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Dominguez orders BIR audit of cooperatives

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By Chino S. Leyco

Finance Secretary Carlos G. Dominguez III has ordered the Bureau of Internal Revenue (BIR) to step up its ongoing audit of the country’s close to 30,000 registered cooperatives to weed out those that have abused the tax incentives granted to them under the law.

Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)

Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)

In a report to Dominguez, the BIR said it has so far sent audit notices to 474 cooperatives across the country resulting in tax assessments amounting to P1.62 billion from which the agency has so far collected P250.35 million.

BIR Deputy Commissioner Arnel Guballa reported the agency has on record a total of 29,623 registered cooperatives whose tax compliance amounted to P3 billion combined in 2017, but which declined by 5.4 percent to P2.84 billion in 2018.

Upon hearing the BIR’s report, Dominguez directed the agency to intensify its efforts in determining which cooperatives are true to their mandate of promoting self-reliance and social change, and which ones have apparently organized themselves into cooperatives as a ruse to exploit the tax benefits granted to such organizations.

“You have the right to audit already, so please exercise it,” Dominguez told BIR officials led by Commissioner Caesar Dulay.

Guballa said the ongoing audit has uncovered enterprises with business models that are not cooperatives, but claim to be one so that they can enjoy tax perks. He cited, for instance, a “cooperative” that the BIR had discovered to own several gasoline filling stations.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which took effect on Jan. 1, 2018, cooperatives, through the Cooperative Development Authority (CDA) are required to submit regular reports on the fiscal incentives they are enjoying.

The CDA, in turn, will submit a consolidated report to BIR for inclusion in the DOF database created under the Tax Incentives Management and Transparency Act (TIMTA).

Under TRAIN, the report includes “information on the income tax, value-added tax (VAT), and other tax incentives availed of by cooperatives registered and enjoying incentives under Republic Act (RA) No. 6938” or the Cooperative Code of the Philippines.

Joint Administrative Order (JAO) No. 1-2019 between the CDA and BIR was signed by Dominguez last May 16 to implement these new regulations under TRAIN.

With this directive, 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.

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