Privilege Speech of Rep. Anthony Bravo against the repeal of Coop Tax Exemption

Privilege Speech of Rep. Anthony Bravo against the repeal of Coop Tax Exemption


Privilege Speech

Rep. Anthony M. Bravo


Delivered on May 3, 2017


Mr. Speaker, distinguished colleagues, please allow me to welcome everyone back from a well-deserved break, and to greet everybody a very good afternoon, hoping that we can make it even better by resuming our duties and intensifying our efforts to serve those who are in need.

I rise today on a matter of personal privilege, and national obligation, as someone who has witnessed and experienced how our less fortunate countrymen courageously endure challenge after challenge in their attempts to unshackle themselves from the chains of poverty, on the way to some kind of respite from struggles and sacrifices, to eventually living a life not only with promise, but also with reality and accomplishment.

I rise as a believer in the power of one of the greatest organizations ever formed – THE COOPERATIVES – to give honest men and women a chance and an opportunity to build on the humble rewards of their hard work; a believer in the capacity of cooperatives to provide economic opportunities where few exist, a believer in being able to overcome challenges with the combined strength of individuals who will otherwise be weak if they are all alone.

I rise as a member of this august chamber representing over fourteen million Filipino cooperators who partake in the responsibilities and benefits of growing cooperatives, which our Constitution recognizes as “an instrument of social justice and development”.

Republic Act 9520 otherwise known as the Philippine Cooperative Code of 2008 and Republic Act 6939 or The Act Creating the Cooperative Development Authority, are two landmark piece of legislation that helped propel the remarkable growth of the cooperative sector.

For 100 years now, cooperatives have played a significant role in economically and socially empowering millions of our people. For this, the cooperative movement is eternally grateful to the legislators who worked with the cooperative sector in the past to enact measures that seek “to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice.”

The cooperative movement may have been confronted with various challenges through the years but I proudly declare that our cooperatives are government’s PARTNERS FOR GENUINE CHANGE AND SOCIO-ECONOMIC TRANSFORMATION through and through.

The cooperative movement could be likened to a diamond in the rough, whose beauty is left unnoticed by the mainstream but whose impact is far-reaching.

Our cooperatives are present in almost all provinces in the country. Eighty five percent of them operate in over 60 poor provinces in Luzon, Visayas and Mindanao.

Cooperatives role in economic and social empowerment

Cooperatives genuinely embrace, educate and help marginalized sectors such as farmers, fisherfolk, women, indigenous people, persons with disabilities and others, to become part of the economic and social mainstream. These are the sectors that are vulnerable and are often left behind.

Cooperatives give voice to the powerless. Today, we have over 25,000 cooperatives gathering together 14 million Filipinos partaking to the collective endeavor of helping each other address their economic, social and cultural needs.

Mr. Speaker, honorable colleagues, the Philippine cooperative movement has supported development goals of every administration. In fact, our cooperatives are often tapped by the government as partners in the implementation of various programs and projects like the Pantawid Pamilyang Pilipino Program or 4Ps where cooperatives serve as conduits in the payouts to beneficiaries.

Our cooperatives take the risk of reaching remote places controlled by rebels. We invest our resources and manpower services to reach isolated islands and mountainous areas just so we could serve not only our brother and sisters but also the government.

The cooperative sector’s contribution to economy could be easily overlooked when one’s eyes are so focused on the foregone revenues due to tax exemption and preferential treatment of cooperatives. But cooperatives contribution to GDP is even higher than the mining industry that similarly enjoys tax incentives.

In terms of employment generation, cooperatives have also provided 463,789 direct employment and 1.5 million indirect jobs to vulnerable sectors like the micro entrepreneurs.
Cooperatives are also tax generators. In fact, they have remitted to the government 6.3-B pesos Withheld taxes in 2015.

Cooperatives are not for profit

Mr. Speaker, distinguished members of this chamber, let me explain one important concept that expressly separates the cooperatives from other traditional types of businesses. It is called the NET SURPLUS.

Unlike a Corporation where at the end of each fiscal year declares a net income or profit from its operations, a cooperative’s net surplus at the end of each fiscal year is not treated as “profit” but considered as “savings.” Members pool their resources to provide for services they need in the form of businesses the cooperative is authorized to undertake.

The surplus or savings are generated out of the cooperative’s operations and member owners’ patronage of the coop’s services. The surplus generated would have been considered profit if the operation is capitalist in nature; instead, they are considered savings because the whole “surplus” is returned to the member-owners in the form of interest on capital and patronage refund. Hence, in its most practical and practicable sense, cooperatives do not have “profits” to be taxed.

Cooperatives do not even have full discretion to use these surpluses. For example, as provided under Article 86 of RA 9520, all cooperatives are mandated to allocate and distribute their net surpluses as follows:

At least 10% for Reserve Fund to be used for the stability of cooperatives and to meet net losses in its operations.
Not more than 10% for Cooperative Education and Training Fund.
Not less than 3% for the Community Development Fund.
Not more than 7% for the Optional Fund.

Only the remaining net surplus, if any, can be made available for the members in the form of interest and patronage refunds, not to exceed the normal rate of return on investments and patronage refund.

