THE hope of private school operators to get a reprieve from widening liabilities after the House of Representatives approved on third and final reading a bill defining the tax rates for proprietary schools.
Under the House Bill (HB) 9913, which was approved by 203 lawmakers last Monday, a preferential tax rate of 10 percent imposed on proprietary educational institutions will be reduced to 1 percent from July 1, 2020 to June 30, 2023. After that, the tax rate shall be set at 10 percent as provided by Republic Act (RA) 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises Act, or “Create” law.
HB 9913 provides that no credit or refund of taxes or penalties shall be given resulting from the availment of the reduced income tax rates under Section 27 (B) of RA 8424, or An Act Amending the National Internal Revenue Code of 1997.
House Committee on Ways and Means Chairman Joey Sarte Salceda said the bill’s intent will constitute a 96-percent tax discount to private schools from 2020 to 2023 and a 60-percent tax discount thereafter.
“That is the largest ever tax cut to any sector ever in the country’s history, and I am proud that we will do it for the sector the Constitution values the most–the education sector,” Salceda, the principal author and sponsor of HB 9913, said.
The bill is meant to intervene in the implementation of the recent regulation of the Bureau of Internal Revenue (BIR), increasing the tax rate of private educational institutions to 25 percent from 10 percent. The BIR has already suspended the rule.
“Unless legislative action is taken, these schools can still be applied a rate of 25 percent or the regular CIT (corporate income tax) rate, from the 10 percent some of them have complied with previously, if not now, then at some future point,” Salceda said.
He noted that the BIR has suspended the implementation of Revenue Regulation 5-2021, which would have increased the income tax private schools pay by defining proprietary educational institutions as private and non-profit entities.
“Although the rule was suspended, their responsibility under the law has not yet been expunged. So, we still have to address that complication. Besides, they are unable to avail of the 1-percent rate,” Salceda added.
The lawmaker emphasized the need to immediately pass the bill to help private schools hire more teachers and keep existing staff through tax relief.
“It will help private schools keep their teachers. They already had to fire teachers due to the pandemic. I think the whole committee agrees we should provide them relief,” Salceda said.
He said applying the reduced preferential rate under the Create law until 2023 would allow schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire 13,000 teachers at the start of the next school year.
Salceda also expressed hope that the bill can be transmitted to Malacañang for the president’s signature before the year ends.