THE Cooperative Development Authority (CDA) said it is encouraging cooperatives to own businesses as a form of livelihood, and defended the sector’s business activities from tax authorities, who suspect that co-ops might be misusing their special tax privileges.

CDA Chairman Orlando R. Ravanera told BusinessWorld that the regulator is encouraging business activity in areas like fuel service stations, pharmacies, coco-sugar production, dairy production, and other micro, small and medium enterprises.

He noted that businesses owned by cooperatives have come in for extra scrutiny from the Bureau of Internal Revenue (BIR) on suspicion that such businesses exploit tax privileges granted to co-ops.

“We are now encouraging them to go to filling stations (and) pharmacies, so (communities) can have a pharmacy… and dairy businesses,” Mr. Ravanera said in an interview on Friday.

This is in response to BIR’s heightened audit on cooperatives abusing tax-exemption after learning that some cooperatives own “several gasoline filling stations.”

He said of the 28,000 registered cooperatives, only 18,000 are active and operating with 10.5 million members. Some 11,138 are qualified to enjoy tax exemptions since they are compliant with requirements.

Of the “qualified” cooperatives, he said BIR issued certificates of exemption (CTE) to 6,623 cooperatives.

However, Mr. Ravanera said there are groups registered as cooperatives to enjoy tax exemptions, which the regulator cancels immediately if it finds irregularities.

“We don’t allow that, we actually have cancelled (some registrations) — every year at least 5,000 are (found to be) not really cooperatives. Pag sila nakita naming hindi sila dapat maging cooperative and use the status as a tax shield, we don’t hesitate to cancel their registration, marami na kaming pina-cancel (when we learn that they are posing as cooperatives to evade tax, we don’t hesitate to cancel their registration. We already cancelled a lot),” he said.

He said the CDA dissolved 8,714 registered cooperatives in 2018, 7,756 in 2017, 5,667 in 2016 5,645 in 2015.

Mr. Ravanera said the agency supports the BIR’s bid to “cleanse” the co-ops list and conducts audits itself.

He said under the rules a co-op’s net surplus — equivalent to net profit — must go 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.

Yung mga compliant, (Those that comply,) we inspect them and they are actually allocating that much. The rest, binabalik ‘yan sa miyembro (they are returned to members) in dividends,” he said.

He said that currently, cooperatives enjoy exemption from income tax, value-added tax, percentage tax and documentary tax, among others.

The sector is governed by Republic Act (RA) 9520 or the Philippine Cooperative Code of 2008.

Mr. Ravanera noted that most members are farmers, fisher folk and indigenous people hoping to “lift themselves out of poverty.”

“The cooperative is the equalizing force to put those on the margins into the mainstream of the development process. We have about 26 types of cooperatives (for) farmers, fisher folk, the indigenous people… to empower them in to harness their power via cooperativism,” he said.

Last week, BIR Deputy Commissioner Arnel SD. Guballa reported that the agency collected P2.84 billion in taxes from co-ops last year, down 5.4%.

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. Ravanera said that according to the US Agency for International Development (USAID), “where there are cooperatives, the economic life of the people is better.” The Philippines is a leader in using cooperatives within Asia and the Pacific, he said.

“Cooperativism is the countervailing force against poverty, against violent extremism, terrorism against ecological turbulence due to climate change,” Mr. Ravanera said. — Beatrice M. Laforga