Title XI, Chapter II – Special Disposition of Certain National Internal Revenue Taxes

SECTION 286.  Disposition of Proceeds of Insurance Premium Tax. – Twenty-five percent (25%) of the premium tax collected under Section 123 of this Code shall accrue to the insurance Fund as contemplated in Section 418 0f Presidential Decree No. 612 which shall be used for the purpose of defraying the expenses of the Insurance Commission. The Commissioner shall turn over and deliver the said insurance Fund to the insurance Commissioner as soon as the collection is made.

SECTION 287.  Shares of Local Government Units in the Proceeds from the Development and Utilization of the National Wealth. – Local government units shall have an equitable share in the proceeds derived from the utilization and development of the national wealth, within their respective areas, including sharing the same with the inhabitants by way of direct benefits.

(A)       Amount of Share of Local Government Units. – Local government units shall, in addition to the internal revenue allotment, have a share of forty percent (40%) of the gross collection derived by the national government from the preceding fiscal year from excise taxes on mineral products, royalties, and such other taxes, fees or charges, including related surcharges, interests or fines, and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction. 

(B)       Share of the Local Governments from Any Government Agency or Government-owned or-Controlled Corporation. – Local government units shall have a share, based on the preceding fiscal year, from the proceeds derived by any government agency or government-owned or-controlled corporation engaged in the utilization and development of the national wealth based on the following formula, whichever will produce a higher share for the local government unit:

• (1)        One Percent (1%) of the gross sales or receipts of the preceding calendar year; or
• (2)        Forty percent (40%) of the excise taxes on mineral products, royalties, and such other taxes, fees or charges, including related surcharges, interests or fines the government agency or government- owned or-controlled corporation would have paid if it were not otherwise exempt.

(C)       Allocation of Shares. – The share in the preceding Section shall be distributed in the following manner:

(1)        Where the natural resources are located in the province:

• (a)        Province- twenty percent (20%);
• (b)       Component city/municipality- forty-five percent (45%); and
• (c)        Barangay- thirty-five percent (35%).

Provided, however, That where the natural resources are located in two (2) or more provinces, or in two (2) or more component cities or municipalities or in two (2) or more barangays, their respective shares shall be computed on the basis of: (1) Population- seventy percent (70%); and (2) Land area- thirty percent (30%).

(2)        Where the natural resources are located in a highly urbanized or independent component city:

• (a)        City-sixty-five percent (65%); and
• (b)       Barangay- thirty-five percent (35%).

Provided, however, That where the natural resources are located in two (2) or more cities, the allocation of shares shall be based on the formula on population and land area as specified in subsection (c)(1) hereof.

SEC. 288.         Disposition of Incremental Revenues. –

(A)       Incremental Revenues from Republic Act No. 7660. – The incremental revenues from the increase in the documentary stamp taxes under R.A. No. 7660 shall be set aside for the following purposes:

(1)        In 1994 and 1995, twenty-five percent (25%) thereof respectively, shall accrue to the Unified Home-Lending Program under Executive Order No. 90 particularly housing program to be allocated as follows: fifty percent (50%) for mass-socialized housing; thirty percent (30%) for the community mortgage program; and twenty percent (20%) for land banking and development to be administered by the National Housing Authority: Provided, That not more than one percent (1%) of the respective allocations hereof shall be used for administrative expenses;

(2)        In 1996, twenty-five percent (25%) thereof to be utilized for the National Health Insurance Program that hereafter may be mandated by law;

(3)        In 1994 and every year thereafter, fifty percent (50%) thereof shall accrue to a Special Infrastructure Fund for the construction and repair of roads, bridges, dams and irrigation, seaports and hydroelectric and other indigenous power projects: Provided, however, That for the years 1994 and 1995, thirty percent (30%), and for the years 1996,1997 and 1998, twenty percent (20%), of this fund shall be allocated for depressed provinces as declared by the President as of the time of the effectivity of R.A. No. 7660: Provided, further, That availments under this fund shall be determined by the President on the basis of equity.

Provided, finally, That in paragraphs (2), (3) and (4) of this Section, not more than one percent (1%) of the allocated funds thereof shall be used for administrative expenses by the implementing agencies.

(B)       (As amended by RA No. 10351 (December 19, 2012)). Repealed by RA No. 11346 (July 25, 2019)).

(C)       (As amended by RA No. 10351 (December 19, 2012)). Repealed by RA No. 11346 (July 25, 2019)).

