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CONGRESS URGED TO OK CORRECTIVE LAW ON SCHOOL TAX

Camarines Sur Representative LRay Villafuerte has expressed the hope that the two chambers of the Congress can work overtime to pass corrective legislation defining the tax rates for proprietary schools and allowing them amid the pandemic to enjoy a 1 percent preferential tax rate until June 30, 2023. 

Villafuerte said the bill will not be passed on time, given that most private schools will be opening classes this month of August, but he called on his fellow lawmakers to at least pass it in September at the latest. 

His bill sought to clarify Section 27 (B) of the Tax Code by specifying the tax rates on proprietary educational institutions and non-profit hospitals. 

The corrective legislation will spell “big relief” for schools, he said, and will hopefully enable them to keep their teachers and even hire new ones for the coming schoolyear, he said.

“The House leadership should hold meetings via Zoom so lawmakers can work on priority measures like the substitute bill correcting the tax rates for proprietary schools, as well as the 2022 budget, and a possible new set of Covid response measures amid the ECQ (enhanced community quarantine) in Metro Manila and selected parts of the country to contain the surge of the more contagious Delta variant,” he said. 

Villafuerte is among the principal authors of House Bill (HB) No. 9913, which consolidated his measure (HB 9672) along with those of several other lawmakers that had similarly sought to reduce the preferential tax rate on proprietary educational institutions to 1 percent from July 1, 2020 to June 30, 2023, after which the preferential rate will be set at 10 percent. 

His bill sought to clarify Section 27 (B) of the Tax Code by specifying the tax rates on proprietary educational institutions and non-profit hospitals. 

“Section 27 (B) of the National Internal Revenue Code (NIRC) creates an ambiguity as to whom the preferential tax rates apply to. Specifically, as to the qualifications, i.e. proprietary and nonprofit. An effective tax administration system is one that is clear and unambiguous and can easily be followed by both the tax office and the taxpayer. To remedy this ambiguity and protect the Constitutional mandate of incentivizing proprietary educational institutions, this measure seeks to amend Sec. 27(B) to clearly indicate that the preferential tax rate shall apply to: a. all proprietary educational institutions, including those that are stock and for profit: and b. nonprofit hospitals,” Villafuerte’s bill states. 

HB 9913 was in response to the plea of the Coordinating Council of Private Educational Associations of the Philippines (COCOPEA), following a recent regulation issued by the Bureau of Internal Revenue (BIR) increasing the tax rate of private educational institutions to 25 percent from 10 percent.

The BIR had issued Revenue Regulations (RR) No. 5-2021 based on the  condition that proprietary educational institutions must be “nonprofit” to enjoy the reduced rate of 1 percent as a result of the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law. 

Amid appeals from COCOPEA, other school-based groups and lawmakers, the BIR subsequently issued RR 14-2021 suspending the previous regulation.

“We hope that the bill will be passed soon and signed into law so that private schools now reeling from the impact of the pandemic would be able to continue operating and hire more teachers and support staff that are badly needed now that we are seeing another school year  with classes that are likely to be conducted mostly online,” Villafuerte said. 

HB 9913 was in response to the plea of the Coordinating Council of Private Educational Associations of the Philippines (COCOPEA), following a recent regulation issued by the Bureau of Internal Revenue (BIR) increasing the tax rate of private educational institutions to 25 percent from 10 percent.

Villafuerte, however, expressed concern over the certainty that the passage of the bill, along with the deliberations on other priority measures, such as the 2022 national budget, would be delayed if the House leadership insists on stopping all work in the chamber altogether while Metro Manila is under ECQ.

“The House leadership is correct in suspending our formal sessions in support of Malacañang’s decision to reimpose ECQ as a way to prevent the spread of the more contagious and more virulent Delta variant if Covid-19,” Villafuerte said. 

“However, the House leadership went overboard in suspending all activities altogether, given the urgency for us legislators to start considering such priority concerns as the proposed national budget for 2022 and what further measures the Congress can initiate or legislate to prop up Covid-19 response, especially with the new virus surge.” 

He said that officially, the House of Representatives cannot take up next year’s budget plan until the National Expenditure Program (NEP)  is formally submitted  by Malacañang.  

“But we could—and should—hold pre-budget discussions during the hard lockdown via Zoom on 2022 budget priorities along with economic stimulus and social amelioration measures that the Congress may need to tuck in next year’s budget program or put up in separate legislation,” Villafuerte said. 

With the government decision to provide cash grants to families affected by the ECQ in Metro Manila, Villafuerte said it may be time for the House  to start discussing the Ayuda bill—as proposed by the BTS (Balik sa Tamang Serbisyo) bloc—to cover even families outside the national capital that are reeling from the pandemic damage. 

“By holding pre-budget deliberations, we would not be wasting our time by just staying home and doing nothing during the hard lockdown for the rest of August. We need to make better use of our time without violating safety and health protocols to avoid virus transmission,” he said. 

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