DOF wants BIR audit on cooperatives

MANILA, Philippines - The Department of Finance (DOF) wants the Bureau of Internal Revenue (BIR) to be given the authority to audit cooperatives should Congress push to retain their value-added tax (VAT) exemptions.

In an interview, Finance Secretary Carlos Dominguez said he has asked Congress to look into the possibly of allowing the BIR to audit cooperatives to make sure they do not abuse their privilege to be exempted from the VAT.

“If that’s the wish of the representatives of the people, we have to honor it,” Dominguez said, referring to the plan to retain VAT exemption for cooperatives.

“However, I have also asked the congressmen that if that’s the case, will they also allow the BIR to audit each and every coop once a year?” He added.

According to Dominguez, the government should have a way of weeding out people who avoid taxes by pretending to be cooperatives.

“We have a lot of doubts as to whether all the coops are actually valid cooperatives,” he said.

House Bill 5636, which contains the first package of the DOF’s Comprehensive Tax Reform Program, includes a provision on the removal of VAT exemption enjoyed by certain groups and individuals, including cooperatives, to broaden the tax base.

However, House Majority Leader Rodolfo Farinas earlier confirmed that House Speaker Pantaleon Alvarez agreed to retain VAT exemptions for cooperatives.

Citing a study, Finance Undersecretary Karl Kendrick Chua said more than half of the 7.6 million members of the 9,431 registered cooperatives in the country belong to rich cooperatives which have annual gross sales of over P5 million.

“The VAT leakage in this sector is big because the Cooperative Development Authority (CDA) cannot audit coops properly and distinguish sales to members and non-members. There are also many fake coops that take advantage of the system,” Chua said in an earlier statement.

“Moreover, not all coops are poor, some can be very rich,” he added.