Basic Economics with Cooperative and Land Reform & Taxation BSCE II Prepared by: Blesilda B. Gonzales Lecturer History of Cooperation Cooperation during Ancient Times The transition from food gathering to food production. Discovery of agriculture paved the way for the establishment of societies. With their social organizations, communal and cooperative activities developed. History of Cooperation Cooperation during Medieval Medieval Guilds – formed Times for the purpose of defense against invasion. Agricultural production stimulated the creation of markets. Merchant Guilds – preserve trade monopoly People no longer produced only in the town market, what they can consume. maintain stable prices under normal conditions. Trade & commerce developed, & so does Manufacturing. Craft Guilds – artisans who manufactured commodities . History of Cooperation Cooperatives in the Philippines Rizal, after his side trip to Sandakan, Borneo in 1892, requested Governor Despudol that he and some relatives and friends be permitted to move to that place and found a colony under the cooperative plan of Robert Owen. Instead, he was arrested for treason and banished to Dapitan, Zamboanga del Norte. In Dapitan, Rizal had his ideas in cooperation partially fulfilled. He put up a school for the poor community on a purely cooperative basis. He also established a cooperative store with the help of his pupils. One noteworthy group organized by Rizal was the La Sociedad de los Abacaleros (Society of Abaca Producers). This functioned for only one year. Rizal returned the members share capital without any loss. History of Cooperation Teodoro Sandiko, in his travels in Europe, must have had a close contact with the cooperative movement in Germany where he came across with the Raiffeisen movement. He was very much impressed by this type of cooperative and he looked forward for an opportunity to have it introduced here in the Philippines. As destiny might have its choice, Sandiko had his chance when he was appointed one of the early governors when Civil Government, under the Americans, was established. Mayor Frederic Raiffeisen of Western Germany (Father of Credit Cooperatives) History of Cooperation Teodoro Sandiko, then governor of Bulacan, prepared a bill patterned after the Raiffeisen type of credit union and had Rep. Albert Barreto of Zambales sponsor the bill in the lower House of Congress. The principal aim of this bill was to protect and develop the agricultural interest of the country. When the Barreto sponsored bill was presented it readily obtained unanimous approval on January 20, 1908. The Philippine Commission however, turned it down. History of Cooperation Sponsors of the bill again put it through in the Second Philippine Legislature. This time it was sponsored in the Lower House by Rep. Rafael Corpuz who succeeded Rep. Barreto from Zambales. The bill was ably presented in both Houses and it was finally passed into law on February 11, 1914 and became Act 2508. When this Act was finally made into law, Gov. Sandiko earned a title of Father of Cooperation in this country. The first rural credit association that was organized under Rural Credit Law was the Agricultural Credit Cooperative Association of Cabanatuan, Nueva Ecija. At the end of 1926 there were 544 rural credit cooperatives organized in the 42 provinces and by 1930 there were 571 associations formed all over the country. In 1935, however, about 90% of these cooperatives were inactive with no funds left in their treasury. The experiment on rural financing, through cooperatives was a failure. History of Cooperation The Cooperative Marketing Law (Act 2425) was enacted and approved on December 9, 1927. By 1939 only 164 societies were actually organized with a total membership of around 5,000 farmers. With this number only 35 reported their sale of products to the Bureau of Commerce. The number of associations reporting indicated that only 20% of the organized associations were active. History of Cooperation Filipino economists and students of cooperatives in this country have often attributed the failure of cooperative societies in this country to the following causes: •Incompetent management •Lack of proper understanding of the principles, practices true aims, and purposes of cooperative associations •Improper use of credits by the borrowers who, instead of using money borrowed for production, spent it for fiestas or luxuries. •Defective securities. •Lack of compensation of officers •Political interference particularly in the collection of overdue accounts •Inadequate character and moral responsibility in handling the other fellow’s money History of Cooperation Filipino economists and students of cooperatives in this country have often attributed the failure of cooperative societies in this country to the following causes: •Lack of adequate safeguard against unscrupulous officers who took advantage of their position to grant loans to themselves and their compadres which later proved disastrous to the system. •The dominance of the individualistic attitude instead of the spirit of cooperation among the people. •Inability of cooperatives to secure adequate capital •Their dependence on alien suppliers and distributors •Ineffectiveness of the government and promotion of cooperative organizations •Inadequate marketing facilities History of Cooperation Congress of the Philippines in 1952 enacted Republic Act 821 It also created an administrative agency known as the Agricultural Credit and Cooperative Financing Administration (ACCFA) To assist small farmers in securing liberal credit. To promote the effective groupings of farmers into cooperative associations. To establish an orderly and systematic marketing machinery for, and controlled by, the