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Agrarian Reform and Taxation
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2 of 8 © Boardworks Ltd 2009
Land Reform
• is a process of redistributing land from the landlords to tenant-farmers in order that they will be given a chance to own a piece of land to improve their plight
• It abolishes unfair land tenancy programs and changes in the land tenure systems
• Is just a part of agrarian reform
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Agrarian Reform
• It is concerned with the total development of the farmer’s economic, social and political transformation
• It covers:Distribution of land to cultivators
Security of tenure and fair system of rental payments
Improved methods of cultivation through the improvement of rural institutions serving farmers such as:• Adequate farming• Cooperative marketing• Agricultural investment
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History of Agrarian ReformPre-Spanish Period American Period
Spanish Period Present Republic
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Pre-Spanish Period
• Social Classes:T h e N o b l e s – could own their own land
and were free from tribute payment
T h e S e r f s – entitled to cultivate certain lands, but were required to pay an annual fee of one-half of the yield of their crops to the Datu; they remained with the land as a result of this regular payment
T h e S l a v e s – served the Datu or the Nobles and were owned by them; they could be sold or traded
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Spanish Period
Encomienda System
- the system of giving lands to people
- resulted in the exploitation of the inhabitants
The encomienderos were replaced by the “cacique class”
Kasama system or share tenancy
Gen. Emilio Aguinaldo confiscated the friar lands and gave it to landless peasants
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American Period
• US negotiated the purchase of 23 Friar Estates during the early years of the century.
• The land was subdivided and offered for sale to the Filipinos residing on it
• SAKDALISTA movement was initiated in 1930 by Benigno Ramos
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Present Republic
• Pres. Manuel Roxas - RA No. 34 of 1946, providing for a 70-30 crops sharing arrangements
• Pres. Ramon Magsaysay - RA No. 1199 which allowed for the division of crops
• Pres. Diosdado Macapagal – RA No.3844 (Agricultural Land Reform Code)
• Pres. Ferdinand Marcos – PD No.2 declaring entire Philippines as land reform areaPD No. 27 ‘”emancipating the tenant- farmers
from the bondage of the soil”
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Objections in the Implementation of Agrarian Reform
• Fragmentation of farm-holdings• Small farms become less
productive• Ineffective government programs• Agrarian reform failed in the past
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Importance of Land Reform
Land reform will:• Diffuse tension existing between tenant-
farmers and landlords• Give farmers a dignified existence in our
society• Bring social justice• Increase the efficiency and productivity
of the farmers• Help solve unemployment• Increase food production• Enhance the living conditions of the
poor farmers
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Aspects of Agrarian Reform
• Economic aspect
AR will help improve agricultural productivity to accelerate general economic development
• Socio-cultural aspect
AR brings about socio-cultural transformation on the life of the farmers
• Religious aspect
When God created earth, He gives it all to His children, hence, all people must enjoy the fruit of having a piece of land to till
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Aspects of Agrarian Reform
• Moral aspect
It is the moral obligation of the government to bring about peace and prosperity to our country
• Legal aspect
The Constitution serves as the basis in the formulation of laws
• Political aspect
AR is ultimately the product of deliberate political decisions, hence, AR must be the highest priority of gov’t programs
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Components of Agrarian Reform
• Land Distribution
Considered as the very foundation of agrarian reform
• Support ServicesIrrigation facilities
Infrastructure development
Price support and guarantee for all agricultural produce
Financial assistance
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On June 10, 1988, President Corazon C. Aquino signed into law RA No. 6657,
otherwise known as the
Comprehensive Agrarian Reform Law of 1988
The program provides the farmers and farm workers the opportunity to improve the quality of their lives and
at the same time enhance the dignity of the farmers.
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Principles
The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice
By means of appropriate incentives, the State shall encourage the formation and maintenance of economically sized family farms to be constituted by individual beneficiaries and small land owners
The State shall be guided by the principles that land has a social function and landownership has a social responsibility
The State may lease underdeveloped lands
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Salient Features of CARP (RA No.6657)
1. CARP covers all public and private agricultural lands
2. Ownership of agricultural lands is based on a family size farm which is not more than three (3) hectares. Landowner can retain five (5) hectares. Three (3) hectares may be awarded to each child of the landowner if he is not less than 15 years old
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Salient Features of CARP (RA No.6657)
3. Qualified beneficiaries in the ff. order of priority are the agricultural lessees and share tenants, regular farm workers, seasonal farm workers, actual tillers or occupants of public lands, collectives or cooperatives of the aforementioned beneficiaries, and other directly working on the land
4. The distribution of the lands covered by CARP shall be implemented within 10 years effective immediately upon signing of the law by Pres. Corazon C. Aquino on June 10, 1988.
