The Senate on Monday passed on third and final reading Senate Bill No. 2407 granting 1 percent preferential tax relief to all private schools, clarifying that all private schools – both ‘non-profit’ and ‘for profit’ – are entitled to the preferential tax rate provided in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law that took effect in March.
Senator Pia Cayetano, principal sponsor of SB 2407, as chairperson of the Senate Ways and Means Committee, affirmed that private school institutions are government’s “partners in delivering quality education for the youth, and in molding them to become changemakers and responsible leaders of the future.”
“This partnership is even more crucial today as our nation struggles with COVID-19, which has disrupted educational systems and the formal learning of our current generation of students,” Cayetano added.
Citing the timing of enacting the remedial legislation, the senator acknowledged many private schools are in a critical state, noting data from the Coordinating Council of Private Educational
Associations of the Philippines (COCOPEA) showed that enrollment among its member-schools declined to 60 percent this school year, compared to 2020. In sponsoring the timely enactment of SB 2407, Cayetano recalled the circumstances that led to the filing and approval of the tax relief measure, recalling that the passage of CREATE (RA 11534) last March 26, 2021, brought timely reprieve to proprietary educational institutions by lowering their 10% preferential tax rate to 1% for a period of 3 years, specifically from July1, 2020 until June 30, 2023.
She added: “On April 8, 2021, the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. (RR) 5-2021, which specifically stated that only ‘non-profit’ proprietary educational institutions can avail of the preferential tax rate under CREATE – basing its policy on previous Supreme Court rulings.
Cayetano noted that this then prompted the filing of SBN 2272 by Senator Juan Edgardo Angara, which sought to clarify the issue. In the hearing held by the ways and means panel on June 30, 2021, senators asked the Department of Finance (DOF) to suspend implementation of BIR’s RR 5-2021 to avert its impending ill-effects on “for profit” private schools.
“In response, DOF, through a letter to the Senate dated July 21,2021, gave its commitment to issue the appropriate revenue regulations suspending the relevant provisions of BIR’s RR 5-2021,” the senator said.
As a result, she further recalled that the BIR then issued RR 14-2021, which suspended the inclusion of “for-profit” private schools in the regime of regular income tax.
The Senator stressed it is important to give the public a fair and full picture of the circumstances that led to the filing of Sen. Angara’s Senate Bill 2272, which was substituted by SB 2407 under her committee report. She concluded by saying that SBN 2407 will help the Philippines keep track with its goal to ensure quality education, which is part of government’s commitments to the Sustainable Development Goals (SDGs), particularly SDG 4.
“This is the power of dialogue at work, involving all stakeholders,” says Cayetano, who also chairs the Senate Committee on the SDGs, Innovation, and Futures Thinking.