BIR Ruling

August 13, 1973 The Acting Chairman-General Manager Philippine Tobacco Administration Elliptical Road, Quezon City S i r : This is in reply to your letter dated July 17, 1973 requesting information as to the exact date of the termination of the subsidy of the Philippine Tobacco Administration from this Office under Republic Act No. 5555. cdtech Section 1 of Republic Act No. 5555 which took effect on June 21, 1969 amending Section 15 of Republic Act No. 1135, as last amended by Republic Act No. 4114, provides, among others, as follows: "SEC. 15. Capitalization To carry out the purpose of this Act, there is created a special fund to be known as the 'Tobacco Industry Promotion and which shall be taken from the taxes derived from the tobacco industry to be made available as follows: ten million pesos, which is hereby appropriated for the fiscal year nineteen hundreds sixty four and nineteen hundred sixty-five, and thereafter, an annual appropriating of ten million pesos is authorized for a period of five years. The Commissioner of Internal Revenue shall segregate and credit to the Philippine Tobacco Administration ten million pesos every year from specific taxes collected on tobacco products manufactured out of the native leaf tobacco until the unreleased appropriations accruing to the Philippine Tobacco Administration are fully funded. The annual appropriation of ten million person herein provided shall be released and turned over by the Commissioner of Internal Revenue to the Philippines Tobacco Administration in four equal installments within twenty days after the end of every quarter of each fiscal year. There shall be allocated, out of such fund, for trading and marketing operations, the following: four million five hundred thousand pesos for the Cagayan Valley, five hundred fifty thousand pesos for the Ilocos region, four hundred fifty thousand pesos for Central Luzon, fifty thousand pesos for Southern Luzon, one million pesos for Eastern Visayas, one million pesos for Western Visayas, six hundred thousand pesos for Northern Mindanao and nine hundred thousand pesos for Southern Mindanao, and one million pesos for the operating expenses of the Philippine Tobacco Administration: Provided, That if necessary to pay the amortization of outstanding loans and interests of the Administration, and/or of retirement benefits of officials and employees a portion, not exceeding five percent of the above allocations may be set aside annually for these two purposes: Provided, further, That no less than ninety percent of each regional allocation shall be used for cigar (native) filler leaf tobacco trading and not more than ten percent thereof for researches to improve the tobacco industry in all its phases: Provided, furthermore, That each allocation shall constitute a revolving fund for the respective region: Provided, finally, That the Chairman-General Manager shall have the power to transfer office and/or field personnel whenever the exigencies of the trading operations require." casia In the implementation of the aforequoted provision of law, this office has already released to the Office the following amounts: January to December, 1970 P10,000.000 January to December, 1971 10,000.000 January to December, 1972 10,000.000 January to June, 1973 5,000.000 Total 35,000.000 On the basis of our records, therefore, there is still due to you P15,000.00 to be released as follows: For the Period July 1- Dec. 31, 1973 P5,000,000 For the Period Jan. 1- Dec. 31, 1974 10,000,000 It should be observed, however, that under Section 15 of Republic Act No. 1135, as amended by Republic Act No. 4114, the P10,000,000 annual subsidy to the Philippine Tobacco Administration started beginning the fiscal year July 1, 1965 June 30, 1966 and to continue for five years or a total of P30,000,000. Under the then law, the subsidy partook of a regular appropriation disbursed by the Budget Commission. For ready reference, Section 15 of Republic Act No. 1135, as amended by Republic Act No. 4114, is reproduced as follows: "SEC. 15. Capitalization . To carry out the purpose of this Act, there is created a special fund to be known as the 'Tobacco Industry Promotion Fund' which shall be taken from the taxes derived from the tobacco industry to be made available as follows: ten million pesos, which is hereby appropriated for the fiscal year nineteen hundred sixty four and nineteen hundred and sixty five, and, thereafter, an annual appropriation of ten million pesos is authorized for a period of five years, which shall be released not later than the end of the third quarter of every fiscal year. This fund will be apportion in the following manner: fifteen percent will be used for native tobacco cigar fillers trading; and ten percent for researchers to improve the tobacco industry in all its phases." After the amendment effected by Republic Act No. 5555, the subsidy was automatically appropriated out of the specific taxes collected on tobacco products manufactured out of native leaf tobacco which is segregated and turned over by this Office to your Office. The obligation of this Office, however, to turn over to you the yearly subsidy consists only for as long as there remains any unreleased subsidy under the operations of the law prior to its amendment by Republic Act No. 5555. For this matter, this Office inquired by letter dated August 1, 1973 from the Auditor General, thru the Budget Commissioner, whether or not the unreleased appropriations accruing to the Philippine Tobacco Administration are already fully funded. If the Auditor General should inform this Office that the unreleased appropriations are already fully funded, then the obligation of this office to turn over to you the balance of P15,000,000 thru quarterly remittances until December 31, 1974 shall cease. On the other hand, should the auditor General say that the unreleased appropriations are not yet fully funded, then this Office will continue to turn over to you any and all unreleased appropriations determined by him until fully funded, and, if the amount of unreleased appropriations should tally with the balance of P15,000,000 as appearing in our records then, as stated at the onset, you shall be entitled to the subsidy until December 31, 1974. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR"