Cebu schools support bill amending new 25% tax policy on proprietary educational institutions

House Deputy Speaker Rufus Rodriguez.

CEBU CITY, Philippines — Cebu educational institutions, along with parents and teachers associations, are calling for the amendment of the Bureau of Internal Revenue (BIR) Revenue Regulations No. 5–2021 that imposes a 25 percent tax rate on proprietary schools instead of the preferential tax rate of 10 percent. 

Proprietary colleges are for-profit colleges and universities. They are operated by their owners or investors, rather than a not-for-profit institution, religious organization, or government.

House Deputy Speaker Rufus B. Rodriguez has filed an amendment bill this week to “correct” the BIR RR 5-2021 that he said illegally raised the taxes on proprietary institutions when the National Internal Revenue Code (NIRC) specifically stated in Section 27 (B) that “hospitals that are non-profit and propriety educational institutions” shall be taxed only 10 percent.

“The BIR interpreted this provision to mean that the rate of 10% (lowered to 1% from July 1, 2020, until June 30, 2023) will only apply to proprietary educational institutions which are non-profit, and hospitals which are non-profit.”

“If this is not corrected, many more private schools may be forced to close down or raise their tuition fees, which will be to the detriment of our students and their families. These students might also be forced to transfer to public schools which would then result in public schools being overcrowded, and the government having to need more resources,” said Rodriguez.

It should be noted that under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act), the taxes of these educational institutions have been reduced to 1 percent from July 1, 2020, until June 30, 2023.

Rodriguez has filed the bill in Congress right before the House adjourned its second regular session today, June 5, 2021.

In his dialogue with Cebu school administrators, Rodriguez pointed out that the amendment of the BIRR IRR No. 5-211 is necessary because the regulation is “unconstitutional, illegal, and has no basis in law.”

The bill has not yet been read in Congress, which is needed to be referred to a committee, but Rodriguez hopes the bill will be tackled soon because there is an urgency to the amendment.

Augustus Go, the president of the University of Cebu (UC), said that if the 25 percent tax would be imposed, they have no choice but to let the paying students bear the burden of such, something that would further threaten the educational system of the country.

In a recent survey conducted by the Coordinating Council of Private Educational Associations (Cocopea), they found out that over 50 percent of school respondents experienced a decline in enrollment.

“The unintended consequence of RR 5–2021 is to impose a very heavy burden on the private education sector at a time when schools are already struggling to survive as a result of first, the K–to–12 Act, and now the pandemic.” 

“The immediate impact will be seen in a sharp reduction of investments in classroom capacity and scholarships. The longer–term impact of RR 5-2021 would be that faculty and personnel are at greater risk of losing their jobs, and even the communities and small businesses built around schools (e.g., dormitories, janitorial and security services, uniform sewers, carinderias, sari-sari stores, and school bus services) will be significantly affected,” said Lawyer Joseph Noel Estrada, managing director of Cocopea. 

Citing Department of Education (DepED) and Commission on Higher Education (CHED) data, Estrada pointed out that there are over 6.1 million students enrolled in 4,125 private educational institutions, over 300 thousand faculty and staff in the basic education units of the private educational institutions, and approximately 100 thousand in higher education. 

Engineer Bernard Nicolas Villamor, the president of the Cebu Institute of Technology-University (CITU) and vice president of the Philippine Association of Colleges and Universities, also supports the amendatory bill and added that the educational institutions need help to make the amendment happen.

He thanked Deputy Speaker Rodriguez for initiating the bill and he expressed hope that the BIR IRR. No. 5-2021 will eventually be amended so that institutions like CIT-U and UC will not suffer further amid this economically devastating pandemic.   /rcg