by Gwen Marie De Leon
Six-hundred private schools in the country have come together to condemn the Bureau of Internal Revenue’s (BIR) new tax rule which threatens the survival of proprietary schools in the country, June 4.
In a letter spearheaded by the Coordinating Council of Private Educational Associations (COCOPEA), they asked President Rodrigo Duterte to urgently fix the “damaging, discriminatory, and illegal provisions” under BIR’s Revenue Regulation 5-2021 which increases the income tax for proprietary educational institutions run by stock corporations from the current 10 percent to 25 percent.
“RR-5-2021 will severely harm the schools, parents, students, teachers, employees, and other stakeholders in the private education sector,” the letter said. “We appeal to you Mr. President, to make our tax laws consistent with your vision and the constitutional mandate of ensuring access to education for all Filipinos.”
Legal infirmities
In an earlier statement published June 1, COCOPEA called on the government to “rectify” the new regulation due to inconsistencies with the law and the Constitution.
In the purpose of curbing the effect of the pandemic, Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act) offered to temporarily reduce the tax rate for private schools to one percent effective from July 2020 to June 2023.
However, under BIR’s new revenue regulation issued April 8, only non-profit proprietary schools are included in the tax reduction.
As an administrative issuance, RR 5-2021 cannot amend the CREATE Law which was passed by the Congress in March this year.
The council also said that under the Constitution, the state shall recognize the equal roles of public and private schools in the education system, and both may be subject to tax exemptions.
Under Article 14, Section 4(3) of the Constitution, “Proprietary educational institutions may likewise be entitled to such [tax] exemptions, subject to the limitations provided by law.”
Pushing the sector to the edge
The statement further called the regulation “ill-conceived and insensitive to the realities of the private education sector.”
According to data from the Commission on Higher Education (CHED) and the Department of Education (DepEd), there are currently more than 6 million students enrolled in 4,125 private schools in the country and over 300, 000 working faculty and staff.
Since the pandemic, 900 private schools have already closed and enrollment for private K-12 schools decreased by 900, 000.
Philippine Association of Colleges and Universities (PACU) reported that 50 percent of the respondent schools from higher education also experienced a decline in enrollment.
COCOPEA fears the imposition of “unfeasibly higher taxes” may push more financially struggling private schools to shut down which will not only affect teachers, students and staff but also associated livelihoods.
The council had already written BIR several letters on April 6, 22, 28 and May 14 requesting a revision in RR 5-2021.
Asserting change
Senator Sonny Angara filed a bill to amend Section 27(B) of the National Internal Revenue Code (NIRC) of 1997, which he said imprecisely identified whom the preferential tax rates apply to, June 3.
The Senate Committee chair said BIR misinterpreted a provision under CREATE Law that an educational institution must be both proprietary and non-profit in order to qualify for the one percent tax rate.
“The term proprietary generally means one that is privately-owned and managed and run as a profit-making organization,” Angara said, pointing out the “error” of the BIR regulation.
Under Senate Bill (SB) No. 2272, the condition of “non-profit” to enjoy the tax deduction to one percent will no longer be applied to proprietary schools but only to proprietary hospitals.
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