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Leaders Tell Why Co-ops Deserve Tax Exemptions

MALATE, MANILA – It had been mentioned in previous meetings of co-op leaders that one of the reasons the DOF wanted co-ops to be taxed was that the tax exemption was being abused by many.  In simple terms, many “fake co-ops” were put up by opportunists to avail of tax exemptions.
 
On April 17,leaders of coop federations, partylist Congresmen, and CDA officials met with DOF Undersecretary Carl Kendrick Chua and other officials to discuss the repeal of the co-op tax exemptions.
 
After pleasantries at the beginning of the meeting, Cooperative Development Authority (CDA) Executive Director Rey Elevazo fired the opening salvo.   He reported that the CDA had not been remiss in its mandate to regulate cooperatives punish erring co-ops and canceling non-complying co-ops.
 
Chief among these were labor recruiters who put up service co-ops, rice traders using agricultural cooperatives to skirt import duties, and usurers who put up credit co-ops to leverage the tax exemptions as well.
 
According to Elevazo, of the 26,000 CDA-registered cooperatives only around 9,800 have submitted the required reports –the Coop Annual Progress Report (CAPRIS), audited financial statements, social audit, and others.
 
“But the CDA continuously reminds the co-ops to submit their reports,” Elevazo said.
 
On erring and non-compliant co-ops, he reported that 677 are scheduled for Delisting, 572 co-ops have seen their registrations cancelled altogether, 3,564 are being dissolved under either consolidation or mergers, 154 are under liquidation, and 690 are under the Dissolution process.
 
Another 3,800 co-ops have been issued show-cause orders because the CDA “has some questions on their operations . . . to be allowed to continue their operations.”
 
“Many are serious violators and are leading towards the Dissolution process!” he added.
 
This is a total of about 8,000 co-ops to be removed from the list of 26,000 registered co-ops.
 
The Position Paper was drafted by a technical working group (see related article in page 1), which had combined positions papers it received from co-op leaders and primary co-ops nationwide.
 
Said position paper offered four arguments – Legal Bases for Co-op Tax Exemption of Co-ops, Social Impact of Cooperatives in Philippine Society, the Economic Impact of Co-ops, and that Co-ops are Regulated Strictly by the CDA.
 
Legal bases included the 1987 Constitution provision on cooperatives, the 2008 Cooperative Code, and the Supreme Court decision on the Dumaguete Cathedral cooperative’s tax case.
 
For the co-ops’ economic impact, the Paper cited figures that demonstrated co-ops as – though tax-exempt – enables many Filipinos to become tax-payers.  
 
On Social Impact of co-ops, the Paper cited the development initiatives of co-ops especially in rural communities.
On inquiries by the DOF officials why co-op federations are charging fees for training, it was clarified that federations are co-ops – owned by the member cooperatives.  
 
The leaders emphasized that co-ops remit the Coop Education Training Fund, which is a self-imposed taxation for reserves, education, advocacy, and community development as stipulated in the Co-op Code.
 
“CDA’s trainings are only on the basics . . . just for them to start.  The other trainings are provided by the federations,” Elevazo stated.
 
Lucy Furo of the Philippine Federation of Teachers’ Cooperatives described in greater detail the dynamics of the CETF.  
Dennis Santander of MASS-SPECC said: “We serve the co-ops even in the terrorist areas of Mindanao.  Co-ops in Mindanao even put up hospitals and have bereavement programs.”
 
The other leaders took turns clarifying that the CETF is not a “payment” to the federation, but rather a “contribution.”
Without federations, primaries will have to outsource their training – and it will be more expensive.  With federations, member cooperatives are given dividends and patronage refunds.  They added that federations are not charity organizations and co-ops have to make sure that federations are sustainable, and that without federations, co-ops will have to outsource their training and could become more expensive.  
 
Besides, co-ops get dividends and patronage refunds from the federations give their members dividends and patronage refunds.  
 
Hamil Rutaquio, Chairman of the Philippine Cooperative Center, made it clear “we support the tax reform bill but not fully beause it is not consistent with the social justice principle na tatangaling an gaming tax exemption . We are imploring you and we hope that you will hear us out. 
 
Rep. Rico Geron said: “I speak not as a Congressman but as a cooperator.  I represent a partylist with coops as constitutents. This representation is from the co-op sector.”
 
“In the House I chair the committee on coops.  That is an indication that cooperative development is valued by the Government.  Co-ops are social enterprises.  In fact, many departments in government partner with coops – DAR, DA, DSWD, DEPED, LGUs – because they see that coops are effective instruments of development.  But it is true that some co-ops are used for politics.  Even the President says tanggalin natin ang mga bumbay – co-ops na lang ang tumulong.”
 
“We shouldn’t look at cooperatives in a bad light just because of a few who have used coops for personal profit.  In the same manner, some corporations abuse but we don’t abolish all corporations!  If there is a problem in the coop movement, let’s correct it!”
 
“But if you will tax coops, you will end up taxing those people – like market vendors, workers and teachers -- who have no capacity to pay the tax.”
 
“Taxing co-ops will lead to the death of many co-ops.  As it is now that they don’t pay tax, very few coops can survive.”
“We appeal to your good heart, coming from the World Bank, I think if we will support the co-op movement, it will give more to our economy.”
 
Rep. Bravo said the tax exemption is not absolute. “Co-ops that have reserves above P10 Million are taxable.  For those below, transactions with non-members are taxable.”
 
Organizations represented at the meeting were NATCCO Network, Philippine Federation of Credit Cooperatives, MASS-SPECC, Philippine Federation of Teachers Cooperatives, COOP-NATCCO Partylist, and AGAP Partylist.
 

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