Probe on shares of LGUs from tobacco excise taxes sought

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VIGAN CITY, Ilocos Sur  – For nearly three decades now, benefits from tobacco excise taxes shares of local government units have remained a tobacco farmer’s dream.

Since Republic Act 7171 or “An Act to Promote the Development of the Farmers in the Virginia Tobacco-Producing Provinces,” was enacted in 1992 principally authored by then Ilocos Sur lawmaker Luis “Chavit”Singson, alleged corruption from administration to another instead flourished, while farmers were left drooling.

This, amidst Congress’ again approving to hike tobacco excise taxes, hence, LGU tax shares increases are in the offing.

Farmers though are not surrendering.  They are asking President Rodrigo Duterte and lawmakers to probe how millions of these excise tax shares are being spent.

Iloko farmer-leader Bernard Vicente of the Federation of Tobacco Growers in Ilocos Sur is citing as an example, the still unfinished almost P500M Farmer’s Convention Center in Vigan City, which they alleged is among the “ghost projects” where supposed excise tax funds went.

RA 7171 is specific with the kinds of projects that the LGUs can fund with their share from the tobacco excise tax.  These are:  cooperative projects that will increase the tobacco farmers’ income; development of alternative farming systems; agro-industrial projects that will be  co-managed and eventually owned by tobacco  farmers; and infrastructure projects, such as farm-to-market roads. Under section 2 of the law and section 8 of RA 8240, 15 percent of the incremental revenue collected from the excise tax on tobacco products shall be exclusively utilized for programs to increase the income and productivity of tobacco farmers and to involve them in post-harvest and secondary processing such as cigarette manufacturing.

In an open letter to Duterte, farmers appealed to the President and Congress to review the FCC contract.  The letter was also sent to Commission on Audit Commissioner Michael Aguinaldo and Ombudsman Samuel Martirez.

Vicente bewailed, since the contract for the construction of the project was awarded in 2008, not even 10 percent was completed a decade after.  Aside from which, the farmer-leader said,  “the funds used in Farmers Convention Center should have been allocated to projects that will benefit us directly.”\

The Commission on Audit report last 2017 had raised “doubts” on the validity, accuracy and fair presentation in the General Fund disbursements of Ilocos Sur amounting to P1.34 billion.

The mothballed P332 million tomato processing plant in Santa, also in Ilocos Sur, is another “white elephant” project financed by RA 7171.

A total of P86.142 million from Ilocos Sur’s tobacco tax share from1996 to 1999 was initially appropriated for the construction of that tomato paste plant.  It was augmented by a P245.887-million loan from the Philippine National Bank.  The plan was to source the payments to the PNB from succeeding remittances from RA 7171.

But COA had found that the construction project was overpriced by P24.7 million, benefiting a private contractor, NS International Inc. The contractor was accordingly paid P73.5 million for civil works when the evaluated cost was only P48.7 million.

The Ilocos Sur provincial government also created the corporation– Ilocos Sur Tomato Paste Plant Inc. (ISTPP) — to manage the tomato paste plant. The COA though found, that the Sangguniang Panlalawigan did not authorize the creation of ISTPP.  Thus, the provincial government was financing a private project.

Securities and Exchange Commission records show that the incorporators of ISTPP were private individuals, but Singson, then representing the provincial government, was the major stockholder.

Vicente also called out anomalies present in flue-curing barns and facilities using money from RA 7171.  Thirty-four tobacco flue-curing and re-drying facilities were constructed but not without irregular transactions, he said.

In 1998, the Sangguniang Panlalawigan appropriated P76 million for the construction of 34 flue curing barns.

State auditors have found that the cost for the 34 barns was overpriced by P28 million, while COA also noticed cash advances totalling P190 million granted to Singson for supposed payment for the flue-curing barns.  The COA said the cash advances should not have been allowed since “these were not intended for petty expenses and the disbursement exceeding P15,000,” as set forth in a COA Circular in February 1997.

Singson reportedly failed to present liquidation documents for the cash advances but in August 2000, he showed documents when he exposed ousted Pres. Joseph Estrada’s alleged machinations to stash away with millions of the excise taxes.

