April 15

2011

TOWARDS A CO-OPERATIVE
TAX IN EUROPE
On the contribution
of co-operatives
to the public interest

HACIA UN IMPUESTO KOOPERATIBEN ZERGA

COOPERATIVO BATERUNTZ
(inglés) (ingelesez)

Working Paper
(Non professional translation from Spanish)
As a Working Paper, it doesn´t reflect any institutional position or opinion of EKAI Center.

Ekai Center
Innovating Public Policy
Goiru 1, A 2, 20500 Mondragón (Spain)

www.ekaicenter.eu
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
On the Contribution of Co-operatives to the Public Interest and the

SOCIEDADES
need to move towards a Co-operative Tax in the Member States of
the European Union:
PARCIALMENTE
1. Overall, co-operatives, like all businesses, contribute to
COOPERATIVIZADAS
Society through their own activity, through their corporate
social responsibility activities and, of course, through their tax
contribution.

2. The tax contribution generated by co-operatives, like in other

businesses (mainly corporate tax, value added tax, and its
members and employees income tax, along with Social
Security contributions) is a contribution that enables the Estate
to develop the functions that enterprises cannot or should not
develop by themselves.

3. In recent years, following the crisis of the welfare state and the
doubts about the Estate's capacity as manager of public
services, a growing involvement in social activities, social
cohesion and services –functions traditionally entrusted to the
state- has been demanded to businesses through the
promotion of Corporate Social Responsibility. This dynamic
usually has been accompanied by a reduction in overall tax
contribution of the enterprises.

4. However, the position of co-operatives from the perspective of

all their various contributions to Society is substantially
different from the contributions made by other enterprises.
Even if it is true that some of the traditional functions of the
Estate (justice, public order, defense, infrastructure, etc..)
complement both the activity of co-operatives and the activity

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 2
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
of other enterprises, the relationship between the activity of
co-operatives and other Estate functions –mostly in social
cohesion, employment and social services- is essentially

SOCIEDADES
different from that of other businesses.

PARCIALMENTE
5. Unlike other enterprises, co-operatives do not tend to create
situations of social inequality or imbalance that must be
COOPERATIVIZADAS
compensated by the activity of cohesion promotion of the
Estate.

The governance model of co-operatives generates an

egalitarian trend in income distribution among its members,
and, overall, an increase in the salaries/income of the working
class, in workers co-operatives, consumer co-operatives,
service co-operatives, etc.

6. Unlike other enterprises, as a consequence of the principle of

self-help –and due to their own nature- co-operatives tend to
self – organize the provision of social services – especially
through social co-operatives, mutuals, etc, instead of
abandoning these functions in hands of public entities.

7. Likewise, while other enterprises, focusing their activities on

maximizing the profitability of capital, leave the solution of all
the social problems which have not been solved by their
activity in the hands of the Estate, co-operatives boost the
creation of social fabric and social capital, structuring civil
society and empowering it to solve their own problems, leaving
in the hands of the affected the resolution of the challenges
that specifically concern them.

8. The crisis of the welfare state is asking for new alternatives

able to balance the need for a new management of public
services, more efficient than the government managed, with a

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 3
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
non-elitist orientation of these services, which only through co-
operative management is really possible.

9. The general regulation of the fiscal contribution of enterprises

SOCIEDADES
in most countries is usually consistent with the need to provide

PARCIALMENTE
financial coverage to the public activities necessary to meet
those needs, largely derived from the activity of enterprises.
COOPERATIVIZADAS
10. Therefore, the efficient management of public policies should
give co-operatives an adequate treatment, according to their
contribution to public interests, and that should mean, in
particular:

- A lower contribution of co-operatives to public

budgets in line with their cooperation in containing
government spending in social cohesion and social
services

- An active government policy in favor of the creation of

co-operative social fabric.

- Avoiding any rule or decision that clearly

discriminates both in favor and and against co-
operatives.

11. Very specifically, it is understandable that the basic criteria

governing the financial contribution of co-operatives to public
budgets are defined by essentially different criteria and, in any
case, by criteria consistent with the different ways in which co-
operatives contribute to the public interest. In this sense, co-
operatives could, of course, help -in terms similar to other
enterprises- to public expenses in defense, public order,
justice and infrastructures.

