Implementation of Republic Act No. 5447 Which Took Effect September 25, 1968, Creating a Special Education Fund

November 11, 1968 REVENUE MEMORANDUM CIRCULAR NO. 42-68 SUBJECT : Implementation of Republic Act No. 5447 Which Took Effect September 25, 1968, Creating a Special Education Fund TO : The Chief, Accounting Division, Chief, Cash and Disbursement Division and all others concerned The Sixth Congress of the Republic of the Philippines in its Eighth Special Session passed H. No. 17066 which was signed into law on September 25, 1968 now known as Republic Act No. 5447, enunciating thereby a policy of the government to support the goals of education as willed by the Constitution, and creating a Special Education Fund to be constituted from the proceeds of an Additional Real Property Tax and a certain portion of the taxes on Virginia-type cigarettes and duties on imported leaf tobacco. The law directs the turn-over of the collections of the taxes monthly within fifteen days of every succeeding month. LLpr For ready reference the pertinent provisions of the law affecting the Bureau of Internal Revenue are hereunder quoted: "AN ACT CREATING A SPECIAL EDUCATION FUND TO BE CONSTITUTED FROM THE PROCEEDS OF AN ADDITIONAL REAL PROPERTY TAX AND A CERTAIN PORTION OF THE TAXES ON VIRGINIA-TYPE CIGARETTES AND DUTIES ON IMPORTED LEAF TOBACCO, DEFINING THE ACTIVITIES TO BE FINANCED, CREATING SCHOOL BOARDS FOR THE PURPOSE, AND APPROPRIATING FUNDS THEREFROM. xxx xxx xxx "SEC. 2. Financing sources of the Fund . This Fund shall consist of the proceeds of the following taxes: (a) a portion of the taxes on Virginia-type cigarettes and duties on imported tobacco; and (b) an additional tax on real property. "SEC. 3. Allocation of the taxes on Virginia-type cigarettes and the duties on imported leaf tobacco . The entire collection from specific taxes on locally-manufactured Virginia-type cigarettes and tariff duties on imported leaf tobacco shall be allocated as follows: The share of the local governments in the regular internal revenue allotment as provided for in Commonwealth Act Numbered Five hundred eight six as amended by Republic Act Numbered Seven hundred eighty-one, as further amended by Republic Act Numbered Five thousand one hundred eighty-five, shall be computed and set aside for distribution to local governments in accordance with existing laws. One per centum of the entire collection shall be retained by the Bureau of Internal Revenue for the purchase of strip stamps, apparatus, equipment, as well as improvement and adoption of modern methods for the effective enforcement and collection of the specific taxes mentioned in this paragraph. The balance shall be distributed as follows: ten per centum to the national share of the Fund; forty per centum to the Philippine Virginia Tobacco Administration Tobacco Fund created under Republic Act Numbered Four thousand one hundred fifty-five; and fifty per centum to the general fund of the National Government. xxx xxx xxx SEC. 9. Turnover of the collections; release of the Fund is ministerial . The municipal or city treasurers or city treasurers concerned shall retain the shares of the municipal or city government and turn over the portions of their collections of the taxes and penalties mentioned in Section two hereof appertaining, as the case may be, to the provincial government and/or to the National Government to the respective treasurers thereof monthly within fifteen days of every succeeding month. No portion of the collections may be transferred or diverted to the general or any other fund of the National Government, provinces, cities or municipalities, or used or expended for any purpose other than those specified in this Act. It shall be the ministerial duty of the Budget Commissioner, the Treasurer of the Philippines, all municipal, provincial and city treasurers, as well as of the officials and employees under their supervision and control to effect releases from the Fund within fifteen days from receipt of the order and/or authorization by the Secretary of Education, in respect to the share of the National Government from the Fund, and by the municipal, city or provincial school boards, in respect to their respective shares from the Fund. prll xxx xxx xxx "SEC. 13. Repealing clause . All Acts, parts of acts, executive orders, ordinances, rules and regulations which are inconsistent with the provisions of this Act are hereby repealed, amended or modified accordingly. "SEC. 14. Effectivity . This Act shall take effect on January first, nineteen and sixty-nine except the allocation under Section three which shall take effect upon approval of this Act. "Approved: September 25, 1968" Features of the Law The provisions of the law are clear and explicit. This Office, however, takes particular concern of Section three of the law which substantially amends the provisions of R.A. 