small farmers. To place agriculture on a basis of economic equality with other industries. Functions of the Cooperative Development Program REPUBLIC ACT NO. 6939 - AN ACT CREATING THE COOPERATIVE DEVELOPMENT AUTHORITY TO PROMOTE THE VIABILITY AND GROWTH OF COOPERATIVES AS INSTRUMENTS OF EQUITY, SOCIAL JUSTICE AND ECONOMIC DEVELOPMENT, DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, RATIONALIZING GOVERNMENT POLICIES AND AGENCIES WITH COOPERATIVE FUNCTIONS, SUPPORTING COOPERATIVE DEVELOPMENT, TRANSFERRING THE REGISTRATION AND REGULATION FUNCTIONS OF EXISTING GOVERNMENT AGENCIES ON COOPERATIVES AS SUCH AND CONSOLIDATING THE SAME WITH THE AUTHORITY, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES. (a) Formulate, adopt and implement integrated and comprehensive plans and programs on cooperative development Functions of the Cooperative Development Program (b) Develop and conduct management and training programs upon request of cooperatives (c) Support the voluntary organization and consensual development of activities that promote cooperative movements and provide assistance towards upgrading managerial and technical expertise upon request of the cooperatives concerned; (d) Coordinate the efforts of the local government units and the private sector in promotion, organization, and development of cooperatives; Functions of the Cooperative Development Program (e) Register all cooperatives and their federations and unions, including their division, merger, consolidation, dissolution or liquidation. (h) Assist cooperatives in arranging for financial and other forms of assistance under such terms and conditions as are calculated to strengthen their viability and autonomy; (j) Impose and collect reasonable fees and charges in connection with the registration of cooperatives; Functions of the Cooperative Development Program (k) Administer all grants and donations coursed through the Government for cooperative development, without prejudice to the right of cooperatives to directly receive and administer such grants and donations upon agreement with the grantors and donors thereof; (l) Formulate and adopt continuing policy initiatives consultation with the cooperative sector through public hearing; (m) Adopt rules and regulations for the conduct of its internal operations; Functions of the Cooperative Development Program (o) Exercise such other functions as may be necessary to implement the provisions of cooperative laws Cooperative Principles Open and Voluntary membership - membership in a cooperative shall be voluntary and available to all individuals regardless of their political, racial or religious background or beliefs. Democratic Control - cooperatives are democratic organizations. Its affairs shall be administered by persons elected or appointed in a manner agreed upon by members. Members of primary cooperatives shall have equal voting rights on an one-member-one vote principle, while a secondary or tertiary cooperative shall have voting rights as delegate of members-cooperatives, but such cooperatives shall have only five (5) votes. The votes cast by the delegates shall be deemed as votes cast the members thereof. Cooperative Principles Member Economic Participation - members contribute equitably to and control the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities as a approved by the membership. Cooperative Principles Autonomy and Independence - cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations (including governments) or raise capital from external sources, they do so on terms that ensure democratic control by the members and maintain their cooperative independence. Cooperative Principles Education, Training and Information - cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public-particularly young people and opinion leaders about the nature and benefits of cooperation. Cooperative Principles Cooperation among Cooperative - cooperatives serve their members more effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures. Concern for the Community - cooperatives work for the sustainable development of their communities through policies approved by their members. How to Organize a Cooperative? There are six steps suggested in setting up a cooperative. FIRST.Get organized.You must have at least 15 members to do that. You may want to include increasing your production, marketing your produce, credit assistance, power generation, banking or insurance and other similar needs. Even before a cooperative is set up, a dedicated core group people who will do all the organizational and paper works is a must. From this core group, working communities may be formed to set things moving. These committees may include membership, finance, executive, secretariat to name a few. How to Organize a Cooperative? There are six steps suggested in setting up a cooperative. SECOND. Prepare a general statement called an economic survey measure your cooperative’s chances of success THIRD. Draft the cooperative’s by-laws. The by-laws contain the rules and regulations governing the operation of the cooperative. http://www.cda.gov.ph/website/howtoorganize.html# How to Organize a Cooperative? There are six steps suggested in setting up a cooperative. FOURTH. Draft the articles of cooperation. (a) the name of the cooperative, which must include the word “cooperative”; (b) the purpose or purposes and scope of business of the cooperative; (c) the term of existence of cooperative; (d) the area of operation and the postal addresses of the registrant- cooperators; (e) the common bond of membership; (f) the names of the directors who shall manage the cooperative; (g) the amount of share capital; (h) the names and residences of its contributors, and (i)the type of cooperative, whether