(D)       Incremental Revenue from the Value-added Tax. – Fifty percent (50%) of the local government unit’s share from the incremental revenue from the value-added tax shall be allocated and used exclusively for the following purposes:

(1)        Fifteen percent (15%) for public elementary and secondary education, to finance the construction of buildings, purchases of school furniture and in-service teacher trainings;

(2)        Ten percent (10%) for health insurance premiums of enrolled indigents as a counterpart contribution of the local government to sustain the universal coverage of the national health insurance program;

(3)        Fifteen percent (15%) for environmental conservation to fully implement a comprehensive national reforestation program; and

(4)        Ten percent (10%) for agricultural modernization to finance the construction of farm-to-market roads and irrigation facilities.

Such allocations shall be segregated as separate trust funds by the national treasury and shall be over and above the annual appropriation for similar purposes.

(E)        The amount of Fifteen million pesos (P15,000,000) shall be allocated for a Public Information and Education Program to be administered by the Bureau of Internal Revenue, explaining clearly to businesses their registration, invoicing and reporting requirements under the value-added tax rules.

Such programs should include seminars and visits to taxpayers to familiarize them with the tax, and the development and publication of easy-to-read guides on the value-added tax.”

(F)        Incremental Revenues from the Tax Reform for Acceleration and Inclusion (TRAIN). – For five (5) years from the effectivity of this Act, the yearly incremental revenues generated shall be automatically appropriated as follows:

(1)        Not more than seventy percent (70%) to fund infrastructure projects such as, but not limited to, the Build, Build Program and provide infrastructure programs to address congestion through mass transport and new road networks, military infrastructure, sports facilities for public schools, and portable drinking water supply in all public places; and

(2)        Not more than thirty percent (30%) to fund:

(a)        Programs under Republic Act No. 10659, otherwise known as ‘Sugarcane Industry Development Act of 2015,’ to advance the self-reliance of sugar farmers that will increase productivity, provide livelihood opportunities develop alternative farming systems and ultimately enhance farmers’ income;

(b)       Social mitigating measures and investments in: (i) education, (ii) health, targeted nutrition, and anti-hunger programs for mothers, infants, and young children, (iii) social protection, (iv) employment, and (v) housing that prioritize and directly benefit both the poor and near-poor households;

(c)        A social welfare and benefits program where qualified beneficiaries shall be provided with a social benefits card to avail of the following social benefits:

(i)         Unconditional cash transfer to households in the first to seventh income deciles of the National Household Targeting System for Poverty Reduction (NHTS-PR), Pantawid Pamilyang Pilipino Program, and the social pension program for a period of three (3) years from the effectivity of this Act: Provided, That the unconditional cash transfer shall be Two hundred pesos (P200.00) per month for the first year and Three hundred pesos (P300.00) per month for the second year and third year, to be implemented by the Department of Social Welfare and Development (DSWD);

(ii)        Fuel vouchers to qualified franchise holders of Public Utility Jeepneys (PUJs);

(iii)       For minimum wage earners, unemployed, and the poorest fifty percent (50%) of the population:

(1)        Fare discount from all public utility vehicles (except trucks for hire and school transport service) in the amount equivalent to ten percent (10%) of the authorized fare;

(2)        Discounted purchase of National Food Authority (NFA) rice from accredited retail stores in the amount equivalent to ten percent (10%) of the net retail prices, up to a maximum of twenty (20) kilos per month; and

(3)        Free skills training under a program implemented by the Technical Skills and Development Authority (TESDA).

“Provided, That benefits or grants contained in this Subsection shall not be availed in addition to any other discounts.

(iv)       Other social benefits programs to be developed and implemented by the government.

“Notwithstanding any provisions herein to the contrary, the incremental revenues from the tobacco taxes under this Act shall be subject to Section 3 of Republic Act No. 7171, otherwise known as ‘An Act to Promote the Development of the Farmers * in the Virginia Tobacco Producing Provinces,’ and Section 8 of Republic Act No. 8240, otherwise known as ‘An Act Amending Sections 138, 139, 140 and 142 of the National Internal Revenue Code, as amended, and for Other Purposes.’

“An interagency committee, chaired by the Department of Budget and Management (DBM) and co-chaired by DOF and DSWD, and comprised of National Economic and Development Authority (NEDA), Department of Transportation (DOTr), Department of Education (DepEd), Department of Health (DOH), Department of Labor and Employment (DOLE), National Housing Authority (NHA), Sugar Regulatory Administration (SRA), Department of Interior and Local Government (DILG), Department of Energy (DOE), NFA, and TESDA, is hereby created to oversee the identification of qualified beneficiaries and the implementation of these projects and programs: Provided, That qualified beneficiaries, under Subsection (c) hereof shall be identified using the National ID System which may be enacted by Congress.

