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President Signs TRAIN, Co-op Tax Exemptions Remain

Cooperators all over the country heaved a sigh of relief as President Rodrigo Duterte signed into law the Tax Reform for Acceleration and Inclusion Act (TRAIN) on December 19 – but maintaining the tax exemption of cooperatives as promulgated in Articles 60 and 61 of the Cooperative Code of 2008.
 
One of President Duterte’s campaign promises prior to the 2016 elections was to simplify or reform the tax system.  And he fulfilled that promise with the tax reform law.  The Department of Finance, the government agency charged with implementing the TRAIN Act will start in 2018.
 
Finance Secretary Carlos Dominguez said during the Senate deliberations last September: “The tax reform bill seeks to achieve a simpler, fairer, and more efficient tax system characterized by lower rates and a broader base, to encourage investment, job creation, and poverty reduction.” 
 
A Dept. of Finance think-tank led by Undersecretary Carl Kendrick Chua drafted the TRAIN Bill, and submitted the initial draft to Congress in September 2016.  The original draft listed some 87 tax exemptions for repeal.  
 
It was not until January 2017, when Co-op Bloc Partylist lawmakers in Congress found out that the TRAIN Bill included in the list of exemptions to be repealed the co-op tax exemptions.  Co-op leaders urged DOF officials to drop the co-op tax exemptions from the list.
 
Co-op Bloc Congressmen Sabiniano Canama and Anthony Bravo of COOP-NATCCO Partylist, and Rico Geron of AGAP Partylist invited co-op leaders to fill up the Gallery of Congress, communicating the Sector’s opposition to the repeal of their tax exemptions.
 
The NATCCO Network in April distributed to member cooperatives a draft Board Resolution, resolving for co-ops to oppose the repeal of tax exemptions and writing or even visiting their District Representatives to signify their protest.   
The TRAIN Bill enjoyed the support of many lawmakers because it provides big personal income tax cuts for the average taxpayer.  To make up for the revenue loss, the Reform Act broadens the tax base by slapping additional tax on tobacco, sweetened beverages, cars, cosmetic surgery (except for accident victims needing it), fuels, coal, lubricants, and metals.  Professionals will be charged a flat rate of 8% on gross revenue.  Estate Tax will likewise be pegged at 6%.
The Lower House, however, made some modifications and removed some co-op tax exemptions from the Repeals List. 
 
This version was approved in May 2017.
 
The Senate began conducting plenary debates on the revised measure, Senate Bill 1592, on September 23 and finally approved it with substantial amendments on November 28.
 
Even with the co-op tax exemptions out of the Repeals List, Rep. Canama would call co-op leaders to the Senate.   Co-op leaders resolved to be vigilant and ensure that the co-op tax exemptions would not be “re-inserted” into the Repeals List.  
“We will guard the TRAIN in the Bicameral conference meetings . . . all the way to Malacanang before President Duterte signs it into law!” said Rep. Canama at a meeting with co-op leaders in the Senate on November 22.
 
The bicameral conference committee meetings lasted for 30 hours.
 
In an interview with COOP-NATCCO Partylist Rep. Ben Canama, the Implementing Rules & Regulations (IRR) of the TRAIN will begin drafting sixty days after President Duterte’s signing, and details of the tax exemptions on co-ops will be discussed, and the Co-op Bloc will be there to provide inputs.
 
According to Philippine Cooperative Center’s former Chairman Hamilcar Rutaquio, one of the agreements arrived at during the discussions between co-op leaders and the Dept. of Finance was that the Bureau of Internal Revenue (BIR) would be 1) CDA will submit data on cooperatives’ a) transactions with members and non-members, and b) their Community Development Fund as one of the Statutory Funds listed in CDA’s Memorandum Circular 2015-06.  The CDF will serve as the tax paid by co-ops; 2) that BIR can view the books of cooperatives.
 
According to President Duterte, “the implementation of these laws will serve as our initial step in making the Philippines an upper-middle-class country by 2022.”
 
Of the P120 billion worth of government revenues that the tax reform law is expected to generate, 70 percent will be earmarked for infrastructure projects while the remaining 30 percent will go to social services.
 
With reports from www.dof.gov.ph , www.manilatimes.net and www.rappler.com
 
 
 
 
 

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