Retaining the value-added tax exemptions of cooperatives that already enjoy almost all types of tax-free privileges is unfair to the almost 100 million taxpayers and non-coop members, Finance Undersecretary Karl Kendrick Chua said Thursday.
Chua cited studies showing that only 7.6 million members of the country’s 9,431 registered cooperatives were benefiting from the VAT exemptions, of which more than half”•or about 4.2 million Filipinos”•belonged to rich cooperatives with annual gross sales of over P5 million.
“The VAT leakage in this sector is big because the Cooperative Development Authority cannot audit coops properly and distinguish sales to members and non-members. There are also many fake coops that take advantage of the system,” Chua said.
“Moreover, not all coops are poor, some can be very rich,” he said.
CDA data showed that cooperatives with gross sales of over P5 million reported a combined total income of P34.2 billion in 2015. This figure excluded income from credit operations and only involved 750 cooperatives, Chua said.
About 8,314 coops with gross sales of below P3 million earned only P3.3 billion, excluding income from credit operations, during the same period.
“There are many ways to help coops, but VAT exemption is not the right way as it goes against the principle of a VAT. The VAT is a consumption tax and is wrong to use it as an incentive. It is not a tax on profit. We can use the budget to target their specific needs,” Chua said.