Electric co-ops not exempt from local gov’t taxes

The Supreme Court has declared that electric cooperatives are no longer exempted from paying taxes imposed by local governments.

In a 24-page decision penned Justice Reynato Puno, the Supreme Court said the tax privileges previously enjoyed by electric cooperatives have been withdrawn with the passage of Republic Act 7160 or the Local Government Code.

"The (High Court) understands the plight of the petitioners. Their remedy, however, is not judicial. Striking down Sections 193 and 234 of the Local Government Code as unconstitutional or declaring them inapplicable to petitioners is not the proper course of action for them to obtain their previous tax exemptions," the tribunal said.

The High Court suggested that electric cooperatives seek the assistance of proper authorities to convert them into cooperatives covered by Republic Act 6938 so they will enjoy the same tax exemptions.

"This is necessary to encourage the growth and viability of cooperatives as instruments of social justice and economic development," the tribunal said.

The ruling stemmed from a petition filed on May 23, 2000 by the Philippine Rural Electric Cooperatives Association Inc., consisting of 119 electric cooperatives around the country; the Agusan Del Norte Electric Cooperative Inc., Iloilo I Electric Cooperative Inc. and Isabela I Electric Cooperative.

The petition was filed in behalf of all other electric cooperatives organized under Presidential Decree No. 269 or the National Electrification Administration Decree.

According to the petitioners, the Local Government Code is discriminating because it does not exempt them from payment of local taxes while it exempts all cooperatives duly registered under RA 6938 or the Cooperatives Code of the Philippines.

The High Court said there is reasonable classification under the Local Government Code to justify the different tax treatments between electric cooperatives covered by PD 269, as amended, and elective cooperatives under RA 6938.

The tribunal said that under RA 6938, one of the characteristics of a cooperative is that each member makes "equitable contributions to the capital required."

PD 269, it noted, does not require cooperative members to make equitable contributions to capital and that the petitioners even admitted that all that was required to qualify as a member of an electric cooperative is the payment of a P5 membership fee.

The Supreme Court also said that the Philippine government actually helped financed the electric cooperatives, including the petitioners, through six loan agreements involving $86 million that it entered into with the United States, through the US Agency for International Development.