BIR Ruling [DA-295-99]

May 17, 1999 BIR RULING [DA-295-99] Hon. Agapito A. Aquino House of Representatives Quezon City, Metro Manila S i r : This refers to your letter dated April 21, 1999 requesting for a re-analysis and re-review of the proposed amendments to Articles 61 and 62 of the Cooperative Code of the Philippines under House Bill Nos. 300, 1096, and 6407, vis-a-vis the position taken by this Bureau in an undated memorandum-comments earlier submitted to your Office. After a careful perusal of the Explanatory Notes supporting the proposed bills, we are now inclined to endorse House Bill No. 300 introduced by Congressman Leonardo Q. Montemayor. We have noted, that the primary purpose of the proposed bill is to limit the enjoyment of tax and other exemptions to cooperatives of small producers, small services providers and/or consumers. That precisely is the very principle in the enactment of the cooperative laws. Thus, in the whereas Clause of P.D. No. 175, it is stated that the State recognizes cooperatives as vehicles by which less fortunate segments of our society could enjoy the privilege of self-development, social growth and economic independence. It is also interesting to note that the definition of "cooperative" under P.D. No. 175 was lifted in its entirety and adopted in the proposed bill. Likewise, the proposed bill which seeks to grant a clearer and fuller tax exemption to the poorer segment of our society is in accord with the pro-poor policy of Pres. Joseph Estrada. However, we object to the proviso in Article 61 of the proposed bill in so far as it provides that cooperatives shall not be required to secure any certificate from the Bureau of Internal Revenue or the Department of Finance. As we have stated earlier, this is an encroachment of the powers and duties of the BIR which is the agency tasked with the enforcement of internal revenue laws and other tax laws. Corollary thereto, Article 62 of the proposed bill should be reworded in the sense that the cancellation of the tax exemptions and other privileges of any registered cooperatives should be done by the Bureau of Internal Revenue upon recommendation of the Cooperative Development Authority. Finally, the proposed House Bill No. 300 should provide for the duration of the tax exemption privileges of duly registered cooperatives. llcd Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue