FINANCE secretary Carlos Dominguez III has directed the Bureau of Internal Revenue (BIR) to expedite its audit of almost 30,000 cooperatives to weed out shams that take advantage of tax incentives.
In a meeting of the Department of Finance (DOF) executive committee (Execom), Dominguez ordered the BIR to intensify efforts in determining enterprises that exploit the tax benefits granted to cooperatives.
Based on the report to Dominguez, the BIR has sent audit notices to 474 cooperatives across the country resulting in tax assessments of P1.62 billion, from which the agency has collected P250.35 million so far.
In the Execom meeting, BIR deputy commissioner Arnel Guballa reported that they recorded a total of 29,623 registered cooperatives whose tax compliance amounted to P3 billion combined in 2017.
However, it declined by 5.4 percent to P2.84 billion in 2018.
Guballa said the audit uncovered some enterprises with business models that are not cooperatives, but claim to be one only to enjoy the tax perks granted to cooperatives.
He cited an example a “cooperative” that the BIR had discovered to own several gasoline filling stations.
The Tax Reform for Acceleration and Inclusion (TRAIN) Law requires cooperatives to submit regular reports on the fiscal incentives they are receiving through the Cooperative Development Authority
(CDA) that will forward a consolidated report to BIR to be included in the DOF database.
All registered cooperatives are required to file their tax returns and pay their tax liabilities, if any, using the electronic system for filing and payment of taxes of the BIR, under the Joint Administrative Order (JAO) No. 1-2019 between the CDA and BIR which was signed by Dominguez in May.
Cooperatives that were issued Certificates of Tax Exemption (CTEs) and availed of tax incentives are required to submit to the CDA their respective Annual Tax Incentives Reports on or before April 30 of the succeeding year or 15 days from the deadline of filing of their Annual Income Tax Returns, depending on the accounting period used.
Failing to comply with these requirements will result to the revocation of CTE of non-compliant cooperative, as the JAO stated.
At first offense, non-compliant cooperative will face revocation of its CTE and a prohibition on availing of tax exemptions for a period of one year from the date of revocation.
Non-compliant co-ops, at second offense, will be prohibited from availing of tax exemptions for three years, while a third offense bars it from tax exemptions for five years.
A fourth offense prohibits a co-op from ever re-applying for any tax exemption.
“Registered cooperatives shall be liable for the payment of taxes immediately upon revocation of the certificate of tax exemption, inclusive of surcharge, interest and compromise penalty,” JAO states.
“Upon payment of taxes, registered cooperatives can re-apply for the issuance of certificate of tax exemption which shall be effective only upon the lapse of the period of prohibition to avail of the tax exemption,” it added. (GMA News)
