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5 senators press BIR: Rescind 150% private school tax hike

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AT least five senators have now come out with a strong appeal to the Bureau of Internal Revenue (BIR) to reconsider its implementing rules that increased the income tax of private schools from 10 percent to 25 percent, saying this violated the intent of the law (Republic Act 11534) to raise revenue while granting relief to businesses, including private schools, hard hit by the pandemic.

In separate instances, Senators Sherwin T. Gatchalian and Maria Lourdes Nancy S. Binay added their voice at the weekend to those of  Senate President Ralph G. Recto, Juan Edgardo M. Angara and Joel J. Villanueva. These senators had warned the BIR its “wrong” interpretation of RA 11534 grossly twisted the spirit of the measure and will bankrupt many private schools.

It is ridiculous, the three lawmakers stressed, for the BIR to more than double the tax of private schools (who had been paying 10 percent in the past) when RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises (Create) law precisely brought down the corporate income tax of all other businesses to 25 percent in a bid to help them recover from the lockdown-induced recession.

“The title alone of the law [Create] clearly shows its intention: corporate recovery and tax incentives,” Recto had pointed out. He aired serious concern raised earlier by Villanueva and Angara who had moved to file a bill redressing BIR’s interpretation of the Create law through its Revenue Regulation (RR) 5-2021 imposing a 150-percent increase on the income tax of private schools.

The BIR last week decided with finality to reject the letter-appeal of the Coordinating Council of Private Education Associations (Cocopea) opposing RR 5-2021. The group wrote the appeal after exhausting legal avenues to have the BIR correct the tax rate. This, over Cocopea’s plea that such would effectively double the rate they have been paying, of 10 percent.

Gatchalian on DWIZ

IN an interview with DWIZ on Saturday, Gatchalian said, “the BIR must suspend its revenue regulations because that is not the true intent of senators in the Create law. The senators intended to grant discounts to private school,s because many of them—900, in fact—have closed down.

“Many schools lost students; so the senators would really rather spare them from paying taxes for the meantime,” he said, partly in Filipino.

Gatchalian told the DWIZ he was dismayed that “the opposite happened—those [schools] paying 10 percent are now told to pay 25 percent.”

“So obviously, the BIR is doing the reverse of what lawmakers intended,” the lawmaker said. Gatchalian added “this must be suspended immediately because it is certainly not the intent of the legislature.”

He stressed it was a “wrong interpretation” by BIR and that is why they “want the BIR rules suspended while the executive and legislative talk about this, because the schools are in a dire situation.”

He said the lawmakers’ true intent will be clearly borne out by the transcripts of their deliberations on CREATE, which is to “give tax relief for just three years, because of the pandemic.”

Gatchalian chairs the Senate’s basic education committee.

Binay weighs in

FOR her part, Senator Binay asked the BIR to “have a heart, spare schools from being taxed” wrongly.

“Many of our private schools have closed because of the pandemic. If this revenue regulation is enforced, certainly many more schools will shut down,” Binay said, partly in Filipino, in a statement issued last Sunday.

Under the BIR regulation issued on April 8, 2021, income tax on so-called proprietary educational institutions that are run by stock corporations would be increased to 25 percent from the current 10 percent.

“We passed the Create Law to help businesses survive the effects of the pandemic through tax incentives. The law plainly states (Section 2, paragraph d) the need to create a more equitable tax incentive system that will allow for inclusive growth and generation of jobs. There is nothing in the law that intended to add to the burden of the schools,” Binay said.

Binay said she supports Senate Bill 2272 filed by Angara, which seeks to amend a section of the National Internal Revenue Code and, thus, correct an erroneous interpretation on the tax imposed on proprietary educational institutions. While the Angara bill has yet to be passed, Binay reminded the BIR to be more circumspect in its interpretation of laws and applying additional taxes during a pandemic.

“Everyone is suffering. Many teachers were laid off, schools closed down; many academic institutions are on the brink of collapse—taxing private schools with 25 percent does not make any sense at all. Please, have heart,” she added.

Read full article on BusinessMirror

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