House leader pushes bill scrapping new higher tax on private schools

Published June 7, 2021, 11:16 AM

by Hannah Torregoza 

Deputy House Speaker Representative Rufus Rodriguez is pushing for a bill that would clarify an existing provision on tax perks granted to educational institutions under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law which the Bureau of Internal Revenue (BIR) allegedly wrongly interpreted.

The Cagayan de Oro City representative said he has filed House Bill No. 9577 in order to clarify that the preferential tax rate of 10 percent applies to all proprietary educational institutions, by amending the first sentence of Section 27 of the National Internal Revenue Code (NIRC), and do away with the imposition of a 25 percent income tax rate on private schools.

The bill would correct a provision that prompted the BIR to interpret the law and subject all private schools that are run by stock corporations, that are already struggling to survive the COVID-19 pandemic to a 25-percent income tax.

“This bill seeks to make it clear that the preferential tax rate of 10 percent—reduced to one percent from July 1, 2020 to June 30, 2023—applies to proprietary educational institutions, by amending the first sentence of Section 27 (B) of the NIRC,” Rodriguez said.

“With the bill, I hope the BIR will see that the intent of the law is to really give all proprietary educational institutions a preferential tax of 10 percent, which from July 1, 2020 to June 30, 2023 is one percent,” the lawmaker said.

“It will address the current situation brought about by the BIR regulation and will help our private schools,” Rodriguez said.

Should the BIR pursue the imposition of a 25-percent tax rate, Rodriguez warned “more schools will be forced to close down or raise their tuition and other fees to the detriment of our students and their families.”

He said data from the Department of Education (DepEd) showed that for school year 2020-2021, enrollment in private K to 12 schools dropped by over 900,000 compared to the previous school year.

The Coordinating Council of Private Educational Associations has also reported that half of their members have experienced a decline in enrollment.

“The implementation of the K to 12 program already hit a lot of private schools. Then COVID-19 struck, resulting in many more schools closing down because of financial difficulties,” Rodriguez explained.

The lawmaker said the BIR and the Department of Finance (DOF) secretary should rescind this tax regulation immediately which contradicted the language and intention of both the Constitution and the CREATE law.

He also warned with private schools increasing fees, students might opt to transfer to the already crowded public school system or drop out.

“Instead of helping these educational institutions, the BIR has made their situation worse by increasing their tax by 150 percent, from 10 percent to 25 percent,” he lamented.

In the Senate, Senator Sonny Angara, who chairs the Senate finance committee, filed a similar bill also correcting this similar provision in the CREATE law which the BIR wrongly interpreted.

Senators have earlier appealed to the BIR to rescind Regulation No. 5-2021 (RR 5-2021, which already took effect on April 9.

“It is illogical, absurd and goes against the spirit of the law,” Senate President Pro Tempore Ralph Recto had said.

“CREATE is meant to bail out distressed private schools. The BIR order further drowns them in a sea of red ink,” Recto lamented.

 
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