More senators oppose tax hike on private schools

The head office of the Bureau of Internal Revenue in Quezon City. File photo from AFP

MANILA, Philippines — “Have a heart,” Sen. Nancy Binay implored the Bureau of Internal Revenue (BIR) on Sunday as more senators joined the chorus of objections to the 150-percent income tax hike on struggling private schools amid the pandemic.

The senator urged the tax agency to correct its “wrong interpretation” of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, arguing that the higher tax would force more private schools to close down amid the financial difficulties suffered by the sector during the COVID-19 lockdown.

“We passed the CREATE law to help businesses survive the effects of the pandemic through tax incentives. The law plainly states the need to create a more equitable tax incentive system that will allow for inclusive growth and generation of jobs,” she said.

“There was no intention in the law to add to the burdens of our schools,” Binay said.

Sen. Sherwin Gatchalian, chair of the Senate basic education committee, urged his colleagues in the Senate to exercise its oversight powers by investigating how the BIR arrived at the decision to impose the tax increase on private schools.

Amendments

“I propose further amendments to the National Internal Revenue Code to protect private schools from the potential consequences of this policy, such as school closures, more job losses and hampered access to education during the community quarantine,” he said.

Gatchalian cited the Labor Force Survey conducted in March by the Philippine Statistics Authority showing that the education subindustry reported the largest decrease in the number of employed persons at 248,000.

‘Illogical, absurd’

“Our private schools need help, not additional burden, during this crisis we are facing,” he said. Under BIR Revenue Regulation No. 5-2021, which took effect on April 9, the income tax rate on so-called proprietary educational institutions that are run by stock corporations would be increased to 25 percent from the current 10 percent.

Senate President Pro Tempore Ralph Recto earlier described the new guideline as “illogical, absurd and goes against the spirit of the law.”

Sen. Juan Edgardo Angara, chair of the Senate finance committee, filed a bill to “correct an erroneous interpretation on the tax imposed on proprietary educational institutions.”

Sen. Joel Villanueva pointed out that agencies “are not allowed to legislate via IRR (implementing rules and regulations).”

“Agencies are supposed to consult the records of the House of Representatives and the Senate to help them understand the clear intention of the provisions of law,” Villanueva, chair of the Senate labor committee, said.

“Regarding the tax breaks on schools, it is clear that the intention of the law is to lower the tax on private educational institutions to 1 percent from the current 10 percent,” he said.

“The aim of the CREATE law is to fix corporate income taxes, so it should be clear that private schools are supposed to benefit from the across-the-board tax decrease,” Villanueva said in Filipino.

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