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BIR suspends tax rate hike on private schools

Christian Deiparine - Philstar.com
BIR suspends tax rate hike on private schools
Students in face masks are seen being taken their temperature in this undated file photo before the COVID-19 outbreak in the country
AFP / Ted Aljibe

MANILA, Philippines — The Bureau of Internal Revenue has put on hold a tax rate hike on private schools following warnings it could lead to more business closures and loss of jobs in the education sector amid the pandemic. 

Finance Secretary Sonny Dominguez on July 26 signed Revenue Regulations (RR) 14-2021, which suspended three provisions in the old RR 5-2021 that imposed a 15% increase in private schools’ income tax rate despite a new corporate tax reform law slashing the rate to just 1% in the next three years.

Dominguez said the move was meant "to ease the burden of taxation among proprietary education institutions, especially during this time of COVID-19 pandemic", as well as “take into account” two pending bills in Congress that would clarify income taxation on schools.

Both bills seek to amend the national revenue code so that both non-profit and proprietary schools can qualify to avail of the hefty tax cuts under Corporate Recovery and Tax Incentives for Enterprises Act or CREATE law, which has been touted as a stimulus package for pandemic-hit businesses by economic managers. Senators in June urged the Department of Finance to suspend the BIR policy as they tackle the proposed measures.

At a congressional hearing, lawmakers said it was urgent to put the tax hike on hold as a new school year approaches, arguing that private schools may pass the costs of higher taxes on students and their families through higher tuition fees.

For its part, the Coordinating Council of Private Educational Associations appealed for President Rodrigo Duterte's intervention and sought a temporary restraining order from the Court of Tax Appeals on BIR's regulation. 

"This is one problem partially solved," Senate President Pro Tempore Ralph Recto said of the tax hike suspension. "Let us move forward by adopting measures that will address the crisis in the entire education system which the pandemic has worsened,” Recto added.

Meanwhile, Sen. Joel Villanueva said: "This is what we need: an academic revenue freeze. Private schools need additional help, not more tax during the pandemic. There is no revenue loss to this."

BUREAU OF INTERNAL REVENUE COORDINATING COUNCIL OF PRIVATE EDUCATIONAL ASSOCIATIONS DEPARTMENT OF FINANCE SENATE OF THE PHILIPPINES
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