REPUBLIC ACT NO.

7171

AN ACT TO PROMOTE THE DEVELOPMENT OF THE FARMER

IN THE VIRGINIA TOBACCO PRODUCING PROVINCES

Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled:

SECTION 1. Declaration of Policy - It is hereby declared to be the policy of the government to

extend special support to the farmers of the Virginia tobacco-producing provinces inasmuch as these
farmers are the nucleus of the Virginia tobacco industry which generates a sizeable income, in terms of
excise taxes from locally manufactured Virginia-type cigarettes and customs duties on imported blending
tobacco, for the National Government. For the reason stated, it is hereby further declared that the
special support for these provinces shall be in terms of financial assistance for developmental projects to
be implemented by the local governments of the provinces concerned.

SECTION 2. Objective - The special support to the Virginia tobacco-producing provinces shall be
utilized to advance the self-reliance of the tobacco farmers through:

Cooperative projects that will enhance better quality of products, increase productivity, guarantee the
market and as a whole increase farmer's income;

Livelihood projects particularly the development of alternative farming systems to enhance farmers
income;

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; and

Infrastructure projects such as farm-to-market roads.

SECTION 3. Financing and remittance - 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.

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 this Act: Provided,
however, That, to qualify as beneficiary under this Act, 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 this Act, 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 to be
remitted to the beneficiary provinces qualified under this Act.

The provisions of existing laws to the contrary notwithstanding the fifteen percent (15%) share
from government revenues mentioned in this Act and due to the Virginia tobacco producing provinces
shall be directly remitted to the provinces concerned.

SECTION 4. Repeating and Amending Clause. All enactment, legislative acts and rules and
regulations inconsistent or incomparable with the provisions of this Act are hereby repealed.

SECTION 5. Effectivity Clause - This Act shall take effect upon its approval.

good government and public accountability wants Ilocos Norte Governor Imee Marcos to personally
explain why the capitol used P66.45 million in tobacco funds to purchase motor vehicles.

Under Republic Act Number 7171, 15% of cigarette excise taxes shall be allotted for a special support
fund for tobacco farmers, who may use the money for cooperative, livelihood, agro-industrial, and
infrastructure projects.

But House Majority Leader Rodolfo Fariñas said he uncovered checks for cash advances amounting to
P66,450,000 in tobacco funds that were used by the Ilocos Norte provincial government to buy the
following motor vehicles:

P18,600,000 on December 1, 2011 for 40 mini-cabs to be given to barangays

P15,300,000 on May 25, 2012 for 5 secondhand buses

P32,550,000 on September 12, 2012 for 70 Foton mini trucks for municipalities

Farmers' groups have been asking the National Tobacco Administration to audit all projects paid for with
tobacco excise tax funds. File photo
Tobacco farmers: Misuse of excise tax funds not

Artemio Dumlao (philstar.com) - June 20, 2017 - 6:50am

ILOCOS SUR, Philippines — Tobacco farmers are asking the Duterte administration to send Ilocos Norte
officials who misused tobacco excise taxes to jail.

Also claiming tobacco excise taxes fund misuse have not been confined only in Ilocos Norte, but all
tobacco-producing provinces in the Ilocos region, organized farmers of the Solidarity of Peasants Against
Exploitation (STOP Exploitation) and the Alyansa dagti Mannalon ti Ilocos Norte (Peasant Alliance in
Ilocos Norte or AMIN) in a joint statement said, “misuse and corruption of the RA 7171 funds is not
limited to Ilocos Norte.”

Zaldy Alfiler, secretary general of STOP Exploitation and Antonio Pugyao, AMIN secretary general both
said, “since its implementation in 1992, politicians in Ilocos region and other Virginia tobacco-producing
provinces mainly utilized the funds for the furtherance of their political ambitions, leaving only crumbs
for the farmers.”

These farmers’ groups had earlier asked the National Tobacco Administration for a full audit of billions of
funds released to all local government units in tobacco-producing regions .

"(We) are demanding the appropriate use of the funds from RA 7171," tobacco farmers said, explaining,
“this is part of the justice that the farmers want to attain.”

Alfiler and Pugyao said: “Clearly, corrupt officials pocket large sums of people’s money denying farmers
of their right to the excise taxes.”

