BIR goes after ‘fake’ co-ops with tax breaks

The Bureau of Internal Revenue (BIR) is going after “fake” cooperatives that enjoy tax breaks, in a bid to not only reduce the government’s foregone revenues but also ensure that only legitimate ones benefit, the Department of Finance (DOF) said Monday.

In particular, Finance Secretary Carlos G. Dominguez III directed the country’s biggest tax-collection agency to fast-track its audit of nearly 30,000 cooperatives in the country to determine which ones are “true to their mandate of promoting self-reliance and social change, and which ones have apparently organized themselves into cooperatives as a ruse to exploit the tax benefits granted to such organizations.”

In a recent report to Dominguez, Internal Revenue Deputy Commissioner Arnel Guballa said the BIR already sent audit notices to 474 cooperatives, which had tax assessments totaling P1.62 billion.

Thus far, these notices generated P250.35 million in tax collections, Guballa said.

The tax take among 29,623 BIR-registered cooperatives reached P3 billion in 2017, but declined to P2.84 billion last year, Guballa added.

“The ongoing audit has uncovered enterprises with business models that are not cooperatives, but claim to be one so that they can enjoy tax perks,” according to Guballa, citing for instance a registered cooperative that the BIR found out also owned a number of gas stations.

As such, Dominguez ordered the BIR to intensity its audit of cooperatives.

The Tax Reform for Acceleration and Inclusion Act mandated cooperatives, through the DOF-attached Cooperative Development Authority, to regularly submit reports detailing the tax incentives that they receive, so that the CDA can consolidate information in a DOF database established under the Tax Incentives Management and Transparency Act.