BUREAU of Internal Revenue (BIR) Commissioner Caesar R. Dulay has issued an order for the audit or investigation of cooperatives due to their “low tax compliance or nonpayment of tax.”
Under Revenue Memorandum Order 7-2020 dated February 10, 2020, Dulay said the purpose of the audit or investigation was to “ensure the correctness of availment of tax exemptions/incentives of cooperatives pursuant to Republic Act 9520.”
Aside from this, Dulay said there is a need to effectively monitor tax compliance of cooperatives.
The order shall cover the issuance of electronic Letters of Authority for the audit/investigation of cooperatives for taxable years 2018 and onward.
Sought for comment on the reason behind the audit/investigation of cooperatives, BIR Deputy Commissioner Arnel SD. Guballa said in a text message to the BusinessMirror: “The audit was due to low tax compliance/nonpayment of tax.”
Cooperatives which transact business with both members and nonmembers whose accumulated reserves and undivided net savings is more than P10 million “shall be prioritized for audit/investigation” by Revenue District Offices having jurisdiction over the said cooperatives.
Moreover, other
cooperatives with income not related to the main/principal business under their
Articles of Cooperation shall be, likewise, among those covered for priority
audit, whether such cooperatives deal purely with members or both members and
nonmembers.
In October last year, Finance Secretary Carlos G. Dominguez III ordered the BIR to intensify its efforts to determine which cooperatives are true to their mandate of promoting self-reliance and social change and which ones organized themselves into cooperatives as a ruse to exploit the tax benefits.
In a report last year, the BIR said it has 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.
It also recorded a total of 29,623 registered cooperatives whose tax compliance amounted to P3 billion in 2017, but declined by 5.4 percent to P2.84 billion in 2018.
Image credits: Nonie Reyes