Bill ensuring lower tax on private schools hurdles 2nd reading in Senate

The Senate approved on second reading Wednesday, September 22, the bill that would ensure that private schools will not be imposed with hefty taxes under the country's laws.

(Rio Deluvio/MANILA BULLETIN File Photo)

Members of the upper chamber quickly gave their nod to the passage of Senate Bill No. 2407, which seeks to amend a provision of the National Internal Revenue Code (NIRC) to clarify that the proprietary education institutions shall also be granted a lower preferential tax treatment under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

The bill was sponsored by Senator Pia Cayetano, Senate Ways and Means Committee head, for plenary approval on Tuesday, Sept. 21, with several senators rallying behind its passage.

Last April, the Bureau of Internal Revenue (BIR) issued a regulation that increases the tax of private schools to 25 percent from 10 percent, which was already lowered by CREATE to one percent for a period of three years.

But the bureau said that only non-profit proprietary educational institutions can avail of the preferential tax rate, causing an uproar in the private school sector, as well as among lawmakers.

The BIR later decided to suspend the implementation of the rule pending the passage of appropriate legislation.

SB 2407, if signed into law, would declare that all private schools must be exempt from the 25-percent corporate income tax, and must be given a preferential tax rate of one percent until June 30, 2023.

Cayetano, in sponsoring the bill, pointed out that the lowering of the preferential tax rate by the CREATE Act was aimed at providing relief to educational institutions, which has been severely affected by disruptions caused by the COVID-19 pandemic.

"This sector continues to need as much assistance and resources as it can get in order to continue delivering quality education to Filipino learners," said the senator, who also sponsored the CREATE in Senate.

Senator Juan Edgardo "Sonny" Angara, a principal author of the bill, said he hopes that the bill would address the confusion on the implementation of the CREATE law.

"Since face-to-face classes have been prohibited for the last 18 months or so, many private schools have suffered an unprecedented setback and now, many find themselves on the brink," Angara said, citing reports that about 900 private schools have stopped operations amid the pandemic.

"Private schools are COVID casualties too, and it is in the national interest to prevent them from going into permanent lockdown," Senate President Pro Tempore Ralph Recto also said.

Senator Joel Villanueva, for his part, reminded the government that private schools are partners of the state.

“We want to alleviate the burden of over 14,435 private basic education institutions, 1,729 private universities and colleges, and 4,001 private technical and vocational institutions in our country,” Villanueva said.

The Senate is expected to pass the SB 2407 on final reading next week. The House of Representatives already passed a counterpart bill last August 23.