Presented to RDC EDSECOM on September 14, 2017 and asking the body to support by way of resolution to retain the tax exemption privileges of cooperatives

1. Retention of the
Cooperative Tax
Exemption of RA
9520

2. Dagupan Extension Office
Presented by:
Josefina B. Bitonio
Regional Director
CDA DEO

3. House Bill No. 4774
House 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.

4. 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.

5. 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.

6. House Bill No. 4774 dated 17 January 2017, p 7
Tax Particulars Current Tax Rules Proposed Tax Reform

7. Sales by Agricultural
Products
Current
Coop buy rice from Traders
P 30 + Mark Up (P5)
= P 35
P 5.00 x 50 kgs 250.00
Proposed Tax Reform
Coop buy rice from Trader
P 30 + VAT = P 33.60
Mark Up 5.00
Total 38.60
P8.60 x 50 kgs 430.00

8. Gross Receipts from
Lending Activities
Current
Loan P 10,000 + Interest
P 10,000 + 12%
= P 11,200.00
Proposed Tax Reform
Loan 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

9. Article 60 , RA 9520
ART. 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

10. Article 60 , RA 9520
ART.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

11. 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.

12. lifting of the tax exemption
of cooperatives?

13. • 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

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

15. • Principle of Net Surplus
Distribution
Nothing is retained, the surplus
from cooperative operations is
given back to all members

16. • Principle of Ownership
Cooperatives are owned by all
members where majority are
not even taxable due to low or
below the minimum wage
income

17. 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

18. • 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.

19. • 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.

20. 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

21. 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

22. Thank you !