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Salient Features of CARP (RA No.6657)
5. Exemptions and exclusions include lands for wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses…
6.
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Payments to landowners:
Above 50 hectares 25% cash and 75% gov’t bonds
above 24 and up to 50 hectares
30% cash and 70% gov’t bonds
24 hectares and below 35% cash and 65% gov’t bonds
Payments are made in 10 years at 10% interest per annum
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Salient Features of CARP (RA No.6657)
7. Beneficiaries pay Land Bank of the Philippines in 30 annual amortization at six per cent (6%) interest per annum.
8. Valuation of lands is determined by PARC (Presidential Agrarian Reform Council), headed by the President of the Philippines.
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Taxation
• Is the supreme power of a sovereign state to impose burdens or charges upon persons, property or property rights for public purpose
• It is the power vested upon the legislature for the purpose of raising revenues to finance government expenditures and for the general welfare and protection of its citizen
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Tax
Compulsory contributions to support the State
Considered as “lifeblood” of a government that without which, a government may not be able to perform and expenditures are financed by tax revenues
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Basis of Taxation
Found in the reciprocal duties of protection and support between
the state and those that are subject to its authority.
In return of their contribution, taxpayer enjoys services and
protection from the government.
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Importance of Taxation
Raise revenue
Protect locally produced goods against competition from import by imposing higher custom duties
Protect new industries by granting tax exemptions
Regulate property
Distribute equally the wealth of the nation
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Essential Characteristics of Taxation
It is…• An enforced contribution• Generally payable in money• Proportionate in character• Levied on persons, property or
property rights• Levied by the state, which has the
jurisdiction over the person or property
• Levied by the legislative branch o the state
• Levied for public purposes
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Basic Principles of a Sound Tax System
Fiscal adequacy(the source of revenue should be sufficient to address the demands of public expenditures)
Equality or theoretical justice(the tax burden should be proportionate to the taxpayer’s ability to pay)
Administrative feasibility(the tax should be capable of convenience, just and effective administration)
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Classification of Taxes
National TaxesThese are taxes imposed by the national
government under the National Internal Revenue Code and other laws particularly the Tariff and Custom Code
Local TaxesThese are taxes imposed by the local
government to meet particular needs under the Local Government Code, such as real property tax and the community tax
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Forms of Taxes
Direct TaxesForm of tax paid directly by the individual or corporations directly to the government
Indirect TaxesTaxes imposed on a particular article or transaction which are paid by others than those from whom the tax collector receives payment
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Direct Taxes
Income Tax Derived from the individuals, corporate, estates and trusts income
Inheritance Tax Paid on property passed on from a deceased person to those who are to inherit it
Estate Tax Tax on the right of the deceased person to transmit his estates to his lawful heirs at the time of death
Donor’s Tax Tax levied on donation or gift and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer
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Direct Taxes
Capital Gains Tax Tax imposed on income from sale of capital assets, which includes stocks, bonds, real estate, and partnership
Property Tax Tax levied on the assess value of land and permanently attached improvements owned by individuals or corporations
Documentary Stamp Tax Tax imposed on documents, instruments, loan agreements and papers evidencing acceptance, assignment, sale or transfer of an obligation
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Indirect Taxes
Value-added TaxTax imposed by the government at each stage in the production of a good or service
Sales TaxTax levied on the sale of goods and services
Percentage TaxBusiness tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT registered
Excise TaxTax on manufacture, sale or use of goods or services levied by local , state or national governments
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Some Fees, Charges and Burdens Collected by the Bureau of Customs
Harbor FeeAmount which the owner, agent, operator or master of a vessel has to pay for each entrance into or departure from a port of entry in the Philippines
Wharfage dueAmount assesses against the cargo of a vessel engaged in foreign trade, based on the quantity, weight or measure received and/or discharged by such vessel
Berthing chargeAmount assessed against a vessel for mooring or berthing at pier at any port of the Philippines
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Some Fees, Charges and Burdens Collected by the Bureau of Customs
Storage charge
Amount assessed on articles for storage in customs premises, cargo shed and warehouses of the government
Arrastre charge
Amount which the owner, consignee or agent of article or baggage has to pay for the handling, receiving and custody of the imported or exported article or baggage of passengers
Tonnage due
Amount paid by the owner, agent or operator of a vessel engaged in foreign trade coming to the Philippines from foreign port or vv based on the net tonnage of the vessel or weight of the articles discharged or laden 3
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Classification of Limitation
• Constitutional Limitation
– those expressly found in the constitution or implied from its provisions
• Inherent Limitation
– those which restrict the power although they are not embodied in the constitution
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Constitutional Limitations
• Due process of law• Equal protection of the laws• Rule of uniformity and equity in taxation• Prohibition for imprisonment for non-
payment of a poll tax• Non-impairment of the obligation of
contracts• Non-infringement of religious freedom• No appropriation for religious purposes• Exemption from taxation of religious
institutions, charitable institutions, non-profit and non-stock educational institutions and non-profit cemeteries
• Concurrence by a majority of all the members of Congress for the passage of a law granting exemption
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Requirement for due process of law
“No person shall be deprived of life, liberty or property without
due process of law”
• There must be appropriate notice to the taxpayer and the tax imposed is for public purpose
Due process of law - done (1) under the authority of a law that is valid, or of the Constitution itself, and (2) after compliance with fair and reasonable methods of procedure prescribed by law
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Requirement of Equal protection of the laws
• The equality it guarantees is “legal equality” or as it is
usually put, the equality of all persons before the law, which
does not treat the persons differently because of who he
is or what he is or what he possesses.