it is primary, secondary or tertiary. How to Organize a Cooperative? There are six steps suggested in setting up a cooperative. FIFTH. Secure bond for accountable officer(s). The accountable officers normally are the Treasurer and the Manager. The amount of the bond is to be decided upon by the Board of Directors, based on the initial net worth of the cooperative which includes the paid-up capital, membership fees and other assets of the cooperative at the time of registration. How to Organize a Cooperative? There are six steps suggested in setting up a cooperative. SIXTH. Register your cooperative with the Cooperative Development Authority (CDA). Four (4) copies each of the Economic Survey, Articles of Cooperation and By- Laws duly notarized; Bonds of accountable officer(s) (any directors, officers and employees) handling funds, securities, of properties in behalf of the cooperative; Sworn statement of the treasurer duly notarized showing that at least 25% of the authorized share capital has been subscribed, and at least 25% of the total subscription has been paid. The paid-up capital must not be less than Php 2,000.00. It must be noted that no member may own more than 20% of the subscribed share capital and each share must not be less than Php 1.00 What are the Types of Cooperatives? Credit Cooperative: is one that promotes and undertakes savings and lending services among its members. It generates a common pool of funds in order to provide financial assistance and other related financial services to its members for productive and provident purposes; What are the Types of Cooperatives? Consumer Cooperative: is one the primary purpose of which is to procure and distribute commodities to members and non- members; What are the Types of Cooperatives? Producers Cooperative: is one that undertakes joint production whether agricultural or industrial. It is formed and operated by its members to undertake the production and processing of raw materials or goods produced by its members into finished or processed products for sale by the cooperative to its members and non-members. Any end product or its derivative arising from the raw materials produced by its members, sold in the name of and for the account of the cooperative, shall be deemed a product of the cooperative and its members; What are the Types of Cooperatives? Marketing Cooperative: is one which engages in the supply of production inputs to members and markets their products; What are the Types of Cooperatives? Service Cooperative: is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services; Tarlac-San Fenando Transport Service Cooperative Inc. What are the Types of Cooperatives? Multi-Purpose Cooperative: combines two (2) or more of the business activities of these different types of cooperatives; Multi-Purpose Cooperative (LMPC) in the barangays of Edwards and Laconon in Tboli, South Cotabato What are the Types of Cooperatives? Advocacy Cooperative: is a primary cooperative which promotes and advocates cooperativism among its members and the public through socially-oriented projects, education and training, research and communication, and other similar activities to reach out to its intended beneficiaries; What are the Types of Cooperatives? Agrarian Reform Cooperative: is one organized by marginal farmers majority of which are agrarian reform beneficiaries for the purpose of developing an appropriate system of land tenure, land development, land consolidation or land management in areas covered by agrarian reform; What are the Categories of Cooperatives? Cooperative shall be categorized according to membership and territorial consideration. In terms of membership, cooperatives shall be categorized into: Primary-the members of which are natural persons of legal age. Secondary-the members of which are primaries. Tertiary-the members are secondaries upward to one (1) or more apex organizations. What are the Categories of Cooperatives? In terms of territory, cooperatives shall be categorized according to areas of operation those organized by minors shall be considered a laboratory cooperative and must be affiliated with a registered cooperative It is governed by special guidelines promulgated by the CDA. Who can be Members of a Cooperative? A cooperative has two kinds of members: regular members and associate members A regular member is entitled to all the rights and privileges of membership as stated in the Cooperative Code and the coops’ by laws. An associate member has no right to vote and be voted upon and is entitled only to such rights and privileges provided by the cooperative’s by laws. Tax Treatment of Cooperatives 1) Duly registered cooperatives under the Cooperative Code which do not transact any business with nonmembers or the general public are not subject to any government taxes or fees imposed under the internal revenue laws. 2) Cooperatives transacting business with both members & nonmembers shall not be subject to tax on their transactions to members. Cooperative Updates http://tritown.gmnews.com/news/2009/0723/letters/010.html You joined a health cooperative where personal dollars or tax dollars are not required, only service in return for service. The health co-op is voluntary cooperation, which is the solution to the health care crisis within our nation. Universal health care is socialism or forced cooperation, which denies the individual freedom. Capitalism is premised on the notion that we are put here to beat each other and fuels the notion of greed, which is both destructive to the well-being of humanity, since we were not put here to beat each other. Cooperativism or voluntary cooperation is the only sound and sane solution to the health care crisis and to what an economy must be.