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BIR TOLD: CLARIFY TAX HIKE ON PRIVATE SCHOOLS

A measure seeking to clarify the latest Bureau of Internal Revenue (BIR) regulation imposing 25 percent corporate income tax on private schools has been filed at the House of Representatives.

Deputy Speaker Rufus Rodriguez filed House Bill 9577, which seeks to correct an erroneous interpretation of the tax imposed on proprietary educational institutions under the newly enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.

The bill seeks to make it clear that the preferential tax rate of 10 percent imposed on proprietary educational institutions was reduced to 1 percent from July 1, 2020 to June 30, 2023, after which the tax rate shall revert to 10 percent.

Lawmakers have argued that this special tax rate was legislated to reduce the tax burden on private schools which are reeling from the coronavirus disease (COVID-19) pandemic.

The BIR Revenue Regulation No. 5-2021, which took effect on April 9, increased the income tax of private schools from 10 percent to 25 percent.

“With the bill, 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, which from July 1, 2020 to June 30, 2023, is 1 percent. It will address the current situation brought about by the BIR regulation and will help our private schools,” Rodriguez said.

“An increase in the income tax of private schools might force them to eventually fold up.”

The veteran legislator warned the BIR that this increase in the income tax of private schools might force them to eventually fold up.

The seasoned lawmaker cited data from the Department of Education showing that for the school year 2020-2021, enrollment in private schools dropped by over 900,000 compared to the previous school year.

He said the Coordinating Council of Private Educational Associations has also reported that half of their members have experienced a decline in enrollment.

“Instead of helping these educational institutions, the BIR has made their situation worse.”

“The implementation of the K to 12 program has already hit a lot of private schools. Then COVID-19 struck, resulting in many more schools closing down because of financial difficulties. Instead of helping these educational institutions, the BIR has made their situation worse by increasing their tax by 150 percent, from 10 percent to 25 percent,” Rodriguez said.

He further warned that more schools might be forced to raise their tuition and other fees to the detriment of students and their families.

Rodriguez said students may opt to transfer to the already crowded public school system or drop out due to increased fees.

He stressed the BIR regulation violates the Constitution and the CREATE Law and should be rescinded immediately by the agency and the Secretary of Finance.

Rodriguez cited constitutional provisions mandating that the State “shall give priority to education and protect and promote the right of all citizens to quality education at all levels and shall take appropriate steps to make such education accessible to all”.

The Constitution also provides that proprietary educational institutions may likewise be “entitled to such exemptions (from taxes and duties) subject to the limitations provided by law”.

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