retention of the cooperative tax exemption privileges under ra 9520

Retention of the Cooperative Tax Exemption of RA

9520

Dagupan Extension Office

Presented by:

Josefina B. BitonioRegional Director

CDA DEO

House Bill No. 4774House Bill on Tax Reform for Acceleration and Inclusion

Last 17 January 2017, House Representative Dakila Carlo E. Cua introduced and filed House Bill (HB) No. 4774, the proposed Tax Reform for Acceleration and Inclusion, which aims to create a tax system that is simpler, fairer and more efficient, characterized by low rates and a broad base that promotes investment, job creation and poverty reduction.

House Bill 4774, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) Bill seeks to reduce poverty from 21.6% to 14%, which means some 6 million Filipinos will no longer wallow in poverty by 2022 and that by 2040, extreme poverty is eradicated and high income status is achieved, attaining a per capita GNI increase of US$12,000 in today’s money.

The proposed bill determines the financial implications of the foregoing targets in the amount of P366-B per year between 2016-2022 to fund programs in infrastructure, education and training, health and social protection programs. Towards this end, HB 4774 seeks to lift the tax exemption of cooperatives to raise the amount.

House Bill No. 4774 dated 17 January 2017, p 7

Tax Particulars Current Tax Rules Proposed Tax Reform

Sales by Agricultural Products

CurrentCoop buy rice from Traders P 30 + Mark Up (P5) = P 35P 5.00 x 50 kgs 250.00

Proposed Tax ReformCoop buy rice from Trader P 30 + VAT = P 33.60 Mark Up 5.00 Total 38.60 P8.60 x 50 kgs 430.00

Gross Receipts from Lending Activities

CurrentLoan P 10,000 + Interest P 10,000 + 12% = P 11,200.00 Proposed Tax ReformLoan P 10,000 + Interest P 10,000 + 12% + VAT (1344) = P 12, 544.00

The proposed removal of the 12-percent VAT exemption of cooperatives is one of the more contentious issues in the Duterte administration’s tax reform package

Article 60 , RA 9520ART. 60. Tax Treatment of Cooperative. - Duly registered cooperatives under this Code which do not transact any business with non-members or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and other tax laws. Cooperatives not falling under this article shall be governed by the succeeding section.

House Bill No. 4774 dated 17 January 2017, p 14

HB 4774 seeks to lift the tax exemption of cooperatives to raise funds

Article 60 , RA 9520ART.61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions:

House Bill No. 4774 dated 17 January 2017, p 14

The cooperatives are appreciative of the current Administration's efforts to update and improve our tax system. While the coop sector supports the administration’s tax reform efforts, it opposes any move to repeal the tax exemptions given to cooperatives mandated under Republic Act 9520, or the Philippine Cooperative Code of 2008.

lifting of the tax exemptionof cooperatives?

• Cooperatives are job generators and tax makers. Cooperatives help their members to become active participants and contributors to local economic endeavors thereby making them tax makers

• Cooperatives creates economic opportunity for the least, last and underprivileged which banks don’t do.

• Principle of Net Surplus Distribution

Nothing is retained, the surplus from cooperative operations is given back to all members

• Principle of Ownership

Cooperatives are owned by all members where majority are not even taxable due to low or below the minimum wage income

Removing the VAT exemption privilege would result in “stifling the development of cooperatives and denying them the benefits” . The removal of the VAT exemption would be tantamount to a violation of the Constitution, which provides for the development of social enterprises

• The social and economic benefits provided by cooperatives have far reaching impact, and they need support from the government to reach their potential as a dynamic people centered enterprise committed to total human development. They make major contributions to the sustainable development goals. While it is true that they do could not eradicate poverty and economic injustice on their own, they are certainly a part of the solution.

• Treating cooperatives as profit-oriented enterprises and imposing taxes on them, is not only unconstitutional, it is also anti-people as it is counter-productive in the long-run. The viability and sustainability of cooperatives that have long been serving millions of members are now put in a serious bind.

One hundred seventy (170) legislators or more than 50% of the 292 members of the House of Representatives supported the retention of VAT exemption of cooperatives.

Update

Role of RCDC

It is within this context that We - RCDC 1 should passed a resolution to all our congressmen and the members of the Senate to retain the tax privileges of cooperatives

Thank you !