Senators have called on the Bureau of Internal Revenue (BIR) to rescind its regulation that increasing the tax rate on schools to 25 percent.
Senate President Pro Tempore Ralph Recto and Senator Joel Villanueva referred to the BIR's Revenue Regulation 5-2021 (RR 5-2021), issued last April for the implementation of the Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
They echoed their colleague, Senator Juan Edgardo "Sonny" Angara, in saying that the BIR misinterpreted the CREATE's provision on the preferential tax rate for proprietary educational institutions.
The "erroneous revenue order can bankrupt struggling private schools", Recto warned on Friday, June 4.
"How can the BIR invoke it to inflict a 150-percent increase on the income tax of private schools, which is directly opposite to what the law clearly intends?” he said in a statement.
“CREATE is meant to bail out distressed private schools. The BIR order further drowns them in a sea of red ink,” he pointed out.
The Senate leader said that prior to CREATE’s enactment, senators actually agreed to bring down the preferential tax rate for schools to one percent, from the 10-percent levy that they have been paying since 1968.
"To help them evade bankruptcy during the pandemic," Recto said.
He said the BIR, in crafting the regulation implementing the CREATE, should have consulted Senate records of the debate and correspondences to ascertain the legislative intent of the provision.
Villanueva shared Recto's view, repeating the lament of senators against the practice of agencies of legislating thru the implementing rules and regulations (IRR) of laws.
"Agencies cannot legislate through IRR. They should always consult House and Senate records to discover the clear intent behind the provisions, especially ones which could be subject to multiple interpretations," the chairman of the Senate higher education committee said in a separate statement.
"Always, the spring, agencies, cannot rise above the source, Congress," Villanueva pointed out.
He also slammed the BIR for its "illogical, unjust and baseless" plan to charge more from private schools.
"If cigarette, alcohol, and other makers of sin products will pay less CIT (corporate income tax) under CREATE, why would BIR more than double the CIT for schools?" he asked.
Angara filed on Wednesday, June 2, a bill that would correct the BIR's interpretation by amending a section in the country's internal revenue law.
But Recto said the filing of the bill does not prevent the BIR "from rectifying its oversight".
“It is illogical, absurd and goes against the spirit of the law," he also said.