National President Tita Caluya of the Philippine Institute of Certified Public Accountants (PICPA), PICPA Cooperative Development Committee chairperson Ma. Elma Ilagan-Ame, distinguished officers and members from the national and chapter organizations of PICPA, guests, friends, ladies and gentlemen, a pleasant morning to you all!
Magandang umaga sa inyong lahat!
At this early juncture, allow me to extend my heartfelt thanks to PICPA and all its members, and all the certified public accountants or CPAs in the country as you celebrate National Accountancy Week!
I am both energized and a little concerned to address your group of most revered and respected professionals, the country’s CPAs. I say that I am energized, simply because I always welcome the opportunity to speak before professionals such as you, as occasions like this gives me the rare privilege not only of extolling the importance and socio-economic value of their learned art, but also trying to rally to fulfill with even greater fervor their indispensable roles in nation-building through the delivery of essential services to the society!
On the other hand, I am a bit petrified at the mere thought of facing all of you today, because I know for a fact that accountants are a rather cliquish and exclusive group that takes great pride in its profession and its sense of achievement—in the spirit of healthy competition, of course!
I have read all the jokes of accountants have made belittling economists. And as an economist, I can say that I am sometimes affected by them. Let me share with you some that have pierced through my sensitive self. One is that which says that economists are people who fell short of intellect and charisma to pass as an accountant. Another claims that the reason why there are economists in this world is so that accountants could have someone to laugh at.
Mabuti na lang, kaming mga ekonomista ay hindi pikon!
Kidding aside, there may be some attendant reason for this, and not merely a sociological or cultural one. Tunay naman kasing napakalaki at napakahalaga ng ginagampanang serbisyo at responsibilidad ng ating mga CPAs sa ating ekonomiya, kung kaya natural lamang sa mga kasapi ninyo na makaramdam ng karampatang pagpapahalaga at importansya sa inyong propesyon!
So without further ado, allow me now, your keynote speaker, to share with you an ECONOMIST’s thoughts on the topic that eminent accountants like you have assigned me to dwell on this morning.
On a serious note, I believe the topic I was assigned today was in recognition of my position as vice-chairman of the Senate Committee on Cooperatives. And in this role, I am to assess how the Philippine accountancy profession can help energize our country’s cooperative sector, through an analysis of some opportunities and challenges that are ripe for action in this sector of our economy.
Simply put, cooperatives operate in the same manner as corporations and partnerships, in that they have separate juridical personalities and can be operated as business organizations. They are also subject to government regulation and supervision, not by the SEC or the DTI, but by the Cooperative Development Authority (CDA). They also have a different governing law, in Republic Act No. 6938, as amended by RA 9520. But theoretically, what sets cooperatives apart from other business organizations are the following principles:
1) Principle of self-reliance and self-help, in that the members are themselves the capital contributors, patrons/clients/customers and the beneficiaries of the services and income generated by the activities of the cooperative;
2) Principles of openness, voluntarism and personal and democratic control, as embodied by the one-member, one¬-vote, non-discrimination, and lower quorum rules;
3) Concern for the community or social responsibility (Consider the fact that social responsibility of cooperatives is mandated by law, unlike in other business organizations such as corporations and partnerships, much less in sole proprietorships); and, finally- and possibly the most important aspect,
4) Social justice, which is the end-all and be-all of all these underlying principles of cooperatives, again mandated by no less than our Constitution.
The social justice aspect of the government recognition of cooperatives lies in this single most important legal consequence under the law: the grant of tax incentives and other favorable terms and conditions. I submit that this is the one area where our Filipino CPAs can make use of and apply their skill and expertise, to help give full effect and realization to the intention of the law and of our Constitution—and in response to the desperate yearning of our fellow citizens who are actively engaged in the cooperative sector.
In the realm of government regulation, one will see the imposing figure of the Filipino CPA silhouetted in the background. This is because ever since the dawn of modern-day financial transactions, the CPA has been recognized as an indispensable partner of government in ensuring the veracity, accuracy and transparency of financial documents, especially of legal fictions such as corporations, partnerships, and on the same theory, cooperatives, in order to ensure that public interest and safety are safeguarded.
In the cooperatives sector alone, our laws provide for areas where our CPAs, whether as employees of the government, of the cooperatives, or as self-employed practitioners, can play vital roles and exercise their learned skills for the benefit of the cooperatives and the entire cooperative sector itself.
