COOPERATIVE

A cooperative is an autonomous and duly registered association of persons, with a common bond
of interest, who have voluntarily joined together to achieve their social, economic, and cultural
needs and aspirations by making equitable contributions to the capital required, patronizing their
products and services and accepting a fair share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principles (Section 3, R.A., 9520).

Cooperative needs to be registered through Cooperative Development Authority, a government

agency in charge of the registration and regulation of cooperatives.

There are several types of cooperatives as provided in R.A. 9520 (supra).

A Single-Line or Single-Purpose Cooperative shall include cooperative undertaking activities

which are related to its main line of business or purpose;

Service Cooperatives are those which provide any type of service to its members, including but
not limited to, transport, information and communication, insurance, housing, electric, health
services, education, banking, and savings and credit;

Subsidiary Cooperative refers to three or more primary cooperatives, doing the same line of
business, organized at the municipal, provincial, city, special metropolitan political subdivision,
or economic zones created by law, registered with the Authority to undertake business activities
in support of its member-cooperatives."

A cooperative (also known as a co-op) is a business owned and controlled by those who use its
services. Individuals and firms who belong to the cooperative join together to market products,
purchase supplies, and provide services for its members.

If run correctly, cooperatives increase profits for its producer-members and lower costs for its
consumer members.

In the case of Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue

(G.R. No. 182722) it provides that under Article 2 of RA 6938, as amended by RA 9520, to
encourage the formation of cooperatives and to create an atmosphere conducive to their growth
and development, the State extends all forms of assistance to them, one of which is providing
cooperatives a preferential tax treatment.

The legislative intent to give cooperatives a preferential tax treatment is apparent in Articles 61
and 62 of RA 6938, which read:

ART. 61. Tax Treatment of Cooperatives. — Duly registered cooperatives under this Code
which do not transact any business with non-members or the general public shall not be subject
to any government taxes and fees imposed under the Internal Revenue Laws and other tax laws.
Cooperatives not falling under this article shall be governed by the succeeding section.

ART. 62. Tax and Other Exemptions. — Cooperatives transacting business with both members
and nonmembers shall not be subject to tax on their transactions to members. Notwithstanding
the provision of any law or regulation to the contrary, such cooperatives dealing with non-
members shall enjoy the following tax exemptions; x x x.

This exemption extends to members of cooperatives. It must be emphasized that cooperatives

exist for the benefit of their members. In fact, the primary objective of every cooperative is to
provide goods and services to its members to enable them to attain increased income, savings,
investments, and productivity.30 Therefore, limiting the application of the tax exemption to
cooperatives would go against the very purpose of a credit cooperative. Extending the exemption
to members of cooperatives, on the other hand, would be consistent with the intent of the
legislature.

shall be resolved liberally in favor of the cooperatives and their members.

In comparison with regular commercial business, cooperation has certain advantages or strengths
and certain disadvantages or weaknesses.

Its main advantage is that it exists and operates for the benefit of its patron members. At the
same time, since the members are also the owners, they have a financial interest in the success of
the cooperative which sways them toward giving it their full support and patronage. Cooperative
members also have a voice in the control of the organization, and, within the limits of majority
rule, it therefore supplies the kind of service they want.

These advantages, which tend to tie the patrons to the organization by making them full partners,
help build an assured volume of business. This in turn is favorable to efficient operation of the
cooperative. A commercial business, on the other hand, has no claim on its patrons except the
good will built up through past service.

Cooperatives have the weaknesses of democratic organizations. The manager must always
remember that he is responsible to a membership group, and this may put a brake on the
initiative and flexibility he can use in operating the co-op. He may be at a real disadvantage in
competition with a commercial business whose manager is concerned primarily with making a
profit and who has a relatively free hand or can consult the owner quickly and frequently.

Sometimes cooperative businesses show an unwillingness to pay the kind of salary needed to
attract and hold competent managers and other employees. In consequence managers and good
workers are often drawn to higher-paid jobs in commercial businesses.

Another weakness of cooperation is that the mass of members may lose interest in running the
organization and let a small group take it over and manage it for their own benefit.