PASAY CITY – Over 300 members of various cooperatives from across the Philippines gathered outside the Senate building in the humid afternoon of January 28 to protest the Department of Finance’s (DOF) proposal to tax cooperatives.

Bearing placards with messages such as “Do Not Tax Cooperatives,” “Cooperatives Are Government’s Partners in Nation-Building,” and “Cooperatives Build a Better World,” the group voiced their opposition to what they see as a direct threat to the cooperative sector's role in supporting marginalized communities.

In April 2024, Senator Imee Marcos, Chairperson of the Senate Committee on Cooperatives, filed Senate Bill 2811, proposing amendments to Republic Act 9520, also known as the Cooperative Code of 2008. The bill seeks to reinforce and retain the tax exemptions granted to cooperatives under RA 9520.

While discussions on the proposed amendments began in early 2024, they were temporarily put on hold in the latter half of the year as the Senate focused on deliberations for the 2025 national budget. Amendments to the Cooperative Code are set to resume in January 2025.

On December 2, DOF Secretary Ralph Recto submitted the agency’s position on Senate Bill 2811. While SB 2811 upholds the exemption of cooperatives from taxes, fees, and charges on members’ share capital and deposits, the DOF proposed the deletion of the phrase “including members’ share capital and deposits” from Section 70. Recto argued that this exemption is already provided under RA 9520 and does not need restating.

Under the current Cooperative Code, cooperatives with reserve funds below ₱10 million are exempt from taxes. SB 2811 proposes increasing this threshold to ₱100 million, but the DOF countered that any increase should apply solely to agricultural cooperatives and recommended a lower threshold of ₱50 million.

Secretary Recto cited President Ferdinand Marcos Jr.’s 2023 State of the Nation Address, emphasizing the role of agricultural cooperatives in consolidating farmers and boosting their income. According to the DOF, expanding tax exemptions beyond agricultural cooperatives risks reducing government revenues unnecessarily.

The DOF raised concerns about the misuse of reserve funds as a basis for tax exemptions, citing the potential for manipulation and lack of transparency. Recto proposed redefining the term “reserve fund” to ensure it reflects the true financial standing of cooperatives.

Additionally, the DOF recommended limiting VAT exemptions to cooperatives that cater exclusively to the poor. Recto also criticized the expansion of cooperative types to include businesses offering non-essential services, alleging that some large enterprises operate under the guise of cooperatives to exploit tax benefits.

The DOF further proposed requiring cooperatives to submit their members’ Tax Identification Numbers (TINs) as a prerequisite for obtaining a Certificate of Tax Exemption. However, cooperative leaders highlighted significant challenges in collecting TINs from their members, many of whom are marginalized individuals in rural areas. They also pointed to a 2023 Supreme Court ruling declaring that requiring TINs for similar purposes violated privacy and due process rights.

Leaders from the cooperative sector expressed strong opposition to the DOF’s proposals. They emphasized that cooperatives are member-owned social enterprises committed to poverty eradication, operating not for profit but for the benefit of their members.

They reiterated that any surplus generated by cooperatives is not "profit" but savings from lower costs of services, which are redistributed to members. By targeting cooperatives with additional tax measures, leaders argued, the government risks undermining these organizations' ability to serve as vehicles for inclusive growth and social equity.

As discussions on Senate Bill 2811 and the Cooperative Code amendments resume, cooperative members remain steadfast in their call for the government to recognize the sector’s role in nation-building and protect its tax privileges.