Within sixty (60) days from the end of the three (3)-year period from the effectiveness of this Act, the interagency committee and respective implementing agencies for the above programs shall submit corresponding program assessments to the COCCTRP. The National Expenditure Program from 2019 onwards shall provide line items that correspond to the allocations mandated in the provisions above.

At the end of five (5) years from the effectivity of this Act, all earmarking provisions under Subsection (F), shall cease to exist and all incremental revenues derived under this Act shall accrue to the General Fund of the Government.” )As amended by RA No. 9334 (Dec. 21, 2004), RA No. 9337 (May 24, 2005). RA No. 10963 (December 19, 2017)).

SEC. 288-A.     Disposition of Revenues from Excise Tax on Sugar– Sweetened Beverages, Alcohol, Tobacco Products, Heated Tobacco Products, and Vapor Products. –

(A)       Revenues from Excise Tax on Sugar-Sweetened Beverages from republic Act No. 10963. – The provisions of existing laws to the contrary notwithstanding, fifty percent (50%) of the total revenues collected from the excise tax on sugar-sweetened beverages shall be allocated and used exclusively in the following manner:

(1)        Eighty percent (80%) to the Philippine Health Insurance Corporation (Philhealth) for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care Act’ of 2019; and

(2)        Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance, the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH;

(C)       Revenues from Excise Tax on Tobacco Products. – The provisions of existing laws to the contrary notwithstanding, the total revenues collected from the excise tax on tobacco products shall be distributed in the following manner:

(1)        An annual amount equivalent to five percent (5%) of the revenue collection from excise tax on tobacco products, but not exceeding Four billion pesos (P4,000,000,000.00) shall be allocated and divided among the provinces producing burley and native tobacco in accordance with the volume of tobacco leaf production.

The respective shares of the local government units of a beneficiary province under this Section shall be distributed as follows:

(i)         Fifty percent (50%) shall be allocated to the provincial government of the beneficiary province; and

(ii)        Fifty percent (50%) shall be proportionately allocated to the municipalities and cities of the  beneficiary province on the basis of the volume of their respective tobacco production.

The fund shall be exclusively utilized for programs to promote economically viable alternatives for tobacco farmers and workers such as:

(a)        Programs that will provide inputs, training, and other support for tobacco farmers who shift to production of agricultural products other than tobacco including, but not limited to, high-value crops, spices, rice, corn, sugarcane, coconut, livestock and fisheries;

(b)       Programs that will provide financial support for tobacco farmers who are displaced or who cease to produce tobacco;

(c)        Cooperative programs to assist tobacco farmers in planting alternative crops or implementing other livelihood projects;

(d)       Livelihood programs and projects that will promote, enhance, and develop the tourism potential of tobacco-growing provinces;

(e)        Infrastructure projects such as farm-to-market roads, bridges, schools, hospitals, rural health facilities and irrigation systems; and

(f)        Agro-industrial projects that will enable tobacco farmers to be involved in the management and subsequent ownership of projects, such as post-harvest and secondary processing like cigarette manufacturing and by-product utilization.

(2)        Fifty percent (50%) of the total excise tax collection from tobacco products shall be allocated and used exclusively in the following manner:

(a)        Eighty percent (80%) to Philhealth for the implementation of Republic Act no. 11223, otherwise known as the ‘Universal Health Care Act’  of 2019; and

(b)       Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance, the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH; and

(D)       Revenues from Excise Tax on Heated Tobacco Products and Vapor Products. – The provisions of existing laws to the contrary notwithstanding, the total revenues collected from the excise tax on heated tobacco products and vapor products shall be allocated and used exclusively in the following manner:

(1)        Eighty percent (80%) to Philhealth for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care  Act’ of 2019; and

(2)        Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance and the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH;

Provided, That the Department of Budget and Management (DBM), in consultation with the Department of Agriculture and National Tobacco Administration, shall issue rules and regulations governing the allocation  and disbursement of the fund allocated to tobacco-producing provinces, not later than one hundred eighty (180) days from the effectivity of this Act.

Provided, further, That the allocation for Universal Health Care shall be based on the collection of the second fiscal year preceding the current fiscal year. (As amended by RA No. 11346 (July 25, 2019)).

SEC. 289.         Special Financial Support to Beneficiary Provinces Producing Virginia Tobacco. – The financial support given by the National Government for the beneficiary provinces shall be constituted and collected from the proceeds of fifteen percent (15%) of the excise taxes on locally manufactured Virginia-type of cigarettes, but not exceeding Seventeen billion pesos (P17,000,000,000.00) notwithstanding the provision of Section 3 of Republic Act No. 7171.

