Camarines Sur Representative LRay Villafuerte is urging the Senate to act quickly to rescue private schools by passing before the adjournment of this congressional session on September 30 a bill that would permanently correct the Bureau of Internal Revenue (BIR)’s flawed interpretation of a tax code provision increasing the corporate income tax (CIT) rate on these educational institutions by 150 percent.
Villafuerte said the swift passage of this measure would “avert the closure of private learning institutions amid the double whammy of anemic enrollment rates this school year and the prospect of paying higher taxes.”
Amid appeals from COCOPEA, other school-based groups and lawmakers, the BIR subsequently issued RR 14-2021 on July 28 suspending the previous regulation.
“The House of Representatives already passed last month the amendatory bill that will permanently do away with the high tax rates on private schools. We appeal to the Senate to do the same before our session adjourns on Sept. 30 so that we can save these schools from bankruptcy and avert a crisis in our education system,” said Villafuerte.
Villafuerte is among the principal authors of House Bill (HB) No. 9913, which aims to clarify that the preferential tax rate of 10 percent imposed on proprietary educational institutions will be reduced to 1 percent from July 1, 2020 to June 30, 2023, after which the tax rate shall be set to 10 percent under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“The amendatory bill will not only save private schools but also small enterprises dependent on their continued existence especially in the post-pandemic period when face-to-face classes will eventually return,” said Villafuerte, who also co-authored the CREATE law.
These include school canteens, food kiosks and sari-sari stores, to name a few.
The BIR has temporarily revoked Revenue Regulation (RR) No. 5-2021, which states that the income tax on proprietary educational institutions that are run by stock corporations would be increased to 25 percent, a hefty 150-percent increase from the current 10 percent.
Villafuerte pointed out that while the BIR has temporarily put on hold the implementation of this revenue regulation, private schools need to be assured that this will be made permanent through a corrective law passed by the Congress, along with a measure that would provide them with additional tax breaks to help them survive the economic shock from the pandemic.
According to Coordinating Council of Private Educational Associations (COCOPEA) chairman Anthony Jose Tamayo, partial data from the Department of Education (DepEd) showed that there were only 118,000 enrollees in the private basic education schools, out of 2 million students last academic year SY 2020-2021.
Tamayo also said that prior to the pandemic in SY 2019-2020, the enrollment in the private basic education schools was more than double the enrollees in the 2020-21 school year at 4.3 million students.
While the BIR has temporarily put on hold the implementation of this revenue regulation, private schools need to be assured that this will be made permanent through a corrective law passed by the Congress.
The DepEd’s Learning Enrollment Survey Quick Count data showed, meanwhile, that the enrollment in private schools was at 1.443 million this school year (SY) 2021-22, down 57% from the SY 2020-21’s 3.376 million and 66% lower than the 4.305-million figure in SY 2019-20.
Villafuerte earlier said the corrective legislation will spell “big relief” for schools, and will hopefully enable them to keep their teachers and even hire new ones for the coming schoolyear.
The BIR issued RR No. 5-2021 last April 8 stating that to enjoy the reduced rate of 1 percent as a result of the passage of the CREATE law, proprietary educational institutions or hospitals must be “nonprofit.”
Otherwise, if the gross income from “unrelated trade, business or other activity” exceeds 50 percent of the total gross income derived by such educational institutions or hospitals from all sources, the tax prescribed for domestic corporations of 25 percent shall be imposed on the entire taxable income.
Amid appeals from COCOPEA, other school-based groups and lawmakers, the BIR subsequently issued RR 14-2021 on July 28 suspending the previous regulation.
