Senator Richard J. Gordon on Friday, July 30 welcomed the decision of Bureau of Internal Revenue (BIR) to suspend its new regulation imposing a hiked tax rate on private schools.
“We welcome this significant decision made by the BIR because as we’ve stated earlier, the new policy is very untimely and inappropriate as we are currently facing a health crisis. A lot of private schools in our country are struggling with their financial condition, and so, we are glad that the BIR considered our call to reassess its regulation,” he said.
Gordon is a co-author of Senate Bill No. 2272, or An Act Amending Section 27 (B) of the National Internal Revenue Code, which seeks to amend a section of the National Internal Revenue Code (NIRC) which imposes higher taxes for private schools.
Gordon stressed that the new policy goes against Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Law, wherein the 10 percent special tax rate imposed on proprietary educational institutions and hospitals, which are non-profit, was reduced to one percent from July 1, 2020 to June 30, 2023, after which the tax rate shall revert to 10 percent.
“Hiniling natin sa BIR na ibalik sa 10 precent ang buwis para sa private schools (We asked the BIR to return to 10 percent the tax on private schools). Ang panawagan natin ay mula sa 25 percent na ipinapataw nito na hango sa interpretasyon ng CREATE Law (Our plea is from 25 percent that was imposed based on the interpretation of the CREATE law),” Gordon stated.
As Gordon explained, BIR Revenue Regulation No. 5-2021 limits the one percent special tax rate for Non-Profit Proprietary Educational Institutions, while the rest of the Proprietary Educational Institutions would be subject to 25 percent tax rate.
“Proprietary educational institutions have been enjoying the 10 percent corporate income tax rate that the imposition to the higher tax of 25 percent defeats the objectives and purpose of the CREATE Act. The primary intent of the law is to give economic relief and cushion the impact of the Covid-19 pandemic,” he said.
Following the call made by some lawmakers and the education sector, the BIR suspended its policy through Revenue Regulations No. 14-2021.
“We support the development of our children by making sure that schools operate and recover from their economic losses. We have long recognized that schools are fundamental in fostering the productive and civic capacity of our children,” Gordon said.