MANILA, Philippines — Cooperatives all over the country are up in arms over a proposed bill that seeks to lift the tax exemption on their operations.
The National Confederation of Cooperatives (NATCCO) said it would gather its members nationwide to protest Congress’ move.
Rep. Anthony Bravo, who represents the Cooperative NATCCO Party at the Lower House, said the new tax measure would affect around 14 million cooperative members, who benefit from the lower loan rates, higher interest in deposits, and lower fees.
“Cooperatives give voice to the powerless. Today, we have over 25,000 cooperatives gathering together 14 million Filipinos partaking to the collective endeavor of helping each other address their economic, social and cultural needs.,” he said.
In terms of employment generation, cooperatives have also provided 463,789 direct employment and 1.5 million indirect jobs to vulnerable sectors like micro-entrepreneurs, according to Bravo.
“Cooperatives are also tax generators. In fact, they have remitted to the government 6.3-B pesos Withheld taxes in 2015,” he said.
The lifting of the tax exemption on cooperatives was among the features of the proposed Comprehensive Tax Reform Package recently approved by the House Committee on Ways and Means.
The bill puts forward a tax package that includes lowering personal income tax, but at the same time, imposes additional taxes on petroleum products, vehicle sales, and lotto winnings.
Section 20 of the bill states that services subject to percent tax would include “sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce.”
The proposed measure would also impose tax on cooperatives’ “gross receipts from lending activities by credit or multi-purpose cooperatives” and “sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the Cooperative Development Authority.”
The tax exemption granted to cooperatives is mandated under Republic Act 9520 or the Philippine Cooperative Code of 2008.
Bravo said cooperatives should retain their tax exemptions because they are non-profit “social enterprises” that provide services for its members.
“Cooperatives are not corporations that exist for profit; cooperatives are social enterprises that contribute and exist to serve their members, not to make a profit,” he said, adding that cooperatives, unlike private companies, do not issue stock or pay dividends to outside stockholders.
“Instead, earnings are returned to their members in the form of lower loan rates, higher interest on deposits, and lower fees,” Bravo said.
The lawmaker stressed that cooperatives should not be taxed because they do not generate profits.
He said the so-called “profit or surplus of cooperatives are actually “savings” generated out of the cooperative’s operations. The surplus generated was considered savings because the whole surplus is returned to the member-patrons in the form of interest on capital and patronage refund.
Bravo also said that cooperatives do not even have full discretion to use these surpluses.
Republic Act 9520, requires cooperatives to set aside a portion of their net surpluses for the following: the Reserve Fund, the Cooperative Education and Training Fund, the Community Development Fund, and the Optional Fund.