RECEIVED
DATE 92 JUL 2005

Republic of the Philippines

House of Representatives TIME _J/ 0)
Quezon City hid
‘TWENTIETH CONGRESS
First Regular Session
House Bitt No. 1077

Introduced by Representative Albert s. Garcia

EXPLANATORY NOTE

This bill seeks to earmark the shares of host local government units in the excise
taxes from petroleum products and the value-added tax (VAT) on the sale of electricity
generated from coal 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. While petroleum refineries 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 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.

Refineries 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
and coal-powered plants unto the communities that are proximate or are located within
the host LGUs.

‘At present, the national goverment 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
via 60-40 proportion. 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 and coal-powered plants through the
earmarking 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 eamestly sought.

-_

AL BEgYE. GARCIA
ict, Bataan


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Republic of the Philippines
House of Representatives
Quezon City
TWENTIETH CONGRESS
First Regular Session

House Bill No._ 1077

Introduced by Representative Albert S. Garcia

AN ACT

EARMARKING THE EQUITABLE SHARES OF HOST LOCAL GOVERNMENT
UNITS IN THE EXCISE TAXES COLLECTED FROM PETROLEUM PRODUCTS 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. Towards this end, the State shall support the local communities that
are host to petroleum refineries and coal-powered plants by providing them with
adequate financial support from equitable the share of local government units in excise

taxes from petroleum products and VAT from coal-powered plants, to offset and


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mitigate the adverse health, safety and environmental impacts brought about by

petroleum refineries and coal-powered plants.

SEC. 3. Amount of Share of host Local Government Units in Excise Taxes. - The
host local government units shall, in addition to their 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
manufactured by refineries and from VAT from sale of electricity from coal-powered

plants located within its respective territorial jurisdiction.

SEC. 4. Share of the Host Local Governments from any Government Agency or
Owned or Controlled Corporation. - Host Local government units shall have the
same equitable share as stated in the preceding Section from the proceeds derived by
any government agency or government-owned or controlled corporation engaged in the
manufacture of petroleum products or in energy generation from coal-powered plants,
based on the following formula whichever will produce a higher share for the host LGU.

(a) One percent (1%) of the gross sales or receipts of the preceding calendar year;
or

(b) Forty percent (40%) of the excise taxes and VAT the government agency or
government owned or controlled corporation would have paid if it were not otherwise
exempt.

SEC. 5. Allocation of Shares. — The shares of host local governments in the excise
taxes from petroleum products of oil refineries and in the 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%);


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

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

(1) 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. 5. 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;

(d) 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. 6. Registry. - The Department of Finance shall maintain a registry of all excise
taxes on petroleum products and VAT on electricity produced by coal-powered plants
collected, with breakdown on the amount collected per petroleum product and kilowatt
per hour produced. Likewise, the Department of Finance shall, in coordination with the
Department of Energy, include in the registry the kind and volume of petroleum products
that every refinery produces or manufactures and the amount of electricity generated

and sold by coal-powered plants.

SEC. 7. 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 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. 8. Separability Clause. — \f 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. 9. Repealing Clause. — All laws, rules and regulations inconsistent with this Act

are hereby repealed, amended or modified accordingly.

SEC. 10. Effectivity. - This Act shall take effect fifteen (15) days afer its publication
in the Official Gazette or in a newspaper of general circulation.

‘Approved,