Bureau of Local Government Finance Opinion

September 3, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Orlando R. Ravanera Chairman Cooperative Development Authority 827 Aurora Blvd., Service Road Brgy. Immaculate Conception 1111 Cubao, Quezon City Sir : This refers to your letter dated July 10, 2015 relative to Resolution No. 47, S. 2015 of Aurora Integrated Multipurpose Cooperative (AIMCoop) seeking from the Cooperative Development Authority (CDA) for assistance to intervene in the interpretation and implementation (perhaps) of local revenue codes or tax ordinances of the different Local Government Units relating to local taxes imposed to cooperatives. The CDA cited the following provisions and issuances relative to the exemptions of cooperatives: 1. Section 133 (n) of the LGC which states that "taxes, fee and charges of Countryside and Barangay Business Enterprises and cooperatives duly registered under RA 8619 and Republic Act Numbered Sixty Nine Thirty Eight (RA No. 6938) otherwise known as the Cooperative Code of the Philippines." 2. Read altogether, the provisions is interpreted to mean that LGUs can no longer levy tax on cooperatives registered under RA 6938, as amended by RA 9520, except as provided under paragraph 1 of DILG Memorandum Circular No. 2010-120 issued by Secretary Jesse M. Robredo which read as follows: 1. "Obtain or secure a Mayor's Permit and pay the commensurate cost of regulation, inspection and surveillance of the operation of its business but not to exceed One Thousand Pesos (Php1,000.00)" 3. BLGF Memorandum Circular 31-2009 to wit, ". . . and pay the commensurate cost of regulation, inspection and surveillance of the operation of its business but not to exceed One Thousand Pesos (Php1,000.00). Likewise the cooperative shall secure a Community Tax Certificate (CTC) and pay the basic tax of Five Hundred Pesos (php500.00) as a juridical entity. . . . " 4. Section 193 of the Local Government Code is indicative of the legislative intent to vest broad taxing powers upon local government units and to limit exemptions from local taxation to entities specifically provided therein. Section 193 provides: "Section 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938 , non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code." With the foregoing provisions, a local tax ordinance cannot supplant the legislative intent of tax exemption enjoyed by cooperatives. We agree, a local tax ordinance will not render taxable what the law has expressly exempted from local taxation. In DOJ Opinion No. 47, s. 1994 (dated April 8, 1994) , the DOJ ruled that: "Nonetheless, for your information only, we would like to point out as a rule, municipal legislation, in order to be valid must not contravene national laws (Secretary of Justice Opinions Nos. 187, s. 1961, and No. 23, s, 1973). It is a well established principle in the law of municipal corporations, that the legislative bodies of municipal corporations, which are mere creations of Congress, may not enact municipal legislations invading or intruding into an area already covered by a statute, or contravening provisions of the same ( ibid. , No. 77, s. 1971). Moreover, in DOJ Opinion No. 155, s. 1994 (dated October 26, 1994), the DOJ ruled that: "Equally settled is the doctrine that an essential requisite for a valid ordinance is, among others, that 'it must not contravene the statute' for it is a fundamental principle that municipal ordinances are inferior in status and subordinate to the laws of the State; thus, whenever there is conflict between an ordinance and a statute, the former 'must give way' ( Primicias vs. Municipality of Urdaneta, Pangasinan, 93 SCRA 462; also OP. No. 222, s. 1939 )." Accordingly, this Bureau expresses the view that for as long as a cooperative is duly registered with the CDA under the provisions of R.A. 6938 and R.A. 9520, it shall remain exempt from the payment of local taxes. However, such exemption should not be interpreted as absolute in view of the provision of Article 61, which provides: " ART. 61. Tax and Other Exemptions . Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members. . . . . Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions: (1) . . . . (2) Cooperatives with accumulated reserves and undivided net savings of more than Ten million pesos (P10,000,000.00) shall pay the following taxes at the full rate: xxx xxx xxx. (a) All other taxes unless otherwise provided herein; and (Emphasis ours) xxx xxx xxx." We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director