Falling coop tax compliance prompts audit

Cooperatives who availed of value-added tax and other tax incentives must submit a regular report to the Cooperatives Development Authority.

The Department of Finance (DoF) has started an audit on the books of cooperatives from around the country to find out why their tax compliance is not only low but also falling.

Finance Secretary Carlos Dominguez said of the nearly 30,000 registered cooperatives around the country, only around a sixth of their number, or 474, have thus far been audited.

But the broader goal is about finding the reason for the low rate of industry tax compliance and at the same time boost the government’s revenue collection.

This was learned Monday from Finance Secretary Carlos G. Dominguez III who directed the Bureau of Internal Revenue (BIR) to expedite the ongoing audit of the almost 30,000 registered cooperatives in the country.

According to the BIR, it has already sent audit notices to some 474 cooperatives, which generated aggregate tax assessment totaling P1.62 billion.

Of the total, the tax bureau collected thus far only P250.35 million.

Deputy BIR Commissioner Arnel Guballa told Dominguez at the recent executive committee meeting the BIR reported a sharp decline in tax compliance from 2017 to 2018.

Data from the BIR show the 29,623 cooperatives settled their tax obligations amounting only to P3 billion in 2017, or a 5.4 percent drop to only P2.84 billion in 2018.

Given the low tax compliance among cooperatives, Dominguez ordered the BIR to intensify efforts and discover who among the various organizations exploit the benefits of incentives given to them.

“You have the right to audit already, so please exercise it,” Dominguez said.

The BIR official told the Finance chief that some enterprises who are not cooperatives cloak themselves as cooperatives so as to enjoy particular tax privileges.

Under the Tax Reform for Acceleration and Inclusion nor TRAIN, cooperatives who availed of value-added tax and other tax incentives must submit a regular report to the Cooperatives Development Authority (CDA).

The CDA, for its part, will then furnish a consolidated report to the BIR for inclusion in the DoF database created under the Tax Incentives Management and Transparency Act.