4155 which created on June 20, 1964, a Tobacco Fund for financing the Virginia tobacco industry under the Philippine Virginia Tobacco Administration (PVTA). The new law prescribes a 40% share for the PVTA from specific tax collections on Virginia-type cigarettes and duties on imported leaf tobacco, after setting aside: (1) One per cent (1%) of the entire collection to be retained by the Bureau of Internal Revenue for expenses; and (2) The corresponding share of the local governments in the regular revenue allotment. The 50% of the PVTA allowed by R.A. 4155 has been reduced to 40% as defined above. Accordingly, the following rules and procedures are hereby promulgated to implement the financing aspects of the law: A. Issuance and control of "Strip stamps for Specific Taxes on locally manufactured Virginia-type cigarettes " 1. All stamps sold by the Cash and Disbursement Division during the month to local manufacturers of Virginia Type cigarettes shall be reported to the Chief Accountant within the first five (5) days of the succeeding month for accounting purposes. The report shall be in the present summarized form except that the sale of strip stamps to local manufacturers of Virginia type cigarettes shall be segregated and specifically identified. 2. The Chief of the Cash and Disbursement Division, who is charged with the responsibility for the issuance and/or sale of strip stamps to local manufacturers of Virginia-type cigarettes shall keep and maintain as usual a daily abstract of stamps (for specific taxes) received and issued properly identifying the sale and issue of a strip stamps for the manufacturers of Virginia-type cigarettes. For purposes of coordination, authorized representatives of the PVTA and of the Department of Education may be permitted to verify the daily abstract of stamps for specific taxes issued, and such other records as may be necessary. 3. The Accounting Division of the Bureau of Internal Revenue shall provide a new account code in the Accounting records to identify the 10% share payable to the "Special Education Fund". It shall, effective September 25, 1968, rectify the share of the PVTA payable to the "Tobacco Fund" from 50% to 40% as defined under Section 3 of R. A. 5447. B. Remittance of the allocations of the Specific Taxes on locally manufactured Virginia-type cigarettes 1. Beginning September 15, 1968, one (1) per centum of the gross collections shall be retained by the Bureau of Internal Revenue for the purchase of strip stamps, apparatus and equipment as well as improvement and adoption of modern methods for the effective enforcement and collection of the Specific taxes on cigarettes. 2. From the gross collections, the allotments to local governments on the basis of Commonwealth Act 586, as amended by Republic Act No. 781, as further amended by Republic Act No. 5185, shall be computed and set aside for distribution to local governments in accordance with existing laws. 3. Out of the balance after deducting the amount due to local governments and the Bureau of Internal Revenue, the balance shall be distributed as follows: a. Ten per centum for the Special Education Fund. b. Forty per centum for the Philippine Virginia Tobacco Administration. c. Fifty per centum for the General Fund of the National Government. 4. Within the first fifteen (15) days of the succeeding month, the Accounting Office of the Bureau of Internal Revenue, Manila, shall draw a treasury warrant representing the 10% share of the Special Education Fund as above defined on specific taxes collected during the previous month just ended on locally manufactured Virginia-type cigarettes, the share to be turned over to the Treasurer of the Philippines who shall effect releases from the Fund pursuant to Section 9 of Republic Act No. 5447. 5. Unused strip stamps returned by local manufacturers after approval by the Commissioner of Internal Revenue shall be refunded their money value by the Accounting Division thru the issuance of treasury warrants. The refund shall be reflected as a negative adjustment or deduction from the respective shares defined under Section 3 of the law, above quoted. 6. No treasury warrant drawn in favor of the Philippine Virginia Tobacco Administration (PVTA) or of the Treasurer of the Philippines, already countersigned by the Bureau Auditor, shall be released to any authorized representative of the aforesaid offices without the issuance of corresponding Official Receipt acknowledging the receipt thereof. This Revenue Memorandum Circular shall supersede and render nugatory the implementing rules promulgated by this Office on July 10, 1964 for R. A. 4155 insofar as the share of the PVTA is concerned. aisadc Republic Act No. 5447 was approved and took effect on September 25, 1968. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue APPROVED: (SGD.) EDUARDO Z. ROMUALDEZ Secretary of Finance