BIR to restrict grant of tax perks to cooperatives

THE Bureau of Internal Revenue (BIR) on Wednesday said it is restricting the grant of fiscal incentives to cooperatives amid loopholes in the law, which has allowed for-profit enterprises to avoid tax and labor rules.

Commissioner Kim Jacinto-Henares told reporters that the bureau will expedite the screening of cooperatives seeking fiscal incentives under Republic Act 9520 or The Philippine Cooperative Code of 2008.

The implementing rules had been approved as early as February last year, but only 4,000 out of the 18,000 applications have been approved so far.

“I’m assuring you that we will be looking into the status of the application and where it is now and the implementation of the law,” Jacinto-Henares told legislators during a House hearing on the agency’s proposed budget for 2012.

“BIR has already issued 4,000 because so far these are the ones who have complied with our requirements,” she said.

“We’re finding out that there are a lot of cooperatives. The problem before of contractualization of labor, now they’re shifting toward cooperativizing their labor,” she said.

“Another problem arises since these cooperatives were shortchanging the labor movement because when you cooperatize you self-employ. And therefore, those hiring these people are not contributing to their SSS, Pag-Ibig, and Healthcare benefits. We’re seeing a lot of these things happening,” the BIR chief said.

Jacinto-Henares said some professionals are organizing themselves into cooperatives to claim tax exemptions.

“Therefore it’s a natural person; it cannot be juridical person. We’re thinking—I hope its not taken against the BIR—to put our foot down and say that we will not give tax exemptions to these kinds of cooperatives because you cannot use the law to do immoral against public policy, against constitution,” she said.

According to the Cooperative Development Authority, the country has 74,000 cooperatives but only 24,000 are active and seeking tax incentives.

Articles 60, 61 and 144 of the law state that duly-registered cooperatives that do not transact any business with non-members or the general public shall not be subject to any tax or fee imposed under internal revenue and other tax laws.

The law also provides that cooperatives with accumulated reserves and undivided savings of no more than P10 million will also enjoy tax incentives.

The law also provides that 74,000 cooperatives shall be relieved from paying taxes for the next five years starting 2010.

“I support the cooperative movement but it should be done for the right purpose and not for these types of purpose that would disadvantage the labor force. Otherwise, it is not only a tax erosion thing but it creates a social problems for our labor force,” Jacinto-Henares said. –Katrina Mennen A. Valdez, Reporter, Manila Times