BIR urged to clarify new tax rules on schools

June 7, 2021 Jester P. Manalastas 202 views

HOUSE Deputy Speaker and Cagayan de Oro Rep. Rufus Rodriguez filed a bill clarifying tax on schools.

Rodriguez, author of House Bill 9577, wanted to clarify the taxation on schools under the newly-enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which President Duterte signed last March 26.

HB 9577 aims to amend a provision in the National Internal Revenue Code (NIRC), which the CREATE Act has amended.

“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.

The Bureau of Internal Revenue (BIR) has issued a regulation subjecting proprietary schools to a 25 percent tax.

“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 one percen. It will address the current situation brought about by the BIR regulation and will help our private schools,” Rodriguez said.

The House leader warned the BIR that with a 25 percent tax, more private educational institutions might be forced to fold up.

He cited data from the Department of Education showing that for school year 2020-2021, enrollment in private K to 12 schools dropped by over 900,000 compared to the previous school year.

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

“The implementation of the K to 12 program 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 pointed out.

He 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, students may opt to transfer to the already crowded public school system, or drop out, he said.

The action of the BIR is contrary to the 1987 Constitution which mandates that: “The State shall give priority to education”, (Sec. 17, Art. II); “The State shall 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”, Sec. 1, Article XIV.

The Constitution likewise clearly mandates: “The State recognizes the complementary roles of public and private institutions in the educational system”, Sec 4(1), Art. XIV; and “Proprietary Educational institutions xxx may likewise be entitled to such exemptions (from taxes and duties) subject to the limitations provided by law”, Sec 4(3), Art XIV.

The BIR regulation, according to Rodriguez, is in violation of the Constitution and The CREATE law and should be rescinded immediately by the Secretary of Finance and the BIR.