Maintain incentives for cooperatives; Go after big business who cheat on incentives instead

Alarm bells should be ringing by now over suspicious proposals coming from the Department of Finance regarding the lifting of tax exemptions for cooperatives, which form part of the reasons why they continue to flourish in the country.

As of 2003, the 31,000 operating cooperatives in the country have contributed more than P517 billion to the national economy, almost 12% of the GDP! Removing what little incentives they enjoy, amounting to only a little more than P5 billion as compared to the hundreds of billions enjoyed by multinationals in export processing zones is to threaten the jobs of the 1.5 million of Filipinos and the welfare of 5 million coops members nationwide.

While it is true that there have been instances in which certain dubiously constituted cooperatives have abused such incentives, it is no reason to punish the whole cooperative movement. In a globalized economy in which large multinationals continue to reap in the profits to the continued detriment of workers everywhere, cooperatives are able to perform several social service functions that an inefficient government has neglected.

It is poor people which mostly compose cooperatives, even those so-called multi-million coops, hence should not be compared with multi-million corporations, which are owned by a few capitalists. Multi-million coops are created through tens of thousands of members and over more than 10 years of regular savings. They should never be mistaken for cash cows that can afford to bleed for a cash-strapped government that does not even know how to get the acts of its revenue-generating agencies in order.

Cooperatives extend low-interest rate loans to members, with minimal documentary requirements, and practically no collateral, thus enabling the poor to have access to small capital for livelihood. Cooperatives also sell low-priced goods in various consumer cooperatives, particularly, in company-based employees consumer cooperatives, as they are not subjected to VAT. Some of them even provide insurance coverage because of the absence of VAT on such services.

Those cooperatives that have abused these incentives should be investigated and their officials punished accordingly. But it is not the incentive structures themselves that are to blame, but the indiscretions of a few. Government is better advised to go after the hundreds of billions in foregone revenues lost to tax incentives handed out like candies to union-busting foreign investors in export processing zones and their patrons in agencies like the Board of Investments and the Philippine Export Zone Authority who should be scrutinized, not the little people from the ranks of workers everywhere.