Farmers' groups have been asking the National Tobacco Administration to audit all projects paid for with
tobacco excise tax funds. File photo

Tobacco farmers: Misuse of excise tax funds not limited to Ilocos Norte

Artemio Dumlao (philstar.com) - June 20, 2017 - 6:50am

ILOCOS SUR, Philippines — Tobacco farmers are asking the Duterte administration to send Ilocos Norte
officials who misused tobacco excise taxes to jail.

Also claiming tobacco excise taxes fund misuse have not been confined only in Ilocos Norte, but all
tobacco-producing provinces in the Ilocos region, organized farmers of the Solidarity of Peasants Against
Exploitation (STOP Exploitation) and the Alyansa dagti Mannalon ti Ilocos Norte (Peasant Alliance in
Ilocos Norte or AMIN) in a joint statement said, “misuse and corruption of the RA 7171 funds is not
limited to Ilocos Norte.”

Zaldy Alfiler, secretary general of STOP Exploitation and Antonio Pugyao, AMIN secretary general both
said, “since its implementation in 1992, politicians in Ilocos region and other Virginia tobacco-producing
provinces mainly utilized the funds for the furtherance of their political ambitions, leaving only crumbs
for the farmers.”

These farmers’ groups had earlier asked the National Tobacco Administration for a full audit of billions of
funds released to all local government units in tobacco-producing regions .

"(We) are demanding the appropriate use of the funds from RA 7171," tobacco farmers said, explaining,
“this is part of the justice that the farmers want to attain.”

Alfiler and Pugyao said: “Clearly, corrupt officials pocket large sums of people’s money denying farmers
of their right to the excise taxes.”

READ: Tobacco farmers seek justice over 'misused' excise tax share

House probe on tobacco taxes

Tobacco farmers of Ilocos Norte have always hoped that they would benefit from the funds from RA
7171 but officials allot the bulk of these for their own whims, Pugyao of the Ilocos Norte farmers’ group
claimed, citing, “minicabs, mini trucks and buses procured by the provincial government never uplifted
the well-being of the tobacco farmers.”

The House of Representatives is holding hearings on allegations that Ilocos Norte officials, including Gov.
Imee Marcos, misused the tobacco excise tax funds.

Pugyao said “the provincial government of Ilocos Norte violated the implementing rules and regulations
of RA 7171 when it purchased vehicles using the excise taxes from tobacco.”

Pugyao urged the six provincial officials detained by the House of Representatives since May 29 “to
divulge the full extent of the misuse and abuse of the excise tax funds instead of withholding crucial
information and acting as scapegoats for Governor Marcos.”
Joseph Cadiz, legal counsel for Gov. Marcos has called the allegations “premature politicking."

Imee hits Fariñas over remark on tobacco funds

The Philippine Star4 May 2017+1 moreBy ARTEMIO DUMLAO

BAGUIO CITY – Ilocos Norte Gov. Imee Marcos accused Ilocos Norte Second District Rep. Rodolfo Fariñas
of politicking when he claimed she had misused P66.5 million in tobacco funds.

During there cent public hearing of the House good government committee on the alleged tobacco
funds anomaly, the House majority leader said Marcos authorized the purchase of 115 assorted motor
vehicles in 2011 and 2012 without public bidding.

“She was both therequesting officer and the approving officer. The huge amount was released in three
tranches to two disbursing officers in the form of cash advances. A major purchase through a cash
advance is a violation of the procurement law and the auditing code,” Fariñas had pointed out.

“She was both therequesting officer and the approving officer. The huge amount was released in three
tranches to two disbursing officers in the form of cash advances. A major purchase through a cash
advance is a violation of the procurement law and the auditing code,” Fariñas had pointed out.

Resolution 882 authored by Fariñas and Pampanga Reps. Juan Pablo Bondoc and Aurelio Gonzales Jr. of
the House committee on good government and public accountability paved the way for the inquiry.

But lawyer Joseph Cadiz, legal counsel of Marcos, condemned Fariñas, saying “this is premature
politicking. These are irresponsible conclusions.”

Cadiz said the accusations are irresponsible.

Fariñas was a long-time political and personal friend of Marcos’ brother former senator Ferdinand
Marcos Jr., but ties broke down when the Marcoses fled the country in 1986.

Fariñas was a long-time political and personal friend of Marcos’ brother former senator Ferdinand
Marcos Jr., but ties broke down when the Marcoses fled the country in 1986.

