FASTLANES: Co-ops awaken, to fight bills lifting tax exemption

QUEZON CITY (MindaNews / 3 Sept) – Leaders of cooperative federations meet here last Thursday to plan out actions on moves to abolish their privilege of tax exemption.

In a meeting called by the Philippine Cooperative Center (PCC) yesterday, leaders of cooperative federations from around the country agreed to campaign against provisions in the proposed law on the Rationalization of Fiscal Investment Incentives, now pending in the House of Representatives and the Senate.

The cooperatives are particularly wary on the provision of the proposed law that seeks to repeal sections 60 and 61 of the Cooperative Code of the Philippines (RA 9520). These provisions give cooperatives tax exemption privileges. Among the non-taxable income of cooperatives are those derived from business transactions with members.

Also cooperatives with assets of not more than P10 million are exempt from “all national, city, municipal or barangay taxes. They are also exempt from customs duties, advance sales or compensation taxes on their importation of machineries, equipment and spare parts used by them.”

The repeal of the tax exemption privileges of cooperatives according to Ponciano Payoyo, chairperson of the Philippine Federation of Electric Cooperatives (Philfeco) is misplaced and defeats the role of cooperatives.

Payoyo, former Apec party-list representative, said the proposed Fiscal Investment Incentives law should only cover investment promotions agencies, and the Cooperative Development Authority (CDA) is not among those.

The creation of the CDA is mandated in section 15, Article XII of the Constitution which says it is policy of the state “to promote the viability and growth of cooperatives as instruments of equity, social justice and economic development.” 

Payoyo said the tax exemption privileges is a social justice measure and can never be considered as fiscal incentive to businesses.

In a position paper submitted by the CDA to the House Committee on Ways and Means chaired by Rep. Romero Quimbo (Marikina, 2nd district), which is deliberating on three House Bills on the Rationalization of Fiscal Investment Incentives, it said that repealing the tax exemption of cooperatives “will defeat the very intent of the 1987 Constitution.”

It added that “cooperatives are voluntary organizations of people who want to improve their economic lives by their own initiatives and using their own resources.” Cooperatives primarily derive their capital from contribution of its members.

According to Hamilcar Rutaquio, chairman of the PCC, cooperatives movement is launching a nationwide campaign against proposed Fiscal Investment Incentives law and intensify their lobby against the proposed law in both houses of Congress. Tens of thousands of co-operators would hit the streets in Manila and key cities nationwide next month as a show of force against the proposed law, he said.

What the government should do, according to Atty. Gloria Fudalan, chairperson of the Philippine Federation of Credit Cooperatives is instead to support the growth of cooperatives and strengthen further their privilege of tax exemption.

This attempt to abolish the cooperative’s privilege of tax exemption “could be the most serious threat to cooperativism, which is celebrating its centennial in the country this year.”

While cooperatives enjoy certain tax privileges, cooperatives are in fact tax makers, said Payoyo. Taxes being withheld from fixed income from those directly employed by cooperatives, numbering over half –million Filipinos, he said is over P4 billion a year. It could be bigger as those indirectly employed by cooperatives run up to over 1.9 million people according to data from the CDA. Micro cooperatives or those with assets below P3 million comprise 76 percent of the country’s cooperatives.

Although, it believes that the proposed law is unconstitutional, the CDA wants to distance itself from the protests planned by cooperatives. “Our role is to inform them of these developments and leave it to them to draw up whatever action they deemed appropriate,” said Ray Ellevazo, executive director of CDA.

He however added that the CDA had already expressed before Congress its stand on the issue in the public hearing last August 11. “Sinabi po namin na if maipasa itong version of the bill that repeals the cooperative privilege of tax exemption, mamamatay ang mga kooperatiba. And we have expressed in writing the basis of this stand,” he told Mindanews.

(The author, a Mindanawon, works in the office of the chairman of the Cooperative Development Authority. Comments can be sent to