Under the Cooperative Act, registered cooperatives that transact and deal exclusively with their own members are not- and I’m quoting the law here- “subject to any taxes and fees imposed under the internal revenue laws and other tax laws”. This is in very clear language, and there is no room for other interpretation.
Whereas, registered cooperatives that transact or deal with non-members or to the general public are granted limited tax exemption and other privileges, the extent of which is determined whether or not their “accumulated reserves and undivided net savings” go beyond P10,000,000.00.
In the words of the CDA, this makes this entire matter of tax incentives under the law a “bookkeeping exercise.” And again, the CPA, whether he or she be an independent practitioner, or from the cooperatives themselves, or employed with the CDA, BIR or other appropriate government agency, is crucial in ensuring that this “bookkeeping problem” is ironed out, and the social justice aspect and intention of the law is fully realized and given effect.
First and foremost, as you all know, the matter of tax incentives is being administered by our mighty BIR. I may not totally agree with the way they do it, but anyway, the current method is that for cooperatives to be able to avail of the tax exemptions under the law, they must first be issued a Certificate of Tax Exemption (CTE) by the BIR. Before that, they must first secure a Certificate of Good Standing (CGS) from the CDA, subject of course to prior and faithful submission of certain documentary and other requirements.
Pero, sorry na lang kung magsasabi na ako ng totoo. Ang paningin ko at ng mga nasa cooperative sector, hindi maganda ang sitwasyon ngayon sa pagtrato sa sektor ng kooperatiba dito sa ating lipunan.
First of all, there are about 23,600 cooperatives registered now with the CDA, 91% of which are from the micro, small and medium categories, and just 9% are large cooperatives. Tapos, ang nabigyan ng Certificate of Good Standing ng CDA ay 11,600 lamang. Pero ang pinakamasaklap sa lahat, 6,295 lamang ang mga nabigyan ng Certificate of Tax Exemption ng ating BIR.
Kung mababa na nga ang bilang ng mga registered cooperatives, mas mababa pa lalo ang nabigyan ng Certificate of Good Standing ng CDA. Tapos, lalo pang mas kakaunti ang mga nabigyan ng BIR ng Certificate of Tax Exemption. It appears that our registered cooperatives get significantly reduced by 50 percent at every important milestone in their quest for tax-exempt status.
Ikumpara natin sa mga korporasyon at mga partnerships. Alam n’yo ba na merong mahigit na 460,000 na aktibong korporasyon na nakatala ngayon sa SEC; samantalang mahigit 92,000 naman ang registered partnerships?
If you ask me, this is not a good sign if we take into account the social justice objectives mandated by the cooperative law. To put it in another way, the cooperative movement is not being sufficiently nurtured and effectively developed, contrary to the intent of the law. In fact, no less than the CDA has made the stark observation that our cooperative sector remains “under-developed”.
Bakit ganun? Why is the perception? Could it be that cooperatives are really not a viable and profitable economic option? Remember, cooperatives have been granted tax exemption privileges by law, whereas, corporations and partnerships generally don’t have such privileges. Could it be that there may be an inherent flaw in our system that tends to undermine and discourage the formation and operation of cooperatives as business organizations?
These are the questions that continue to bother the members of the Senate Committee on Cooperatives. And actually CPAs can assist in providing some veritable answers. Mind you, cooperative development is a mandate provided in the Constitution and the law. So I exhort everyone here to effectively use your proven expertise in resolving this, and, in the process, ultimately help promote the growth of the cooperative movement in our country.
You see, the matter of tax incentives involves a cycle or process of submission of documents, compliances, approvals and issuances of certificates. And I will not be mistaken to think that our CPAs are there in every step of the entire process, with varying roles, mandates and objectives.
From the point of view of the CPAs from within the cooperatives themselves, or as hired external auditors, CPAs are instrumental in helping the cooperatives to be fully compliant with the requirements of laws and rules and accounting standards, such that the cooperatives’ reports and other documents are correct, complete and in order, as to entitle the cooperatives to a Certificate of Good Standing with the CDA.
From the viewpoint of the CDA, CPAs will be most welcome to check the completeness and accuracy of the documents and their compliance with the laws and rules.
Let us now go to the mighty BIR. Alam ko maraming CPAs ang nasa BIR. My point here is that the CPAs in the BIR should consider themselves as instrumental in ensuring a healthy balance between the revenue-collection mandate of the government, and in judiciously effectuating the social justice and economic objectives of our laws. Sa madaling salita, makakatulong ang mga CPAs sa BIR sa pagpaparami pa ng mga bilang ng mga mahuhusay na kooperatiba na mabibigyan ng Certificates of Tax Exemption (CTE) upang matamasa rin ang mga benepisyo na binibigay ng ating batas para sa kanila.
