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'Final nail in coffin': BIR urged to halt tax rate hike on private schools

Christian Deiparine - Philstar.com
'Final nail in coffin': BIR urged to halt tax rate hike on private schools
This August 2020 photo shows a grade school teacher at a private school in Las Piñas conducting an online class orientation.
The STAR / Edd Gumban

MANILA, Philippines — Senators on Wednesday sought for the suspension of a policy that would hike private schools' tax rate to 25% while they hear a measure to amend a part of the country's revenue code. 

The Bureau of Internal Revenue's RR 5-2021 has come under fire from groups and lawmakers who warned that it may lead to more school closures and loss of jobs amid the COVID-19 pandemic. 

It would raise private schools' income corporate tax rate by 15%, despite the CREATE law slashing schools' tax to just 1% in the next three years as a relief.

"The opening of a new school year is already approaching that's why the call to temporarily suspend the revenue regulation is urgent," said Sen. Risa Hontiveros in Filipino, during a hearing of the chamber's Committee on Ways and Means. 

Members of the panel began deliberations for Sen. Sonny Angara's Senate Bill 2272. It seeks to amend Section 27 (B) of the national revenue code to qualify both non-profit and proprietary schools in availing the tax cut under CREATE.

Angara, who chairs the committee on finance, described the RR as the "final nail in the coffin" for private schools who had to deal with adjustments from the K-12 program, and loss of students due to the free tuition law in college. 

He said many senators have already expressed intention to co-author the bill, including Senate President Pro Tempore Ralph Recto and Majority Leader Juan Miguel Zubiri.

In the hearing, Finance Asec. Dakila Napao said they support the proposed measure, too. That led to Minority Leader Franklin Drilon asking why they would not recall the RR if they are for the bill, whose filing stemmed from the policy. 

"I think it is natural to assume that schools will pass [the burden] to students," Drilon said, as he also stressed urgency. "They're already suffering from the pandemic and now there's the interpretation that would increase their taxes.

Napao did not give a direct answer on calls to put on hold the RR's implementation. He said he would consult higher ups in the DOF, and was given a week by senators to return with a response.

Sweeping impact

How much has the policy's effect been so far? 

Lawyer Ada Abad, legal counsel of the Philippine Association of Colleges and Universities, said they have received reports that the BIR is already trying to impose the 25% tax rate on some of their member schools.

The Coordinating Council of Private Educational Associations took to court this month to stop the implementation of BIR's new regulation. 

COCOPEA said it had exhausted all means in appealing before the BIR and the DOF, but to no avail. It sought for President Rodrigo Duterte's intervention as well, but was seemingly turned down as Palace backed the finance department's position.

Its managing director, lawyer Joseph Estrada, told senators that some 900,000 students in private basic education schools were not able to re-enroll in the present academic year, with around 400,000 transferring to public schools. 

Impacts of the ongoing health crisis has also forced 900 schools to shut down, he said.

"We are one of the hardest hit sectors," Estrada added. "We're looking at this trend to continue without government economic policy intervention."

Apart from thousands of students unable to return to private schools, many employees from the sector also lost their jobs. 

Sen. Joel Villanueva said the National Economic Development Authority had pointed out that those education ranked second in terms of the total number of jobs lost due to the pandemic. 

He stressed the need to "help rather than increase," the burden of some 14,435 basic education schools, 1,729 colleges and universities, and 4,001 technical and vocational education and training private institutions.

"If we brought down the income tax on tobacco and alcohol and other sin products under CREATE, why are we doubling taxes for schools?" Villanueva, who chairs the Committee on Higher, Technical and Vocational Education, said in Filipino.

A similar measure has been filed in the House of Representatives to amend the national tax code by Rep. Joey Salceda (Albay).

BUREAU OF INTERNAL REVENUE

COORDINATING COUNCIL OF PRIVATE EDUCATIONAL ASSOCIATIONS

DEPARTMENT OF FINANCE

PHILIPPINE ASSOCIATION OF COLLEGES AND UNIVERSITIES

PRIVATE SCHOOLS

SENATE OF THE PHILIPPINES

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