Four municipalities in the Ilocos region of the Philippines that, during the past two years, received the biggest shares from tobacco excise taxes have failed to publicly disclose how the funds are being spent, in violation of budget rules, according to a major Vera Files story by Maria Feona Imperial, Lucille Sodipe and Jake Soriano, published in the Philippine Star.

Candon City, the municipalities of Cabugao and Santa Cruz in Ilocos Sur, and Balaoan in La Union reportedly each received more than a billion pesos in tobacco excise taxes since 2016 but failed to comply with Department of Budget and Management (DBM) memoranda reporting requirements.

LGUs [Local Government Units] that benefit from excise taxes are required to prepare quarterly reports on fund utilization and the status of projects, following a prescribed format. These reports are to be posted within 20 days after every quarter on the LGUs’ websites, and in at least three conspicuous public places.

Two laws, Republic Act 7171 and RA 8240, later amended by RA 10351, provide tobacco-producing local governments 15 percent of total excise taxes collected annually on the sale of tobacco products.

Local governments’ shares in these taxes, which are earmarked to ‘advance the self-reliance of tobacco farmers’, have risen to more than P41 billion since 2016, an election year, when the national government started releasing a windfall of excise tax shares after the sin tax reform law, which imposed higher taxes on cigarettes.

Prior to 2016, the funds were channeled through lawmakers, a scheme that the Supreme Court declared unconstitutional due to post-enactment intervention in the implementation of the national budget.

The budget releases were since accompanied with guidelines on the use of funds and ’emphasized the concomitant posting and reporting (of) requirements to enhance transparency and accountability’.

Yet VERA Files said that it had found that the top recipients of tobacco excise tax shares since 2016 had failed to comply with the DBM’s reporting requirements.

Reports showed also that proceeds from the taxes were being used to fund projects that did not directly benefit tobacco farmers.

Budget Secretary Benjamin Diokno, in an interview with VERA Files, said noncompliance could be grounds for administrative action, including suspension from office.

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