Roxas to probe BIR for taxing sugar co-ops

The outcry against the regional OIC director of the Bureau of Internal Revenue (BIR) for taxing sugar cooperatives has not just reached the ears of the Sangguniang Panlalawigan, but has also elicited from Sen. Mar Roxas a commitment to have this case investigated.

While it was originally considered only a local issue, actually the BIR action in the province has spurred the possibility that it could spill over to other areas where there are sugar cooperatives.

Roxas told mediamen in Sagay City on Thursday that he would ask the Senate to conduct an inquiry into complaints lodged against the BIR here for taxing sugar cooperatives.

The problem boils down to what cooperative officials point out — the fact that the cooperatives law clearly exempts cooperatives from paying taxes (VAT). The exemption is 100 percent, pointed out a co-op official.

Roxas was in Sagay City on Thursday to visit the Museu sang Bata sa Negros when Sagay City Mayor Alfredo Maranon informed him about the complaints of sugar cooperative elders of the province against the BIR imposition.

The provincial board also reacted to the call by board member Martin Ibanez detailing the BIR violations of the law, which exempts sugar cooperatives from paying taxes.

I know this case clearly because I was one of those originally involved in studying the provision of the law which vests on the CDA the authority over sugar cooperatives.

“We are inviting the co-op associations to send a letter detailing their complaints so we can call an investigation into why the BIR is insisting on imposing VAT on them,” Roxas said.

BIR regional OIC director Rodita Galanto was the target of the complaints by the sugar cooperatives.

But the issue has reached a feverish level with Galanto filing a complaint against officials of the Ma-ao Parish Multipurpose Cooperative headed by Fr. Armand Onion, now parish priest of Granada in Bacolod City.

The complaint cited violations of provisions of the law related to taxation. Included in the suit was Analyn Agustin.

The city prosecutor’s office issued a subpoena last week ordering the respondents to file their counter-affidavits in 10 days upon receipt of the subpoena.

Fr. Onion said the BIR chief moved against them when they refused to agree to the imposition of the 60 percent collection on their milled sugar. They have been protesting for almost a year against Galanto’s move, which was in violation of the provisions of the Cooperative Law, Onion said.

The sugar co-op officials demanded that Galanto stop collecting the 60 percent levy, which they said was an “illegal imposition which she is stubbornly implementing on her own.”

The 60 percent is what is called advanced VAT. Galanto reportedly claims that the advanced VAT on exempted agricultural sugar co-ops is just a voluntary payment of the farmer-members.

Co-op officials charged that this claim is untrue because she uses pressure on the issuance of clearance for the withdrawal of refined sugar as leverage against the co-ops, the sugar officials contended.

Besides, according to the protesting co-op officials, she is not only collecting the 60 percent advanced VAT (devoid of legal basis) but she is also issuing letters of authority to cooperatives covering taxable years 2005 and 2006 without a prior written approval from the BIR Commissioner nor a prior written authority from the Cooperative Development Authority which is embodied in CDA Code, Section 62 (p3) in relation to RR-20 –2001 and RR-12–2007 of the BIR.

Among the protesting co-op leaders were the more prestigious figures of the sugar industry, including Jimmy Golez of Sageplas MC; Miguel Trebol, chairman of Sageplas; Edgardo Gargar; Jose Maria Villanueva, chairman of Dos Hermanas MC; Miguel Hinojales; Primo Esleyer; Paul Monfort; and Jose Ledesma IV, chairman of the VMC Farmers Cooperative.

RA 8424, the Tax Reform Act of 1997, institutionalized the exemption of cooperatives from VAT under Section 109 (r) which includes the sales by agricultural cooperatives duly registered with the CDA to their members as well as the sale or their produce, whether in original state or processed form, to non-members.

This troublesome development comes after the sugar industry leaders had aired their concerns over the issue of tariffs, which will go down to only 28 next year unless the Philippines can convince the ASEAN Council to transfer sugar from the sensitive to the highly sensitive list.

Administrator Rafael Coscolluela of the Sugar Regulatory Administration earlier had pointed out that the danger is that the tariff on imported sugar under the AFTA could reach zero to five percent by 2010 unless the situation is remedied. That means that it could lead to the collapse of the local sugar industry.

I had written extensively on the issue after Confederation of Sugar Producers’ trustee Bernardo Trebol pleaded with President Arroyo on the dire implications of the situation.

Although bio-ethanol may provide an alternative solution, the problem is that it is not yet an ongoing concern that could rescue the industry from the doldrums should that tariff issue not be resolved.

Roxas himself admitted that another problem is the high cost of fertilizers. Local sugarmen have been complaining about this, pointing out that they are mostly confronted with the possibility of not being able to cultivate enough for the next crop year.

During the last meeting of the Confed Negros-Panay chapter, sugar leaders predicted a 20 percent drop in production.

While that may relieve the problem of oversupply, that does not solve the problem of rising cost of inputs on sugarcane cultivation and could still give rise to massive unemployment when fertilizers become unaffordable. The industry has some five million people dependent on it for their livelihood.

But the more important thing now – address the problem of taxing sugar co-ops at a time when the industry is struggling for survival. Besides, the more important thing is, that contravenes the law.

Hopefully, Finance Secretary Margarito Teves may be able to address the problem without the need for Congress to conduct an extensive inquiry into it.