Tobacco farmers oppose tax on leaf produce

NARVACAN, Ilocos Sur — Tobacco farmers have raised their objection to a move of the Bureau of Internal Revenue (BIR) to impose a three percent tax on the gross sales of their tobacco leaf produce.

The tax imposition was adopted by the BIR as part of the revenue agency’s implementation of Republic Act 9337 or the Expanded value added Tax (EVAT) law.

The farmers, through the Philippine Association of Tobacco-Based Cooperatives (PATCO), submitted a petition to President Arroyo seeking a review of the EVAT law and a clarification of its implementing rules.

The petition was endorsed by Ilocos Sur Gov. Luis "Chavit" Singson whose province produces the largest volume of tobacco in the country.

The farmers claimed that there is no provision in the EVAT law that specifically includes tobacco in its coverage. In the petition, PATCO president Carlos Cachola and vice president Andy Reyes said that BIR’s inclusion of tobacco was based on the "non-food agricultural and marine products" that are included for coverage in the EVAT law.

They also said that although transactions below P1.5 million are exempt from paying 10 or 12 percent VAT, these transactions shall however be subject to the payment of three percent gross receipts tax.

Under the three percent tax scheme, a farmer tilling a half hectare farm, which is the average size tilled by tobacco farmers, would be taxed P1,200 based on an average gross sales of P40,000 from the leaf harvest.

With a production cost of P17,500, they said that the farmer would end up earning only P21,300 in one year of tobacco farming.

"That kind of money (P1,200) taken away from the farmer’s measly income is like snatching one sack of rice away from his family," Cachola told The Star.

The PATCO leaders noted that government and private employees earning P275 and P300 a day "which are much bigger than the income of tobacco farmers" are exempt from paying income tax. — Teddy Molina