A BILL filed in the Lower House by Deputy Speaker Rufus B. Rodriguez seeks to “clarify” the taxation on schools under Republic Act (RA) 11534, or the Corporate Recovery and Tax Incentives for Enterprises, or Create, law.
Rep. Rodriguez (2nd district, Cagayan de Oro City) said his proposal contained in House Bill (HB) 9577 seeks to further amend a provision of the National Internal Revenue Code (NIRC). The Create law, which President Duterte signed last March 26, amended the NIRC.
Under Revenue Regulation (RR) 5-2021 that the Bureau of Internal Revenue (BIR) issued last April 8, income tax on proprietary educational institutions run by stock corporations would be increased to 25 percent from the current 10 percent.
“This bill seeks to make it clear that the preferential tax rate of 10 percent (reduced to one percent from July 1, 2020 to June 30, 2023), applies to proprietary educational institutions, by amending the first sentence of Section 27 (B) of the NIRC,” Rodriguez said.
“With the bill [HB 9577], I hope the BIR will see that the intent of the law is to really give all proprietary educational institutions a preferential tax of 10 percent. It will address the current situation brought about by the BIR regulation and will help our private schools,” the lawmaker added.
Warning
THE deputy speaker also warned the BIR that with a 25-percent tax, more private educational institutions might be forced to fold up.
Citing data from the Department of Education, the senior lawmaker said for school year 2020 to 2021, enrollment in private K-to-12 schools dropped by over 900,000 compared to the previous school year.
Rodriguez said the Coordinating Council of Private Educational Associations (Cocopea) has also reported that half of their members have experienced a decline in enrollment.
“The implementation of the K-to-12 program already [affected] a lot of private schools. Then Covid-19 struck, resulting in many more schools closing down because of financial difficulties,” Rodriguez said. “Instead of helping these educational institutions, the BIR has made their situation worse by increasing their tax by 150 percent.”
But the BIR has decided with finality to reject the letter-appeal of the Cocopea opposing RR 5-2021.
Rodriguez said if the BIR-imposed rate is not corrected, “more schools will be forced to close down or raise their tuition and other fees to the detriment of our students and their families.”
With increased fees, the solon said students may opt to transfer to the already crowded public school system, or drop out.
Also, the action of the BIR is contrary to the 1987 Constitution (Sec. 17, Art. II), Rodriguez added.
Hence, the lawmaker is pushing for the Secretary of Finance to rescind RR 5-2021.
The filing of HB 9577 came after Sen. Richard Gordon joined five senators in appealing to the BIR to reconsider its implementing rules that increased the income tax of private schools. The six senators noted that RR 5-2021 violated the intent of RA 11534 to raise revenue while granting relief to businesses, including private schools, hard hit by the pandemic and the economic recession.