THE REGULATOR of the country’s cooperatives has dissolved more than 9,000 entities for non-compliance and is asking the Bureau of Internal Revenue (BIR) to “trust” its governance after the latter formally conducted its own audit on these firms’ tax compliance.
“We audit them correctly, there’s nothing to fear. There is no reason for them to audit those whom we already audited (since) it is CDA’s responsibility,” Cooperative Development Authority (CDA) Chairman Orlando R. Ravanera told BusinessWorld in an interview.
BIR Commissioner Caesar R. Dulay issued Revenue Memorandum Order No. 7-2020 on Feb. 18, to send audit letters to cooperatives and look at their books of accounts for 2018 onwards and check the “correctness” of tax exemptions availed and monitor their tax compliance
The circular reiterated the bureau’s authority to conduct audit without the need to secure prior authorization from the CDA, as stated under the Tax Reform for Acceleration Inclusion (TRAIN) Act.
This is after Finance Secretary Carlos G. Dominguez III ordered the BIR to step up its audit of these groups “to weed out those that have abused the tax incentives granted to them under the law” and plug possible tax leaks.
Mr. Ravanera said they respect BIR’s power to conduct audit especially for tax monitoring purposes.
“On their own right, if they want to verify whether (cooperatives) are tax compliant or not, it could be within their own [jurisdiction]. But for me, with regarding to [identifying if cooperatives] are ‘fake’ or not, it is our responsibility,” he explained.
However, he said CDA, as the sole governing body for cooperatives, has already been conducting regular audits on its members and used the data to determine cooperatives that are worthy of keeping their certificates to operate and the tax privileges that comes with it.
He said the CDA does not hesitate to dissolve cooperatives that fail to adhere to the principle of cooperativism and follow their rules.
In fact, he said they have dissolved a total of 9,576 cooperative to date after their audits showed they were not compliant with requirements and the rules.
“As a regulatory agency, we have been enforcing the law and even cancelling [cooperatives’ registaration], kahit malaki yan, (even if it is huge), if they deviate from what they are supposed to do,” he said.
There are currently 28,000 registered cooperatives across the country, but only 18,000 are operating, according to CDA data.
Of the active cooperatives, only a third or more than 6,000 were given certificates of exemption by the BIR despite the fact that the tax privileges should be applicable to all cooperatives that got CDA’s approval.
Mr. Ravanera said majority or around 80% are considered micro-cooperatives which have a capital of P3 million and below.
According to the circular, big cooperatives or those with accumulated reserves and undivided net savings over P10 million will be prioritized in their audit.
The CDA chief said BIR authorities can also look at the results of the audits they have been doing in the past.
“If you can see that CDA did not do its job of really regulating the cooperatives, then I will tender my resignation. It is a big insult to me, to CDA, that those whom we have audited, you will still audit. Do you not trust us? We do our job,” he said.
Under the law, he said the net surplus of cooperatives’ earnings are allocated to a reserve fund to maintain operations (10%), to an education and training fund (10%) and to a community development fund (3%) for medical services, feeding program and scholarships, while they distribute the remaining to their members in the form of dividends.
Currently, cooperatives enjoy exemption from income tax, value-added tax, percentage tax and documentary tax, among others.
Earlier, the BIR reported that it collected P2.84 billion in taxes from cooperatives in 2018, 5.4% less than the P3 billion collected in 2017. — B.M. Laforga