Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 175)
The policy of the State is to foster the creation and growth of cooperatives as a means of increasing income and purchasing power of the low-income sector to attain a more equitable distribution of income and wealth.
A cooperative is defined as an organization composed primarily of small producers and consumers who voluntarily join together to form business enterprises which they own, control, and patronize. A small producer is a self-employed individual who provides the primary labor for his enterprise or earns at least fifty percent of gross income from his labor.
The principles are: (a) Open membership without discrimination; (b) Democratic control with one member, one vote; (c) Limited interest to capital with rates established by the Department of Local Government and Community Development; (d) Patronage refund where net income after capital interest is distributed among members in proportion to patronage.
Cooperatives can exercise rights like persons or corporations, establish and operate business enterprises, establish or purchase rural banks, enjoy government incentives, petition for expropriation of lands, and own, dispose of property, enter into contracts, sue or be sued.
Cooperatives are exempt from income and sales taxes provided a substantial portion of net income is returned to members. Non-agricultural cooperatives have a 5-year income tax exemption, agricultural cooperatives have 10 years, counted from registration date with the Department of Local Government and Community Development.
A fund created to support cooperative development financed through general appropriations, proceeds from US Public Law 480 commodities, foreign loans, grants, levies on agricultural commodities, and other existing or future sources.
A Management Committee composed of representatives from the Department of Local Government and Community Development (Chairman), Central Bank, Philippine National Bank, Department of Agriculture and Natural Resources, Department of Agrarian Reform, and two representatives from the cooperative movement designated by the Local Government Secretary.
No person or group other than properly registered cooperatives may use the word 'cooperative' or its vernacular equivalent with intent to defraud. Violators face a fine of P2,000 and, if insolvent, imprisonment up to six months.
Through the Bureau of Cooperatives Development, it can register and regulate cooperatives, suspend or cancel registrations, liquidate cooperatives, recommend criminal charges against officials committing crimes, and promulgate implementing rules and regulations.
Officials who commit crimes against their cooperative are penalized as civil servants would be, including disqualification from holding elective or appointive office.