Mr. Speaker, taxation on cooperatives income would be tantamount to double taxation as members of cooperatives already pay an indirect tax mandated by law. RA 9520 mandates the deduction of 30% of the cooperative’s net surplus before distributing them as interest on share capital and patronage fund. Hence, only 70% of the net surplus of the cooperative’s businesses are enjoyed by the members as income.

You may ask where does this 30% of coop net surplus go?

Data of the CDA shows that based on the cooperatives operations for the year 2015, they have contributed a total amount of Php2,119,320,481.36 of Cooperative Education and Training Fund to educate their own officers and members to better manage their own cooperatives. This is less amount of scholarship that government would have otherwise spent to educate the cooperative officers and members.

Furthermore, cooperatives have contributed a total amount of Php1,546,713,063.69 of Community Development Fund as their share not just in community development but in nation-building as well. This amount is brought back to the communities where the cooperatives are situated in the form of feeding programs, medical missions, tree planting activities, scholarship programs, river or ocean cleaning drives, among others.

Cooperatives serve a social purpose. I hope it is clear amongst us Mr. Speaker, honorable members of this august chamber.

As social enterprises, cooperatives provide social services across marginalized sectors, especially the poor and underprivileged that comprise its membership. Such services are delivered utilizing their own capital, for the following: the operation of small businesses of cooperative members, training for values and leadership, loans with low interest and minimal documentation for immediate financial needs, cheaper goods for everyday needs, insurance and medical care at affordable costs, and decent housing, among others.

These are basic services that the government should be providing but the cooperatives have wholeheartedly embraced their mission of uplifting the economic and social welfare of every cooperator. Cooperatives never waiver in their mission to provide the much-needed financial and social services otherwise absent or lacking especially in the remote areas in the countryside.

Today, the cooperative sector again reaches out to you honorable members of the House of Representatives. In this time that there is imminent threat to revoke the cooperative tax exemption, we appeal to your wisdom. Let us consider the damaging impact of some proposed measures that will have direct impact to the welfare of 14 million Filipinos.

I believe that these 14 million cooperators are representative of every household. Thus, if the average household size is 4 according to the Philippine Statistical Authority, we could argue that around 56 million Filipinos or more than half of the population will be affected by the repeal of coop tax exemption.

Cooperatives has legitimate right to tax exemption

At this point, may I humbly remind our distinguished colleagues that Section 15, Article XII of the 1987 Philippine Constitution recognizes the importance of cooperatives as instruments of social justice and economic development.

Citing provisions of the Philippine Constitution, the Supreme Court categorically recognized the cooperatives in its Ruling in Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue.

To wit, the High Court ruled:

“No less than our Constitution guarantees the protection of cooperatives. Section 15, Article XII of the Constitution considers cooperatives as instruments for social justice and economic development. At the same time, Section 10 of Article II of the Constitution declares that it is a policy of the State to promote social justice in all phases of national development. In relation thereto, Section 2 of Article XIII of the Constitution states that the promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and self-reliance.”

The Supreme Court further said:

“In closing, the cooperatives, including their members, deserve a preferential tax treatment because of the vital role they play in the attainment of economic development and social justice. Thus, although taxes are the lifeblood of the government, the State’s power to tax must give way to foster the creation and growth of cooperatives. To borrow the words of Justice Isagani A. Cruz: “The power of taxation, while indispensable, is not absolute and may be subordinated to the demands of social justice.”

RA 9520 explicitly emphasizes the need for the State to extend preferential treatment to cooperatives with regard to taxation. Articles 60 and 61 stipulates the tax treatment of cooperatives.

Applying the same principle relied upon by the Supreme Court, the removal of tax exemptions granted to cooperatives under Articles 60 and 61 of RA 9520, is contrary to the letter and spirit of the Constitution.

Let me clarify that the tax exemption granted to cooperatives is not even absolute as only cooperatives with accumulated reserves and undivided net savings of not more than Ten million pesos (P10,000,000.00) are tax exempt. Coop transactions with non-members are also not tax exempt.

Distinguished colleagues, Mr. Speaker, the tax exemption privilege this august body has bestowed on cooperatives is the only countervailing force to democratize wealth and power in our highly iniquitous society.

Cooperative sector supports government’s pro-poor programs

We support the Duterte administration’s pro-poor programs in the same way we supported anti-poverty programs of past administrations.

We support the noble goal of uplifting an additional six million Filipinos from the bondage of poverty by year 2022.

Initiatives to reform the tax system in our country are welcome as we believe that there is indeed a need to modernize our taxation system to make it efficient and fair. Tax reform however should stick to its goal of improving the welfare of Filipinos in the lower strata.

If it is intended as a pro-poor measure it should not be against the interest of the poor. I believe that we could do so without compromising the tax exemption of cooperatives whose members are primarily the poor and marginalized.

Mr. Speaker, distinguished colleagues, last Saturday thousands of cooperative members across the country staged a simultaneous COOP SHOW OF FORCE in every region to register our position against the proposed repeal of coop tax exemption.

I rise today Mr. Speaker precisely to echo the stand of the cooperative movement. We say NO TO THE IMPOSITION OF VAT ON COOPERATIVES! WE SAY NO TO THE REPEAL OF COOP TAX EXEMPTION!

At this juncture, this humble Representation pleads for your support to build the cooperative movement. Let us not kill or weaken the cooperative movement but rather let us strengthen it.

Thank you very much.