Finance Secretary Carlos Dominguez III ordered the Bureau of Internal Revenue to fast-track the audit of around 30,000 registered cooperatives to weed out those that have abused the tax incentives granted to them.
The BIR said in a report to Dominguez that it had sent audit notices to 474 cooperatives resulting in tax assessments amounting to P1.62 billion. It said the government so far collected P250.35 million.
BIR deputy commissioner Arnel Guballa said during a recent DOF executive committee meeting that there were 29,623 registered cooperatives whose tax compliance amounted to P3 billion in 2017. The figure declined by 5.4 percent to P2.84 billion in 2018.
Upon hearing the BIR’s report, Dominguez directed the BIR to intensify its efforts to determine which cooperatives were true to their mandate of promoting self-reliance and social change and which ones apparently organized themselves into cooperatives as a ruse to exploit the tax benefits granted to such organizations.
“You have the right to audit already, so please exercise it,” Dominguez told BIR officials led by commissioner Caesar Dulay.
Guballa said the ongoing audit had uncovered enterprises with business models that are not cooperatives but claimed to be so to enjoy tax perks. He cited, for instance, a “cooperative” that the BIR had discovered to own several gasoline filling stations.
Under the Tax Reform for Acceleration and Inclusion Law which took effect on Jan. 1, 2018, cooperatives, through the Cooperative Development Authority were required to submit regular reports on the fiscal incentives they are enjoying.
The CDA, in turn, will submit a consolidated report to BIR for inclusion in the DOF database created under the Tax Incentives Management and Transparency Act.
Under the TRAIN law, the report includes “information on the income tax, value-added tax, and other tax incentives availed of by cooperatives registered and enjoying incentives under Republic Act No. 6938” or the Cooperative Code of the Philippines.