The House of Representatives can restore the P5 billion annual Value Added Tax exemption (VAT) for cooperatives that was removed under the proposed Tax Reform, Acceleration and Inclusion (Train) bill.
Rep. Dakila Cua of Quirino, chairman of the House Ways and Means panel and sponsor of the tax reform bill in the plenary, said House leaders will take into consideration the cooperatives’ concern on the removal of their VAT exemption.
Before the plenary debate, the 47-strong Party-list Coalition in the House thumbed down the removal of VAT exemption of cooperatives under the Train bill.
The party-list coalition in the House that has 47 members opposed the removal of VAT exemption of cooperatives.
“Cooperatives in the country were formed to serve as practical vehicles for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice. Their profit is only incidental in order to meet the needs of the community it seeks to serve; in the form of different services they provide that aim to alleviate poverty through self-education and social development projects,” party-list lawmakers said.
They argued that the tax exemption privilege on cooperatives is the only provision democratizing wealth and power to the marginalized.
“We hope that in the creation of a simpler, fairer and more efficient tax system, the same will remain true to being a social justice measure and will result to inclusive growth, without forsaking the lives of millions of the Filipino people who have come to depend on these cooperatives,” they said.
Rep. Anthony Bravo of Coop-Natcco party-list asked Cua if he would be amendable to accepting amendments from the cooperative sector.
“I am of the same objective as our friend in the cooperative sector. I would like to tell Congressman Bravo that I have an information from the Majority Leader and the Speaker that they also have a heart for the cooperative,” Cua said. “At the proper time, they will join in advocating…in making a superior provision on cooperative taxation arrangement in this bill.”
The bill scraps the VAT exemption for sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members, as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce.
It also removed VAT exemption on gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority as well as sales by non-agricultural, non- electric and non-credit cooperatives duly registered with the Cooperative Development Authority.
Rep. Rico Geron of Agap party-list earlier warned that the interest rates on loans provided by cooperatives will increase by five to six percent without the VAT exemption.
“Imagine the small-time business owners bearing the brunt of that. The interest could reach more than 20 percent. Where will they go at this point? Banks won’t readily approve their loan application because banks don’t consider market vendors, farmers as bankable who can pay their loans,” Geron told reporters.
“The Finance department argues that cooperatives should not rely on exemptions but sound fiscal management and that there is a need to address the leakage on cooperatives. Leakages in tax collection, however, is not limited to cooperatives and yet, the cooperatives are being singled out. If you see a rat in the rice field, do you set the rice field on fire to kill the rat? You should find the rat, kill it, not burn the entire rice field just to kill a rat,” he said. Llanesca Panti