Press Release
February 5, 2010

Zubiri lauds SC decision favoring cooperatives sector

Senate Majority Leader Juan Miguel Zubiri on Friday lauded the Supreme Court decision upholding the interest of the cooperative sector in Dumaguete City.

The Majority Leader said the High Court's decision reversing the ruling of the Court of Tax Appeals (CTA) released on Dec. 18, 2007 is "a testament of the true essence and importance of the new Cooperative code of 2008, which focuses on giving incentives to cooperative membership and strengthening the cooperative sector in the countryside."

The senator expressed confidence that all other pending cooperative tax cases with the Bureau of Internal Revenue "will find a fitting end in favor of the cooperatives."

Zubiri's statement came after the SC upheld the two Pre-Assessment Notices for deficiency withholding taxes issued by the Bureau of Internal Revenue (BIR) in Bacolod City against the Dumaguete Cathedral Credit Cooperatives (DCCCO).

In the CTA's earlier ruling, it ordered the DCCCO to pay the amount of P2.64 million representing the deficiency withholding taxes on interests from savings and time deposits of its cooperative members from 1999 - 2000, as well as the delinquency interest of 20-percent per annum.

But in a 16-page decision penned by Associate Justice Mariano del Castillo, the court said the savings and time deposits of DCCCO for the taxable years 1999 and 2000 are not subject to 20-percent withholding tax.

The high court also assailed the CTA for ignoring BIR Ruling No. 551-888 which was issued on Nov. 16, 1988. In the said ruling, the country's major tax collecting agency declared that cooperatives are not required to withhold taxes on interest from savings and time deposits of their members.

The SC also referred to Republic Act 6938 or the Cooperative Code of the Philippines, which states that credit cooperatives such as DCCCO duly registered with the Cooperative Development Authority (CDA) "deserve a preferential tax treatment."

The SC's precedent-setting decision noted Article 2 of RA 6938, stating that "it is a declared policy of the State to foster the creation and growth of cooperatives as practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice."

Zubiri, primary author of the new Philippine Cooperative Code of 2008 and also the chairman of the Joint Congressional Oversight Committee on Cooperatives (JCOCC) thanked the Supreme Court for its swift action on the case.

"I laud the Supreme Court decision favoring the cooperatives sector," Zubiri said.

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