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Cooperatives in
taxmen’s sights
October 15, 2019 | 12:33 am

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THE GOVERNMENT has now turned its sights on nearly 30,000

registered cooperatives as it moves to plug tax leaks, the Finance
department (DoF) said in a press release on Monday.
According to the news statement, Finance Secretary Carlos G.
Dominguez III ordered the Bureau of Internal Revenue (BIR) to step
up its audit of these organizations “to weed out those that have
abused the tax incentives granted to them under the law,” after BIR
Deputy Commissioner Arnel SD. Guballa reported in a recent DoF
Executive Committee meeting that the bureau has on record 29,623
registered cooperatives that paid a total of P2.84 billion in taxes last
year, 5.4% less than the P3 billion they paid in 2017.

The BIR said it has sent audit notices to 474 cooperatives, so far,
resulting in tax assessments amounting to P1.62 billion. The bureau
has so far collected P250.35 million of that amount.

Mr. Dominguez told BIR brass in the same meeting led by

Commissioner Caesar R. Dulay to check if these groups “are true to
their mandate of promoting self-reliance and social change, and
which ones have apparently organized themselves into cooperatives
as a ruse to exploit the tax bene ts granted to such organizations.”

During the ongoing audit, BIR “uncovered enterprises with business

models that are not cooperatives but claim to be one so that they can
enjoy the tax perks,” Mr. Guballa said in that meeting, citing the
example of one group that posed as a cooperative but owned “several
gasoline lling stations.”

Republic Act No. 10963, or the Tax Reform for Acceleration and
Inclusion Act (TRAIN) that came into effect on Jan. 1 last year,
required cooperatives to submit regularly to the Cooperative
Development Authority (CDA) reports on tax breaks they enjoy —
including from income tax and value added tax — under RA 6938, or
the Cooperative Code of the Philippines.

The CDA then submits a consolidated report to the BIR which the
DoF will include in its database under RA 10708, or the Tax Incentives
Management and Transparency Act.
BIR-CDA Joint Administrative Order (JAO) No. 1-2019, which Mr.
Dominguez signed on May 16, set rules to implement the new TRAIN
requirements.

The JAO requires all registered cooperatives to le tax returns and

pay any tax liabilities using the BIR’s electronic system for ling and
payments.

These groups that were issued certi cates of tax exemption (CTE) and
which then availed of such perks are now required to submit their
annual tax incentives reports to the CDA by April 30 of the
succeeding year, or 15 days from the deadline of ling annual income
tax returns, depending on accounting period used.

The JAO provides that any cooperative that fails to comply with these
reportorial requirements will have its CTE revoked.

The BIR will draw up a list of those that did not comply with such
requirements from the master list to be provided by the CDA.

The rst offense will result in CTE revocation and prohibition from
availing of tax perks for a year from date of revocation. The second
offense will result in prohibition from availing of tax exemptions for
three years, while a third offense bars the violator from perks for ve
years. A fourth offense bars the erring cooperative from scal
incentives permanently. — B. M. Laforga

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