The chief aim of cooperatives, according to the Cooperative Development Authority (CDA), is to help improve the quality of life of their members. Co-ops can do this by providing goods and services to their members and by increasing their income, savings and purchasing power. The importance of cooperatives in assisting the State usher in economic development, particularly in the countryside, is underscored by the fact that an agency was created to promote their viability and growth.
There are 26,000 registered co-ops engaged in various undertakings in the Philippines. The most popular types of cooperatives are credit co-ops (which promote and undertake savings and lending services); consumer co-ops (which procure and distribute commodities to members and nonmembers); producers’ co-ops; and service co-ops. These co-ops enjoy a number of privileges, including exemptions from all national, city, provincial, municipal, or barangay taxes for those with accumulated reserves and undivided net savings of not more than P10 million.
These tax exemption privileges, according to the CDA, are what attracted unscrupulous traders to use certain co-ops as dummies for importing rice under the new trade scheme (See, “CDA presses overhaul of rice import scheme,” in the BusinessMirror, February 14, 2020). These tax exemptions are particularly tempting to those who do not want to incur additional costs as rice imports are now slapped a 35-percent tariff. At $360 per metric ton plus the 35-percent tariff, a trader or group will have to spend a
minimum of P24.3 million to import 1,000 MT of rice.
Sources informed this newspaper that farmers’ co-ops serve as fronts of institutions or firms that wanted to avail themselves of tax exemptions (See, “Pre- and post-rice trade liberalization law, big traders gaming farmer groups,” in the BusinessMirror, October 31, 2019). These co-ops earn a certain percentage or a specific amount for every ton of rice brought into the Philippines under their name. While this arrangement allows co-ops to earn, it also enables unscrupulous players to dodge payment of correct taxes and duties.
The law does not prohibit co-ops from importing rice, but their increasing involvement in the rice trade following the enactment of Republic Act 11203 could rob government of much-needed revenue. Shipments that are not meant for their members and are channeled instead to their financiers could cause local rice inventory to swell and pull down farm-gate prices of unmilled rice. The increasing involvement of co-ops in the rice trade could also spell doom for their members who are badly in need of their services.
The government must fast-track its investigation so it could identify the financiers of co-ops who are gaming the current rice trade regime. These cheats must not be allowed to profit from local planters, who have already lost billions of pesos due to the drop in farm-gate price of unmilled rice (See “Planters lose P61.77 billion due to rice price drop,” in the BusinessMirror, November 15, 2019). If these traders want to sell imported rice, they must do so legally. The government must put a stop to their despicable practice of using co-ops as dummies in an effort to maximize earnings by not paying the correct taxes.