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Requirement of uniformity and equity in taxation
• The rule of taxation shall be uniform and equitable
• A tax is uniform when it operates with the same force and effect and in every place
where the subject of it is found
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Prohibition against imprisonment for non-payment of Poll tax
• Poll tax – cedula tax or residence certificate tax
• The constitution does not prohibit cedula tax but it prohibits imprisonment for non-payment of the cedula or residence tax
• A poll tax maybe understood as a tax, the payment of which is made a requirement for the exercise of the right of suffrage
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Prohibition against impairment of obligation of contracts
“No law impairing obligation of contracts shall be passed.”
Impairment of obligation of contracts - “when a right is taken or when a person is deprived of the means for enforcing such right”
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Prohibition against infringement of religious freedom
“No law shall be made respecting an establishment of religion, or
prohibiting the free exercise thereof.”
• The free exercise and enjoyment of religious profession and worship, without discrimination shall forever be allowed.
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Prohibition against appropriation for religious purpose
“No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit or support of any
sect, church, denomination, sectarian, institution, or system of
religious, or of any priest, preacher, minister, or other religious teacher…
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Prohibition against taxation of religious institutions, charitable institutions, non-profit and non-stock educational institutions and non-profit cemeteries
• …charitable institutions, mosques, and non-profit cemeteries are required that for the exemption of “lands, buildings, and improvements” they should not only be ‘exclusively’ but also ‘actually’ and ‘directly’ used for religious, charitable or educational purposes.
• There must be a proof therefore of the actual and direct use of lands, buildings, and improvements for religious or charitable (or educational) purposes to be exempt of taxation
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Requirement of concurrence by a majority of all the members of Congress for the passage of a law granting exemption
“No law granting any tax exemption shall be passed
without the concurrence of a majority of all the members of
the congress”
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Inherent Limitations
Requirement that levy must be for a public purpose
Non-delegation of the legislative power to tax
Exemption from taxation of government entities
International comity
Territorial jurisdiction
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Requirement that levy must be for a public purpose
The power to tax exists for general welfare. Hence implicit
in the power is the limitation that it should be exercised only
for a public purpose.
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Prohibition against delegation of the taxing power
• The power to impose tax is purely legislative. Congress cannot delegate the power to others
• Doctrine of separation of powers:
Each branch must exercise its powers without intruding into the exercise of the powers of the
other branches, for they are independent and coordinate
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Prohibition against taxation of government entities
• Government agencies and instrumentalities are generally exempted from taxation, unless otherwise provided by law.
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Limitation on International comity
• The property of foreign state or government may not be taxed by another. Foreign Diplomats/ Ambassadors are also exempted from taxation, this principle is based on the sovereign equality among states under international law that foreign government may not be sued without its consent so that it is useless to assess the tax, since anyway it cannot be collected
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Limitation on Territorial jurisdiction
• A state may not tax property lying outside the borders or right or privilege in another state. The reason is that tax laws do not always operate beyond a country’s jurisdictional limits.