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 4
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
However, it is reasonable to assume that co-operatives should
contribute with different criteria from those of other enterprises
on public expenditures for social cohesion, employment and

SOCIEDADES
social services.

PARCIALMENTE
12. At the same time, governments should encourage the
contribution of co-operatives to the creation of social fabric,
COOPERATIVIZADAS
social cohesion and social services through the self-managed
activities of the Co-operative Movement, and through the
public-private partnership.

13. Somehow, these basic criteria have been traditionally

accepted by governments, by rules and decisions like these:

a) Specific tax rules designed to the tax promotion of

co-operatives, recognizing the need of a lower
contribution of co-operatives to government budgets in
exchange of their contribution to social cohesion and
public services management.

b) Specific “parafiscal” rules that take into account the

contribution of co-operatives to Society, mainly through
compulsory social fund allocations for the promotion of
the Co-operative Movement or for other purposes of
social interest.

14. From a conceptual point of view, the recognition of the social

role of co-operatives and their budgetary contribution seems to
be more adequately captured by an expressly recognized
replacement of a substantial part of the tax contribution by a
“parafiscal” endowment to co-operative funds for the
promotion of Co-operatives. This would be some kind of “co-
operative tax”, and it is already recognized in some countries.

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 5
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
Public authorities should consider the desirability of a gradual
implementation of this “co-operative tax” which purpose would
be in the line of the public interest in the field of promotion of

SOCIEDADES
Co-operatives in the community, through co-operative
management of social services or through the promotion of the
PARCIALMENTE
social cohesion by means of the activity of co-operative

COOPERATIVIZADAS
enterprises.

15. Regarding the amount of this potential “tax” or “parafiscal”

contribution, and considering the proportions in which public
expenditure is distributed between the different expenses,
governments should consider as a possibility that a substantial
proportion of the total tax contribution generated by
enterprises (mainly Value Added Tax, Profit Tax and Income
Tax of partners and employees) could be replaced in co-
operatives by this “co-operative tax”. Governments should
take account for this purpose the proportion of the destinations
of government expenses to the different goals of employment,
stability and social cohesion and social services.

16. From the point of view of public policy, the potential benefits of
this “co-operative tax” (under different names and amounts
this concept already exists in several Estates of the European
Union) are basically the following:

a. Encouraging the creation of social fabric, Strengthening

Civil Society and promoting the traditional self-help
principles of co-operatives.

b. Qualitatively improving the quality and efficiency of

public services.

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 6
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
c. Avoiding enforcing co-operatives to contribute with
taxes to solve social problems created by other types
of enterprises.

SOCIEDADES
d. Giving to co-operatives a tax treatment in line with their

PARCIALMENTE actual and potential contribution to the needs of the

society in which they are located.
COOPERATIVIZADAS
17. In this sense, taking into account some of the “good practices”
in certain Estates, this is the alternative we propose:

a. Formal recognition as fiscal or “parafiscal” contributions –

as a “co-operative tax”- of the mandatory contributions to
public purposes that some Estates regulate for co-
operatives

b. Overall, regulate a “co-operative tax” of a 10 percent of the

net results of co-operative enterprises, as part of profit tax,
to be channeled as such “co-operative tax” with a
mandatory destination -defined by law- to strengthen the
community through the promotion of co-operative social
fabric.

c. Preferably, to quantify this “co-operative tax” as a

substitute of profit tax, with the same or equivalent amount.
Co-operatives would be exempt from profit tax and, in
place of this tax, they should make an equivalent
contribution, as a mandatory “parafiscal” contribution or
“co-operative tax” to purposes of public interest, by
strengthening the co-operative social fabric.

In our opinion, this amount would not be excessive,

considering that co-operatives, along with this “co-
operative tax” would maintain their tax contribution in the

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 7
 TOWARDS A CO-OPERATIVE TAX IN EUROPE

PARCIALMENTE
COOPERAIVIZADAS
Value Added Tax and in the Income Tax for employees
and members in terms equivalent to those of other
societies.

SOCIEDADES
18. This kind of rules would also help to clarify that co-operatives
PARCIALMENTE
contribute to the public interest no less than other enterprises,
but that they only contribute “in a different way”.
COOPERATIVIZADAS

EKAI Center
Goiru 1 A2, 20.500 Mondragón (Spain)
Tel: 34-943 250104 e-mail: ekaicenter@ekaicenter.eu www.ekaicenter.eu 8