Model Law on Cooperatives for Africa: Taxation, self-regulation among key issues cited
KAMPALA, September 30, 2024 — The Pan African Parliament [PAP] recently adopted the Model Law on Cooperative for Africa. The Law has over 40 articles that the cooperative movement or cooperatives in Africa must adhere to. Below we highlight some of the key issues including taxation and self–regulation:
Taxation of cooperatives
According to the Law, in taxing cooperatives in African countries, the following considerations shall be taken into account: Difference between profit and surplus; the rationale for patronage payments to members; the purpose of reserve funds in cooperatives; the organisation of the cooperative movement in particular the relationship among primary societies, secondary societies, tertiary/apex societies and federation; the nature of the business of the cooperative; the volume of business of a cooperative; and the area in which it is established.
The Law adds that the minister responsible for taxation or any other relevant public official may exempt cooperatives from: Corporate tax for societies whose annual turnover does not exceed a specified amount; value added tax for societies whose annual income does not exceed a specified amount; any taxes or duty chargeable upon turnover or capital other than interest on income, profits, dividends or rent accruing from investments by the cooperative outside its normal course of business; any auction duties chargeable in respect of agricultural produce and livestock sold by or on behalf of a cooperative; any license duties chargeable in respect of turnover of capital; and any other taxes or duties of a like nature to some of those mentioned above.
Dispute settlement
The Law defines a dispute is a disagreement that has the potential to affect the business of a cooperative in a manner that causes loss or affects the operations of a cooperative. It urges coops to use alternative dispute resolution methods before rushing to courts of law. “All disputes shall first be referred to mediation and reconciliation. A dispute that cannot be resolved through mediation and reconciliation shall be referred to arbitration under the guidance of the regulatory authority for cooperatives. Where arbitration fails, parties may resort to courts of law of competent jurisdiction,” it says.
Cooperative societies strive to address disputes through prevention, management and resolution of conflicts by way of early warning, early response and preventive diplomacy, says the Law.
“The national federation shall have duty to mediate disputes in the cooperative movement and may establish Cooperative Mediation Centers,” says the Law. “Provided that disputes which have prescribed legal procedures such as land and labour shall be resolved through those procedures.”
Where necessary, the Law says, there shall be established an independent body for settlement of cooperative disputes.
Criminal offenses
Where a criminal activity is committed in a cooperative, the Law says the relevant criminal law and procedure shall apply.
Cooperative Regulatory Body
The Legislation calls for the establishment of a cooperative regulatory authority which shall be responsible for regulating cooperatives by mainly ensuring compliance with existing cooperative legislation.
The functions of the regulatory authority shall be to: Register and de-register cooperatives; provide technical advice and assistance to cooperatives in relation to formation, management, organization and operation of cooperatives; oversee the implementation of cooperative development policy; and maintain and disseminate information relating to cooperative development to key actors and stakeholders.
Other functions are to keep a register of cooperatives; maintain databases on various matters relating to cooperatives; inspect and supervise cooperatives; encourage and promote establishment of viable cooperatives; and enforce self-regulation of the cooperative movement including by-laws
Self-regulation of cooperatives
The Legislation mandates cooperatives and the cooperative movement to put in place systems and mechanisms to ensure and facilitate self-regulation to augment/complement existing government regulatory framework.
Power to make rules/regulations
According to the law, the relevant government authority responsible for cooperatives shall have power to make rules/regulations under this Law for proper implementation of this Law. “The rules/regulations so made shall aim at providing practical and detailed information on the implementation or enforcement of the provisions of the Law and should not be inconsistent with letter and spirit of this Law,” says the law.
https://thecooperator.news/model-law-on-cooperatives-for-africa-what-you-must-know/
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