual cash programming procedure and budgetary constraint.
- The LGUs’ distribution is structured through fixed percentage allocations to specific government units within beneficiary provinces.
LGU distribution and mandatory allocations
- The LGU shares of a beneficiary province must be distributed as follows:
- 30% to the provincial government of the beneficiary province.
- 40% to the municipalities and cities, to be further distributed:
- 50% divided equally among all municipalities and cities of the beneficiary province; and
- 50% divided according to the volume of their respective tobacco productions.
- 30% to the municipalities and cities in the congressional districts of a beneficiary province in consultation with representatives of the congressional districts of the province, with each unit’s share based on the volume of tobacco production within its district.
- All LGU shares accruing to local government units must use 50% of all shares for barangay economic development projects.
- LGUs must maintain separate accounting records for receipts and disbursements of the released funds to account for any remaining balance.
Special account and eligible project purposes
- LGU shares must be treated as a special account under the general fund of the LGUs of provinces.
- The special account must be utilized for these project types:
- Cooperative projects to enhance better quality of products, increase productivity, guarantee the market, and increase farmers’ income.
- Livelihood projects, particularly development of alternative farming systems to enhance farmers’ income.
- Agro-industrial projects enabling tobacco farmers in Virginia tobacco-producing provinces to be involved in management and subsequent ownership of these projects, including post-harvest and secondary processing such as cigarette manufacturing and by-product utilization.
- Infrastructure projects such as farm-to-market roads.
Implementation, approvals, and governing timeline
- NTA certifications must be approved by the NTA Administrator and submitted to DBM not later than the first quarter of the current year.
- BIR certifications for set-aside amounts must be submitted to DBM not later than April 15 of the current year.
- Provinces, cities, and municipalities must have the projects to be implemented duly approved by their legislative councils through an appropriation ordinance or resolution.
- DBM releases are structured so quarterly allotments are supported by monthly funding checks, consistent with cash programming and budgetary constraints.
Effect of the circular
- The circular takes immediate effect and implements the funding, certification, qualification, and LGU distribution scheme for R.A. 7171.
- The circular operates as an amendment to NTA Memorandum Circular No. 61.