DIRECTING THE MODE OF TREATMENT UTILIZATION, ADMINISTRATION AND MANAGEMENT OF THE COCONUT LEVY FUNDS

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WHEREAS, the coconut levy funds, which comprise four general classes, viz.:
(a) the Coconut Investment Fund created under R.A. 6260 (effective June 19,
1971); (b) the Coconut Consumers Stabilization Fund under P.D. 276 (effective
August 29, 1973); (c) the Coconut Industry Development Fund under P.D. 582
(effective November 14, 1974); and (d) the Coconut Industry Stabilization Fund
under P.D. 1841 (effective October 2, 1981), were created to support and
advance the development of the coconut industry for the ultimate benefit of the
coconut farmers;

WHEREAS, the Supreme Court, in upholding the sequestration of various
industrial and commercial enterprises organized and financed with proceeds from
the coconut levy, declared in the Philippines Coconut Producers Federation,
Inc. (COCOFED), et al. vs. Presidential Commission on Good Government (PCGG),
et al. (178 SCRA 236 [21 October 1989]) case that:

“The utilization and proper
management of the coconut levy funds, raised as they were by the State’s police
and taxing powers, are certainly the concern of the Government. It cannot be
denied that it was the welfare of the entire nation that provided the prime
moving factor for the imposition of the levy. It cannot be denied that the
coconut industry is one of the major industries supporting the national
economy.  It is, therefore, the State’s concern to make it a strong and
secure source not only of the livelihood of a significant segment of the
population but also of export earnings the sustained growth of which is one of
the imperatives of economic stability. The coconut levy funds are clearly
affected with public interest. Until it is demonstrated satisfactorily that
they have legitimately become private funds, they must prima facie and by
reason of the circumstances in which they were raised and accumulated be
accounted subject to the measures prescribed in E.O. Nos. 1, 2, and 14 to
prevent their concealment, dissipation, etc. which measures include the
sequestration and other orders of the PCGG complained of.”

WHEREAS, the Supreme Court, in ruling that the PCGG is entitled to vote the
sequestered shares of stock of the United Coconut Planters Bank (Republic vs.
Sandiganbayan, G.R. No. 96073, 16 February 1993), reiterated the above
declaration and clarified that:

“The coconut levy funds
being ‘clearly affected with public interest,’ it follows that the corporations
formed and organized from those funds, and all assets acquired therefrom,
should also be regarded as ‘clearly affected with public interest.’ “

WHEREAS, the Constitution mandates that:

“Sec. 2. (1) The Commission
on Audit shall have the power, authority, and duty to examine, audit and settle
all accounts pertaining to the revenue and receipts of, and expenditures or
uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies or instrumentalities,
including government-owned or controlled corporations with original charters,
and on a post-audit basis: … (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the Government,
which are required by law or the granting institution to submit to such audit
as a condition of subsidy or equity.

x x x

Sec. 3. No law shall be
passed exempting any entity of the Government or its subsidiary in any guise
whatever, or any investment of public funds, from the jurisdiction of the
Commission on Audit.”

WHEREAS, the Commission on Audit, consistent with its mandate and relying
upon the above declaration of the Supreme Court, has opined on 15 January 1993
that the coconut levy:

“x x x would seem to fall
within the purview of the provisions of Section 63 of Presidential Decree No.
1445, to wit:

‘Except as may otherwise be
specifically provided by law or competent authority all moneys and property
officially received by a public officer in any capacity or upon any occasion
must be accounted for as government funds and government property.’

It would seem, therefore,
that all moneys realized from the said levy should accordingly be accounted for
as governments funds the provisions of Section 5, Article III, of PD No. 961
notwithstanding, in the light of the following provisions of the 1987
Constitution:

‘All money collected on any
tax levied for a special purpose shall be treated as a special fund and paid
out for such purpose only. If the purpose for which a special fund was created
has been fulfilled or abandoned, the balance, if any, shall be transferred to
the general fund of the Government. (Sec. 23[3], Article VI).

‘All existing laws, decrees,
executive orders, proclamations, letters of instructions, and other executive
issuances not inconsistent with this Constitution shall remain operative until
amended, repealed, or revoked.’ (Section 3, Article XVIII)

which all the more strongly
indicate that the coconut levy constitutes government funds.

x x x

In the light of the
foregoing, this Commission is strongly of the view that the coconut levy is a
public fund, and therefore subject to government audit.”

WHEREAS, the Bureau of Internal Revenue, in replying to the query raised by
the Philippine Coconut Authority Administrator as to the character of the
coconut levy funds, relied upon the same Supreme Court ruling and, thus, ruled
on 15 December 1992, as follows:

” . . . the Supreme Court of
the Philippines, already had the occasion to make an En Banc pronouncement that
it was the welfare of the entire nation that provided the prime moving factor
for the imposition of the levy. Neither can it be denied that the coconut industry
is one of the major industries supporting the national economy . . . .

Moreover, the coconut levies
are forced contributions levied by the taxing power on the coconut farmers. The
levies imposed upon the coconut products of the coconut farmers are taxes in
fact. They are enforced contributions levied by the taxing power on the coconut
farmers, neither dependent upon the will nor the contractual assent, express or
implied of the persons thus taxed. Thus, the coconut farmers were originally
required by R.A. 6260, on June 19, 1971, to pay the sum equivalent of P0.55 on
their first domestic sale of every one hundred kilograms of copra, or its
equivalent in terms  of other coconut products; P0.50 of the exaction were
accrued to a special fund, the COCONUT INVESTMENT FUND(CIF). Likewise, the levy
of P15.00 per 100 kilograms of copra resecada or its equivalent in other
coconut products, set by P.D. 276 on August 20, 1972 were imposed on the
farmer’s first domestic sale and they were accrued to a separate trust fund
known as the COCONUT CONSUMERS STABILIZATION FUND (CCSF).

Such being the case, and
since the burdens of the levies thereby imposed and collected were meant to be
shouldered by the coconut farmers, the coconut levy is not a public trust fund
for the benefit of the coconut farmers, but it is in the nature of a tax and,
therefore, are public funds that are subject to government administration and
disposition.“

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines pursuant to the powers vested in me by lay hereby order and direct:

(a) The coconut levy funds,
which include all income, interests, proceeds or profits derived therefrom, as
well as all assets, properties and shares of stocks procured or obtained with
the use of such funds, shall be treated, utilized administered and managed as
public funds consistent with the uses and purposes under the laws which
constituted them and the development priorities of the government, including
the governments’ coconut productivity, rehabilitation, research, extension,
farmers organizations and market promotions programs, which are designed to
advance the development of the coconut industry and the welfare of the coconut
farmers.

The heads of the Department of
Agriculture, Presidential Commission on Good Government, Philippine Coconut
Authority, United Coconut Planter’s Bank and The Coconut Industry Investment
Fund, herein constituted as an ad-hoc committee with the Secretary of
Agriculture as Chairman, in consultation with representatives of the coconut
industry, including coconut farmer’s organizations, shall jointly review,
rationalize and integrate their concerns and programs in a Master Plan for the
years 1995 to 2000.

(b) All existing laws, rules and
regulations governing custodianship, use, disposition, disbursement and/or
divestment of public funds and properties shall be applied in the utilization,
administration and management of the coconut levy funds.

DONE in the City of Manila, this 24th day of September in the
year of Our Lord, Nineteen Hundred and Ninety-Five.

(Sgd.) FIDEL
V. RAMOS
President of the Philippines

By the President:

(Sgd.) RUBEN D. TORRES
Executive Secretary

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