co-operatives

Some Canadian bike shops and distributors are angry, claiming Mountain Equipment Co-op is using its unfair competitive advantage to push its own bike line. Read on.

Its foray this month into bike selling has been criticized by rival specialty retailers for everything from unfair competition because of its tax-exempt status, to a Wal-Mart-style money grab, to unethical sourcing.

This meme about the co-operative being "tax-exempt" has been around for many years. Back in the day it was the outdoor stores that were complaining (oh wait, they still are) about it. The truth is that the co-op, like any business, is taxed on what it retains and since it returns much of the earnings back to the customer as a "patronage allocation" or refund, it has no earnings and only keeps 3% for capital improvements and 1% as an environment fund.

The group of competitors of MEC years ago demanded and got a meeting with "government tax policy officials in Ottawa where they were they were told the same thing that co-ops already knew: the Income Tax Act does not favour co-ops over other corporations." All co-ops pay income tax at the same rates and under the same rules as their competitors.