The funds allotted shall be divided among the beneficiary provinces pro-rata according to the volume of Virginia tobacco production.

Provinces producing Virginia tobacco shall be the beneficiary provinces under Republic Act No. 7171: Provided, however, That to qualify as beneficiary under R.A. No. 7171, a province must have an average annual production of Virginia leaf tobacco in an amount not less than one million kilos:

Provided, further, That the Department of Budget and Management (DBM) shall each year determine the beneficiary provinces and their computed share of the funds under  R.A. No. 7171, referring to the National Tobacco Administration (NTA) records of tobacco acceptances, at the tobacco trading centers for the immediate past year.

The Secretary of Budget and Management is hereby directed to retain annually the said funds equivalent to fifteen percent (15%) of excise taxes on locally manufactured Virginia-type cigarettes, but not exceeding Seventeen billion pesos (P17,000,000,000.00) notwithstanding the provision of Section 3 of R.A. No. 7171, to be remitted to the beneficiary provinces qualified under R.A. No. 7171.

The provisions of existing laws to the contrary notwithstanding, the fifteen  percent (15%) share from government revenues mentioned in R.A. No. 7171, but not exceeding Seventeen billion pesos (P17,000,000,000.00) notwithstanding the provision of Section 3 of R.A. No. 7171, and due to the  Virginia tobacco-producing provinces shall be directly remitted to the provinces concerned.

Provided, That this Section shall be implemented in accordance with the guidelines of Memorandum Circular No. 61-A dated November 28, 1993, which amended Memorandum Circular No. 61, entitled ‘Prescribing Guidelines for Implementing Republic Act No. 7171,’ dated January 1, 1992 and that the funds be utilized to further advance self-reliance and expand viable alternatives for Virginia-tobacco farmers and workers through:

(1)        Cooperative projects that will enhance better quality products, increase productivity, guarantee the market and as a whole increase farmers income;

(2)        Livelihood projects particularly the development of alternative farming systems to enhance farmer’ income;

(3)        Agro-industrial projects that will enable tobacco farmers in the Virginia tobacco-producing provinces to be involved in the management and subsequent ownership of these projects such as post-harvest and secondary processing like cigarette manufacturing and by-product utilization;

(4)        Infrastructure projects such as farm-to-market roads, bridges, schools, hospitals, rural health facilities, and irrigation systems;

(5)        Programs and projects that will promote, enhance, and develop the tourism potential of Virginia tobacco-growing provinces; and

(6)        Programs that will provide financial assistance for tobacco farmers that were displaced or who cease to produce tobacco.

Provided, further, That in addition to the local government units mentioned in the above circular, the concerned officials in the province shall be consulted as regards the identification of projects to be financed.” (As amended by RA No. 11346 (July 25, 2019)).

SEC. 289-A.     Support for Local Water Districts. – The amount that would have been paid as income tax and saved by the local water district by virtue of its exemption to the income taxes shall be used by the local water district concerned for capital equipment expenditure in order to expand water services coverage and improve water quality in order to provide safe and clean water in the provinces, cities, and municipalities: Provided, That, the water district shall adopt internal control reforms that would bring about their economic and financial viability: Provided, further, That the water district shall not increase by more than twenty percent (20%) a year its appropriation for personal services, as well as for travel, transportation or representation expenses and purchase of motor vehicles.

All unpaid taxes or any portion thereof due from a local water district for the period starting August 13, 1996 until the effectivity date of this Act are hereby condoned by the Government subject to the following conditions: (1) that the Bureau of Internal Revenue, after careful review of the financial statements of a water district applying for condonation of taxes due, establishes its financial incapacity, after providing for its maintenance and operating expenses, debt servicing and reserve fund, to meet such obligations for the period stated herein; and (2) that the water district availing of such condonation shall submit to Congress of the Philippines a program of internal reforms, duly certified by the local water utilities administration, that would bring about its economic and financial viability.

All water districts, through the Local Water Utilities Administration, shall furnish the Committee on Ways and Means of the Senate and House of Representatives, respectively, on an annual basis; with statistical data and financial statements regarding their operations and other information as may be required, for purposes of monitoring compliance with the  provisions of this Act and reviewing the rationalization  for tax exemption privileges.” (As amended by RA No. 10026 (March 11, 2010)).

(Manual encoding credits: Magdaleno Abdon, Sept. 2020)