Both political families are now political allies of President Duterte.

Fariñas, Bondoc and Gonzales claimed that the tobacco excise tax law mandates that the funds could be
used for livelihood, development and infrastructure projects that would benefit tobacco farmers and
promote the growth of the industry and that purchases of motor vehicles are not among the authorized
uses of the funds.
According to the three lawmakers, the first cash advance of P18.6 million was made on Dec. 1, 2011 for
the purchase of 40 units of mini-cab to be distributed to different barangays in Ilocos Norte.

The second, for P15.3 million, was made on May 25, 2012 for the acquisition of five second-hand buses
while the third, for P32.55 million, was made on Sept. 12, 2012 for the procurement of 70 units of Foton
mini-trucks.

Imee hits Fariñas over remark on tobacco funds

The Philippine Star4 May 2017By ARTEMIO DUMLAO

BAGUIO CITY – Ilocos Norte Gov. Imee Marcos accused Ilocos Norte Second District Rep. Rodolfo Fariñas
of politicking when he claimed she had misused P66.5 million in tobacco funds.

During the recent public hearing of the House good government committee on the alleged tobacco
funds anomaly, the House majority leader said Marcos authorized the purchase of 115 assorted motor
vehicles in 2011 and 2012 without public bidding.

“She was both the requesting officer and the approving officer. The huge amount was released in three
tranches to two disbursing officers in the form of cash advances. A major purchase through a cash
advance is a violation of the procurement law and the auditing code,” Fariñas had pointed out.

Resolution 882 authored by Fariñas and Pampanga Reps. Juan Pablo Bondoc and Aurelio Gonzales Jr. of
the House committee on good government and public accountability paved the way for the inquiry.

But lawyer Joseph Cadiz, legal counsel of Marcos, condemned Fariñas, saying “this is premature
politicking. These are irresponsible conclusions.”

Cadiz said the accusations are irresponsible.

Fariñas was a long-time political ally and personal friend of Marcos’ brother former senator Ferdinand
Marcos Jr., but ties broke down when the Marcoses fled the country in 1986.

Both political families are now political allies of President Duterte.

Fariñas, Bondoc and Gonzales claimed that the tobacco excise tax law mandates that the funds could be
used for livelihood, development and infrastructure projects that would benefit tobacco farmers and
promote the growth of the industry and that purchases of motor vehicles are not among the authorized
uses of the funds.

According to the three lawmakers, the first cash advance of P18.6 million was made on Dec. 1, 2011 for
the purchase of 40 units of mini-cab to be distributed to different barangays in Ilocos Norte.

The second, for P15.3 million, was made on May 25, 2012 for the acquisition of five second-hand buses
while the third, for P32.55 million, was made on Sept. 12, 2012 for the procurement of 70 units of Foton
mini-trucks
FAST FACTS: Tobacco funds in the Philippines

16 May 2017:

Use of tobacco funds by local government units has long been marred by issues of corruption

MANILA, Philippines – Ilocos Norte Governor Imee Marcos has been accused of misusing the tobacco
funds allotted to her farmer-constituents.

House Majority Leader Rodolfo Fariñas on May 3 said that he discovered checks for advances amounting
to P66.45 million from tobacco funds. (READ: House panel wants Imee Marcos to explain P66.45M in
‘misused’ tobacco funds)

The money was allegedly used by the provincial government for motor vehicles – 40 mini-cabs for
barangays, 5 second-hand buses, and 70 Foton mini-trucks for municipalities.

If these purchases are not allowed under the law, how then can tobacco funds be utilized?

What is the tobacco fund?

The tobacco fund was first created through Republic Act No. 7171 signed by then president Corazon
Aquino in 1992.

The law says 15% of excise taxes from locally manufactured Virginia-type cigarettes shall be allotted for a
special support fund for tobacco farmers who are “the nucleus of an industry which generates a sizeable
income.”

Four years later in 1996, then president Fidel V. Ramos signed RA 8240 that gave 15% of excise taxes
from burley and native tobacco to provinces that produce them.
What provinces benefit from these funds?

RA 7171 says that the funds are distributed to the provinces of Abra, Ilocos Norte, Ilocos Sur, and La
Union.