• In movable property taxation, the rule is: “Mobilia Sequntur Personan” meaning “movables follow the law person”
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Income - It means all the wealth which
flows into the taxpayer other than mere return of capital
Income tax
- a tax levied directly on personal income in one taxable period
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Classifications of Income
• Gross income
All income derived from whatever source
• Ordinary income
Includes any gain from any sale or exchange of property which is not a capital asset or property
• Taxable income
Pertinent items of gross income less the deductions and/or personal and additional exemptions
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Classifications of Income
• Passive income
Income such as interest on bank deposits, dividends, royalties, prizes and other winnings
• Net income
Gross income minus allowable deductions
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Taxpayer
• Any person subject to tax imposed by the National Internal Revenue Code
• Classification of TaxpayersIndividual taxpayer
Corporate taxpayer
General Professional Partnership
Estates and Trusts
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Basic Personal Exemption (BPE)
• A mandatory deduction allowed to individual citizens in the Philippines regardless of the status at the amount of P50,000.00. This applies to all individual citizen taxpayers engaged in trade or business, practice of professions, and employees earning compensation income
• Deducted from gross income
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Basic Personal Exemption (BPE)
• Single / Legally Separated /Judicially annulled…………P50,000.00
• Head of the Family……………...P50,000.00
• Married…………….P50,000.00
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Additional Personal Exemptions (APE)
• A mandatory deduction of P25,000.00 for each qualified dependent child up to maximum of four (4) qualified dependent children in the Philippines or maximum amount of P100,000.00
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Head of the Family
• An unmarried or legally separated man or woman with one or both parents, or with one or more brothers/sisters, or with one or more legitimate, recognized natural or legally adopted children living with and dependent upon him for their chief support
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Dependent
• A legitimate, legitimated, illegitimate, or legally adopted child of the taxpayer
• Not more than 21y/o, unless physically or mentally handicapped
• Living with the taxpayer• Dependent upon the taxpayer for chief
support• Not gainfully employed, even if the child
is employed but the taxpayer is still supporting the child at least 51% of its living expenses
File a Certificate of Tax Exemptions or BIR Form No. 2305
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Income Tax Rates
Over But not over
P 10,000 5%
P 10,000 30,000 P 500 + 10% of excess over 10,000
30,000 70,000 P 2,500 + 15% of the excess over 30,000
70,000 140,000 P 8,500 +20% of the excess over 70,000
140,000 250,000 P 22,500 + 25% of the excess over 140,000
250,000 500,000 P 50,000 + 30% of the excess over 250,000
500,000 P 125,000 +32% of the Excess over 500,000
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Tax Evasion
• It is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the amount of tax
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Tax Avoidance
• It is the use by the taxpayer of legally permissible methods in order to avoid or reduce tax liability
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Tax Exemption
• It is the grant of immunity or freedom from financial charges, burdens or fees extended by the State to the taxpayers.
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Cooperative
derived from the Latin word “cooperatus”
Co means “with” and operatus means “to work”
= working together
A group of persons who pool their resources under the procedure and principle of equality and common understanding for their mutual benefits
Based on the saying that:
“in union, there is strength”
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Why Previous Cooperative Failed
Incompetent Management
Inadequate Capital
Lack of knowledge on the concept of cooperative
Inability to meet competition
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• Republic Act 6938 – The Cooperative Code of the Philippines
Fosters the creation and growth of cooperatives as a practical vehicle promoting self-reliance and harnessing people towards the attainment of economic development and social justice
• Republic Act 6939 – The Cooperative Development Authority
Provides for the creation of CDA tasked to implement the programs of cooperatives in the Philippines
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Purposes of the Cooperative Development Program
Facilitate redistribution of income and wealth
It is a means for community development
To systematize the developments of cooperatives
to give more opportunities to the poor
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Objectives of Cooperatives
• To provide goods and services to its members and thus enables them to attain increased income and savings, investments, productivity, and purchasing power and promote among them equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk sharing without, however, conducting the affairs of the cooperative for charitable purposes.
• It shall provide maximum benefits to its members, teach them efficient ways of doing things in a cooperative manner, propagate cooperative practices and new ideas in business and management and allow the lower income groups to increase their ownership in the wealth of the nation. 7
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Types of Cooperatives
1) Credit Cooperatives(composed of persons who are bounded y common interest in promoting the virtue of thrift among its members by pooling their savings into a common fund)
2) Consumer’s Cooperatives(composed of consumers residing in a particular community who have pooled their resources together to procure and distribute commodities at low prices; serves the need of its members)
3) Producer’s Cooperatives(Composed of skilled workers and craftsmen engaged in small scale industry who have pooled their economic resources)
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Types of Cooperatives
4) Marketing Cooperatives(Engaged in the sale of farm products produced individually by member-farmers in their respective farms)
5) Service Cooperatives(Established by members to provide themselves with certain services which would help ameliorate their life)
6) Multi-purpose Cooperatives(combines two or more of the business activities of these different types of cooperatives)
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Factors Contributing to the Success of Cooperatives
Economic needs
(Man is a social being, his economic problems can best be solved through cooperation)
Sound Business Policies
(Refers to efficiency of operation, careful planning, foresight and fair dealing with customers)
Honest and Competent management
(The persons who are to serve as members of the board of directors should have adequate business experience)
Exemption from Taxes(Cooperatives has a decided edge or advantage over private enterprises)
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