Republic of the Philippines
House of Representatives
Quezon City

NINETEENTH CONGRESS

Third Regular Session

House Bill No. 11240

Introduced by Representative Albert S. Garcia

EXPLANATORY NOTE

This bill seeks to earmark the shares of host local government units in the excise
taxes on petroleum products from oil refineries and depots and in the value-added tax
(VAT) on the sale of electricity generated by coal-powered plants located in their area
of jurisdiction in addition to their national tax allotment or NTA similar to their share from
national wealth, as provided for under the 1991 local government code.

Petroleum refining is the process of converting crude oil to petroleum products
to be used as fuels for transportation, heating, paving roads, generating electricity and
manufacturing of products for daily use. Petroleum and oil depots are facilities that
store and transport oil, petroleum, and petrochemical products. While petroleum
refineries and oil depots stimulate economic activity and provide local employment, they
also pose significant health, safety and environmental risks, particularly within their
territorial jurisdiction.

Similarly, coal-fired power plants generate electricity but pose significant health,
environmental, and safety risks, particularly to host LGUs and their communities.

Several studies have found that residents living close to an oil refinery, depots
and coal-powered plants continue to experience adverse impacts with short and long-
term health effects such as respiratory problems, skin diseases, malignancies, birth
defects, neurological and cardiovascular damage, blood disorders and a general
perception of poor health

Oil refineries, depots and coal-powered plants also produce waste and by-
products that can contaminate soil, water, and air, which may cause serious
environmental problems and damage the ecosystem. Hazardous fumes, smoke,
ashes, chemical spills, and explosions are among the safety and environmental risks
brought about by oil refineries, depots and coal-powered plants unto the communities
that are proximate or are located within the host LGUs.

At present, the national government imposes excise taxes on petroleum
products, which should be included in the computation of all national taxes collected.


While all local government units benefit from the excise taxes collected on petroleum
products through their just shares in their national tax allotments, the host provinces,
cities, municipalities, and barangays with existing oil refineries located in their
respective areas of jurisdiction are left alone to deal with its direct adverse
consequences, leaving these communities worse off.

Similarly, the national government imposes Value Added Tax on sale of
electricity, from which tax the national government and LGUs have respective shares
as provided for under the 1991 Local Government Code. Meanwhile, host LGUs are
directly affected by the adverse effects of energy production from combusting coal.

To alleviate the adverse consequences, direct financial assistance should be
granted to the host LGUs of petroleum refineries, depots and coal-powered plants
through the earmarking of their equitable share from the excise taxes and VAT collected
therein to enable them to strengthen their healthcare systems and offset the safety and
environmental impacts of hosting petroleum refineries in their respective localities.

In view of the foregoing, the approval of this bill is earnestly sought.



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Republic of the Philippines
House of Representatives
Quezon City

NINETEENTH CONGRESS
Third Regular Session

No._11240

Introduced by Representative Albert S. Garcia

House

AN ACT

EARMARKING THE EQUITABLE SHARES OF HOST LOCAL GOVERNMENT
UNITS IN THE EXCISE TAXES ON PETROLEUM PRODUCTS COLLECTED FROM
OIL REFINERIES AND DEPOTS AND IN THE VALUE ADDED TAX COLLECTED
FROM SALE OF ELECTRICITY FROM COAL POWERED PLANTS IN THEIR
RESPECTIVE TERRITORIAL JURISDICTIONS

Be it enacted by the Senate and the House of Representatives of the Philippines in

Congress assembled:
SECTION 1. Short Title. — This Act shall be known as the “Petroleum Excise Tax Coal
Value Added Tax Allocation Act.”
SEC. 2. Declaration of Policy. — It is the policy of the State to promote the
Constitutional right of the people to a balanced and healthful ecology in accord with the
rhythm and harmony of nature. Local governments shall be entitled to an equitable
share in the proceeds of the utilization and development of national wealth within their
respective areas, including sharing the same with the inhabitants by way of direct
benefits. Towards this end, the State shall support the local communities that are host

to oil refineries, depots, and coal-powered plants by providing them with adequate

financial support from equitable the share of host local government units in excise taxes


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from petroleum products and VAT from coal-powered plants, to offset and mitigate the
adverse health, safety and environmental impacts brought about by oil refineries,
depots and coal-powered plants. For purposes of this Act, depots shall mean facilities

that store and transport oil, petroleum, and petrochemical products.

SEC. 3. Amount of Share of host Local Government Units in Excise Taxes. - The
host local government units, in addition to their share from the national tax allotment
(NTA), shall have a share of forty percent (40%) of the gross collection derived by the
national government from the preceding fiscal year from excise taxes from petroleum

products from oil refineries and depots

SEC. 4. Amount of Share of host Local Government Units in value added tax. —
The host local government units, in addition to their share from the national tax allotment
(NTA), shall also have a share of fifteen percent (15%) from the share of the national
government in VAT on the sale of electricity generated by coal-powered plants located

within their respective territorial jurisdiction based on the preceding fiscal year.

SEC. 5. Allocation of Shares. - The shares of host local governments in the excise
taxes from petroleum products of oil refineries and depots, as well as in VAT from coal-
powered plants in the preceding sections shall be distributed in the following manner:
(a) Where the natural resources are located in the province:

(1) Province - Twenty percent (20%);

(2) Component City/Municipality - Forty-five percent (45%); and

(3) Barangay - Thirty-five percent (35%)


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Provided, however, that where the oil refineries 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%)
(b) Where the natural resources are located in a highly urbanized or independent
component city:

(A) City - Sixty-five percent (65%); and

(2) Barangay - Thirty-five percent (35%)
Provided, however, that where the natural resources are located in such two (2) or
more cities, the allocation of shares shall be based on the formula on population and

land area as specified in paragraph (a) of this Section.

SEC. 6. Utilization of Shares. - The shares of host local governments in the excise

taxes and VAT shall be allocated and used for the following purposes:

(a) Construction and improvement of healthcare facilities;

(b) Increase of medical and non-medical personnel in healthcare
facilities;

(c) Enhancement of the delivery of healthcare services;

(3) Information and education campaigns to improve help-seeking
behaviors of citizens;

(e) Infrastructure and development projects that may mitigate the

adverse safety concerns and environmental impacts of petroleum
refineries; and

) Welfare programs and projects.


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SEC. 7. Direct Remittance to host LGUs by DBM. - The Secretary of DBM is hereby
directed to retain annually the said funds earmarked under Sections 3 and 4 of this Act
to be directly remitted to the host LGUs qualified, in accordance with the allocations

provided for under Section 5 of this Act.

SEC. 8. Implementing Rules and Regulations. — Within one hundred twenty (120)
days from the effectivity of this Act, the Commissioner of the Bureau of Intemal
Revenue, in consultation with the Department of Budget and Management, Department
of Finance, and the Department of the Interior and Local Government, as well as with
the Presidents of the Leagues of Provinces (LPP), Cities (LCP), Municipalities (LMP)
and Barangays (LnB), shall promulgate the necessary revenue issuances, rules and

regulations for the effective implementation of this Act.

SEC. 9. Separability Clause. — If any provision of this Act is declared unconstitutional,
the remainder of this Act or any provisions not affected thereby shall remain in full force

and effect.

SEC. 10. Repealing Clause. — Alll laws, rules and regulations inconsistent with this Act

are hereby repealed, amended or modified accordingly.

SEC. 11. Effectivity. - This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,