Senate Minority Leader Franklin Drilon on Wednesday proposed that another resolution be crafted to complement the approval of a Senate bill that seeks to amend tax regulations governing private schools and institutions.
Drilon, during the Senate Ways and Means Committee hearing on Senate Bill No. 2272, said this would “put on record the Senate’s official interpretation” on the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE law when they crafted it.
Senate Bill No. 2272, which Sen. Sonny Angara filed, seeks to correct the Bureau of Internal Revenue’s (BIR) regulation on private schools by amending Section 27 of the National Internal Revenue Code.
Angara filed the measure to correct the “patently erroneous interpretation” of the BIR on the tax regime governing education institutions.
According to Angara, increasing the corporate income tax on private schools or proprietary educational institutions from 10 percent to 25 percent, as imposed by the BIR regulation is “not only unwarranted in law, but also very bad policy” especially during a COVID-19 pandemic.
Drilon noted that the BIR’s Regulation No. 5-2021 ruled, interpreted and redefined an “education institution” for purposes of a tax regime that would be applicable as such.
However, Drilon clarified that senators did not amend the characterization or the coverage of the education institutions when they crafted the CREATE bill.
“What we did was to touch the rates given the effects of the pandemic on the education institution,” Drilon said.
“I am certain that Regulation No. 5-2021 will be questioned before the courts as being beyond the scope of the BIR to implement it in a matter that they want to implement it,” Drilon said.
As a remedy, the minority leader said another resolution should be crafted to accompany the committee report recommending the approval of the bill in order “to put on record the Senate's official interpretation, in so far as, this particular provision is concerned.”
Cayetano, who chairs the ways and means panel and who spearheaded discussions and approval of the CREATE Law in the Senate, said the purpose of the committee’s hearing is to address the questions, confusion and clarifications sought by a lot of stakeholders.
“As a quick backgrunder, we were looking at two provisions of this bill. Sen. Sonny (Angara, had, I think submitted in writing one version and then there was a lengthy discussion on the floor with Sen. (Ralph) Recto and in the end, it was the version of Senator Recto that was carried by the body,” Cayetano recalled.
“It was very clear that what we carried is an existing provision of the bill with a simple change in rates,” she pointed out.