RA 8420, meanwhile, lists 16 provinces that benefit from the tobacco funds:

Abra

Kalinga

Mountain Province

Ilocos Norte

Ilocos Sur

La Union

Pangasinan

Cagayan

Isabela

Nueva Viscaya

Quirino

Tarlac

Occidental Mindoro

Misamis Oriental

Maguindanao

North Cotabato

The allotted funds from the excise taxes is divided among beneficiary provinces.
A beneficiary-province, the laws says, must have an average annual production of leaf tobacco of no less
than one million kilos.

What projects can the fund be used for?

Tobacco funds, however, cannot be used just for anything – at least that’s what the law says.

It can only be utilized to develop the capacity and capability of tobacco farmers through the following:

Cooperative projects that will enhance the quality of cigarettes, increase productivity and the market,
and increase the income of farmers

Livelihood projects can also be started using the tobacco fund as capital to develop alternative farming
systems for farmers

Agro-industrial projects that will help tobacco farmers to eventually take the helm as owners of
processing systems in the industry

Infrastructure projects such as farm-to-market roads to ease transportation and lessen costs

What are the issues surrounding the Tobacco fund?

Although the law sets tobacco funds to be used for a certain set of projects, it’s not always followed. The
use of tobacco funds has been marred with several issues since it was established at least 24 years ago.

Tobacco funds were also put under the spotlight during the impeachment trial of President Joseph
Estrada. Former Ilocos Norte governor Chavit Singson accused Estrada of taking P130 million out of the
P200-million tobacco excise share of the province.

Meanwhile, according to an investigation by Newsbreak in 2009, government auditors found that the
local government of Ilocos Sur “misused, misappropriated, or failed to account for at least P1.3 billion of
the tobacco fund.”

The Commission on Audit further pointed out that the projects built using the tobacco fund allotted for
the province – such as a tomato paste plan – does not fall under the classifications allowed by the law.
(READ: P1 billion in tobacco funds misused)

The demand for tobacco, meanwhile, has harmed forests in North Luzon.

A Newsbreak piece published in 2009 exposed the flawed government monitoring “of fuel wood
consumption for tobacco curing allows for unhampered tree-cutting.” Farmers consumed about 13,734
cubic of meters of fuel wood just to produce the required million kilos of tobacco leaves. – Rappler.com

Tobacco farmers deny benefiting from tax proceeds.

Contrary to the claim of Ilocos Norte Gov. Imee Marcos, a group of tobacco farmers on Thursday said
they did not benefit from the proceeds of the tobacco excise tax.
Antonio Pugyao, secretary general of Alyansa dagiti Mannalon ti Ilocos Norte, disputed Marcos’
statement during the House committee on good government and public accountability during its hearing
on the alleged misuse of the excise tax proceeds.

“The amount (that) tobacco farmers have infused into local government units are dizzying. But up to
now, instead of improving the situation of farmers, (the tax proceeds) did not,” Pugyao said.

On Wednesday, Marcos denied any wrongdoing in the alleged disbursement of P294.3 million in cash
advances taken from the tobacco tax proceeds for the purchase of medicines and motor vehicles, as well
as on construction projects.

“The real objective (of the tobacco excise tax was) to improve the farmers’ general welfare and
wellbeing,” Marcos told the committee, which had pointed out that the Commission on Audit (COA)
allows the use of cash advances only for salaries and wages, allowances, honoraria, and petty operating
expenses.

Since last year, the committee has been looking into the Ilocos provincial government’s alleged misuse of
its share of the excise tax proceeds to purchase P66.45 million worth of minicabs, buses, and mini-trucks
for various municipalities when the fund was clearly intended for the livelihood projects of tobacco
farmers.

Marcos maintained that she had relied only on the approval and endorsement of the province’s finance
committee.

“Cash advance was the preferred mode of payment recommended by the local finance committee. And
given that, this is the preferred mode as well of the suppliers. Because they’re always rushing us, we use
cash advances to pay them,” the Ilocos Norte governor said.

In a press statement, Kabataan Party-list Rep. Sarah Jane Elago said that 32 years after the ouster of
authoritarian President Ferdinand Marcos, “it seems that the legacy of the Marcoses stealing from the
nation’s wealth continues.”
Governor Marcos had defended the alleged purchase of more than 100 vehicles in 2011 and 2012 using
the excise tax fund of the province and said that the COA saw nothing wrong with the transaction.

“I could not say that the cash advance was prohibited…because it passed the COA audit, the post audit,”
she added. —VINCE F. NONATO