Indeed, there is also validity in the CDA’s observation that the law could be exploited by unscrupulous cooperatives to enter through the “backdoor of the business of tax exemptions.” In addition, just recently, we have seen and heard the exposé regarding the modus operandi of some criminal minds using farmers’ cooperatives as “fronts” in order to import rice and other agricultural products; in short, committing the act of technical smuggling.
Of course, all of us here do not want any of these to happen. Now, we have our CPAs, like all of you here, that could help minimize the problem by offering their expertise to train officers and members of cooperatives, likewise to prevent fraud, let alone mistakes and inaccuracies, whether honest or deliberate, from creeping into the reportorial system of the financial transactions of our cooperatives.
Not only can CPAs help cultivate, strengthen and nurture new as well as existing cooperatives in our economy, but CPAs can also help us unearth the sham, expose the scams and the unscrupulous entities, such that the market would become healthier and more robust for new and existing cooperatives to thrive and grow, while substantially curbing corruption in our midst.
Ultimately, on account of the numerical sharpness and financial savvy of our CPAs, working efficiently and ethically in government and in the private sector, as auditors, compliance officers, or forensic accountants, our country will be better-equipped to prevent and combat the wider and more pervasive problem of financial crimes and money laundering offenses, and the so-called “white-collar crimes”, which are now emerging as a massive and dangerous threat to the financial health of our economy and of the world as a whole.
Senate President Drilon has said that he would prioritize the enactment of a tax expenditure method of accounting in the national budget in order to clearly account for the incentives granted to certain taxpayers, in an effort to promote transparency and good governance. Once again, our CPAs would again play a vital role in guaranteeing correct and accurate financial reports of the exempt taxpayers from the bottom-up so as to reveal to our countrymen that we have a healthy, logical and reasonable tax incentive system in place.
In summary, all of the above thoughts I have shared with you are precisely why I say that accountants are important to our society. Never mind the joke that says that an accountant is, “someone who solves a problem you didn't know that you had in the first place, and in a way that you don’t understand.”
If truth be told, tulad ng nasabi ko kanina, mahalaga naman talaga ang ginagampanan ng mga CPAs sa ating lipunan. Siguro, mahina lang ang ibang tao sa math, kung kaya hindi nila lubos na nauunawaan ang mga accountants! Huwag ninyo akong isama dun!
So, in closing, let me once again exhort our CPAs to truly live to their Oaths, ideals and ethics, before the public that they have sworn to serve. Lagi po nating paghusayin at galingan ang ating mga trabaho. Let us all make it a lifelong passion and commitment to always learn, by religiously complying with the continuing education programs of your profession. Remember, the ASEAN integration is just around the corner! By 2015, we may already have to open the practice of all professions to foreign nationals. In the process, we will be tested against and compared to our ASEAN counterparts.
This is a big challenge to us all because we are already confronted by a difficult economic environment in our country today. Now, by virtue of our international commitments, we shall also have to open our borders to accommodate new and foreign competition. Looking at it positively, it is also good in the sense that we will also gain the opportunity to showcase to the ASEAN international scene the Filipino brand of the accountancy practice: one that is of a high quality, ethical, and always committed to serve the public!
Let us all remember that accountants are certainly here to stay, and that the practice of accountancy will surely survive as an indispensable profession.
However, let me once again remind you that the cooperative’s survival depends on how our entire system makes of it, and whether it will continue to remain a viable, practical and a profitable socio-economic venture not only in the eyes of the Filipinos, but more than that, as a tool of economic development and nation-building.
Fortunately, we have you, our Filipino CPAs, who will help ensure that the cooperative sector will survive and thrive, and our countrymen will continue to be convinced that cooperatives will remain as a worthwhile means of achieving and boosting economic self-sufficiency, thus contributing to local and national development!
Before I end, let me take this singular opportunity to send my best wishes to all the graduates of accountancy in our country who shall be taking the licensure examinations these coming days! I wish them all the best of luck in their academic toil to enter this proud and noble profession!
Hanggang dito na lamang po! Maraming salamat sa pagkumbida ninyo sa inyong lingkod!
Mabuhay ang ating mga kooperatiba!
Mabuhay ang PICPA at ang mga Pilipinong CPAs!
Maraming, maraming salamat po!
Muli, magandang umaga sa inyong lahat!