Some P300 million of the RA 7171 fund was also found by COA to have been granted to an NGO in 1998.  The Southern Ilocos Sur Federation of Tobacco Based Cooperatives, which had assets of only P215,000.00 got the financial assistance to operate the Santa tomato paste plant.

But a total of P110.178 million out of the P300 million were not properly documented, COA said in the report, adding, its president, despite repeated requests, failed to submit the required papers to support its expenses.

After 2001, Singson ended his nine-year stint as governor and now Rep. Deogracias Savellano succeeded him.

The alleged irregularities continued.  In 2003, the COA found that “improper charges” totaling P45.7 million were made by the Ilocos Sur provincial government against the tobacco excise tax fund.

The Ilocos Sur government also gave financial assistance of P37 million to the Ilocos Sur Tomato Paste Plant Inc. (ISTPPI) that was not supported by liquidation reports also in 2003.  Further investigation showed that the financial assistance was regarded as a donation instead of a loan to the ISTPPI.

Again in 2004, the COA noted disbursements totaling P85.6 million improperly charged against the tobacco excise fund.

Moreover, the provincial government granted another financial assistance to ISTPPI amounting to P20 million, despite the latter’s failure to liquidate the financial assistance it got in 2003.

Another NGO, Buying and Bulk Curing Center in Sinait, Ilocos Sur, got P31 million as financial assistance.

In 2005, when Singson returned as governor, the provincial government, COA said,  made another allegedly “improper diversion” totalling P72.5 million.  For the third year, ISTPPI got P19.6 million, in spite of two previous COA notices disallowing it from receiving any funds.

“25 Years Of Tobacco Excise Tax” Nearly three decades that millions of funds from the tobacco excise taxes have been handed to LGUs.

The budget department’s Local Budget Memorandum No. 71 on September 21, 2015 and Memorandum Nos. 72 and 73 dated March 8, 2016 show that some P10.72 billion have been received by Ilocos region provinces from its share of the excise taxes from tobacco.

Ilocos Sur, Ilocos Norte and La Union received a total of P9.11 billion for the 359 million kilograms of tobacco produced in 2013, DBM also showed.

Likewise the finance department said that some P91.60 billion was collected from tobacco in 2016 and at least  P120.66 billion in 2017.

Despite of the huge taxes coming from the industry,  cries Zaldy Alfiler,  leader of the militant peasant group Solidarity of Peasants Against Exploitation (Stop-Exploitation),  tobacco farmers still face unending troubles as these billions of funds are misused.

DBM shows that a total of 40 percent of budgets of LGUs in the Ilocos region from the collected tobacco excise taxes for the past five years.  But these millions doesn’t benefit tobacco farmers, Alfiler blurts out.  “Saan met a mapakpakinabangan dagiti mannalon gapu iti pananggamulo wenno discretion dagiti LGUs nu kasano a busbosen ti nasao a pondo,” (Farmers doesn’t benefit from these because of the discretion of LGUs how to spend them).

Most LGUs, Alfiler continues, spend tobacco excise tax shares without referring to RA 7171’s mission citing anomalies have been spilled about how Ilocos Norte also spent P1.5 billion including the questionable P66.45 million for multicabs, P193.4 million for medicines, books, sanitizer, Coaster vehicle, uniforms, sprayer and foliar fertilizer from RA 7171 tax shares.

The P10.72 billion total shares of the Ilocos provinces  could have well assisted the 37,000 tobacco farmers overcome their woes,  Alfiler explains, citing irrigation facilities that would have watered 26,805 hectares or funded 4,765 good-quality tractors.

Ilocos Sur has been getting the “lion’s share” of the tobacco excise tax fund for local governments.  Of the over P10.72B,  50 percent went to Ilocos Sur; 20 percent, La Union; I5 percent, Ilocos Norte; and 5 percent, Abra.  The share corresponds to the volume of tobacco produced by each province.

Accordingly, tobacco tax share is divided into: 40 percent for the provincial government; 30 percent, municipal governments; and 30 percent, district representatives.

Based on this percentage, Ilocos Sur provincial government received P3 billion from 1999 to 2006.

At least a billion or (a third of that amount) was found by COA to have been misused or unaccounted for.

Singson, who has since become Narvacan councilor in 2016, is now running for the mayoralty post in the town, has remained unusually silent on the allegations.

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