The taxation of cooperative's income: analysis of its rationale

In this paper we address the issue of taxation of cooperatives’ income. Cooperatives traditionally receive a specific tax treatment distinct from that given to companies. In general terms, that specific cooperative tax regime is apparently more favorable when compared to the one applied to companies. A tradition of granting cooperatives a favorable tax relief-based tax regime is widely extended, being noticeable in all Western European Countries and in the Northern American countries (USA and Canada). This paper seeks to lay down some conceptual basis on which the issue ought to be analyzed, with a special emphasis on the definition of what is to be treated as cooperative income for tax purposes and the rationale for a favorable cooperative tax regime.