8 June 2021 – Drop tax rule, save private schools, House official urges BIR

By: Nestor Corrales, Philippine Daily Inquirer, 8 Jun 2021

MANILA, Philippines — The Bureau of Internal Revenue (BIR) should rescind its new regulation raising the income tax on private schools by 150 percent and prevent more private education institutions from closing down, according to House Deputy Speaker Rufus Rodriguez.

Rodriguez is the latest in the growing number of lawmakers urging the agency to revoke BIR Regulation No. 5-2021 (RR 5-2021), which would increase to 25 percent from 10 percent the income tax rate on proprietary educational institutions operated by stock corporations.

The Cagayan de Oro City lawmaker has filed House Bill No. 9577 to revise a provision of the National Internal Revenue Code (NIRC), which the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act earlier amended, clarifying the coverage of the lower income tax rate.

“This bill seeks to make it clear that the preferential tax rate of 10 percent applies to proprietary educational institutions. 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,” Rodriguez said.

The CREATE law reduced the tax rate to 1 percent from July 1, 2020, to June 30, 2023, to help schools adversely affected by the pandemic. The rate will revert to 10 percent after this period.

The Cagayan de Oro City lawmaker warned that if the BIR-imposed rate was not corrected, more schools would be forced to close down or raise their tuition and other fees to the detriment of students and their families.

With increased fees, he said students might decide to transfer to the already crowded public school system or drop out.

Dipping enrollment

Citing data from the Department of Education, Rodriguez said enrollment in private K-12 (kindergarten to Grade 12) schools fell by more than 900,000 for the school year 2020-2021 compared to the previous school year.

He said the implementation of the K-12 program, exacerbated by the COVID-19 pandemic, had affected a lot of private schools, resulting in many of them shutting 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,” he said.

In a petition made public last week, the 2,500-member Coordinating Council of Private Educational Associations (Cocopea) and other private school associations urged President Duterte to reverse the BIR’s newest policy.

The group said the new BIR regulation would “severely harm” the schools, parents, students, teachers, employees and other stakeholders in the private education sector.

Rodriguez said the BIR’s latest move was contrary to the 1987 Constitution, which provides 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.”

Rodriguez urged Internal Revenue Commissioner Caesar Dulay and Finance Secretary Carlos Dominguez III to immediately rescind the BIR regulation.