Clarified BIR rule on school tax hike won’t calm critics – Hontiveros

Senator Risa Hontiveros. Handout from Office of Sen. Risa Hontiveros

MANILA, Philippines — Sen. Risa Hontiveros on Monday called on the Bureau of Internal Revenue (BIR) to revoke the tax hike of 25 percent it began to impose on propriety educational institutions or private schools, even after the revenue agency had already issued a circular clarifying that the tax rate to be imposed on these schools should be 1 percent.

She said the BIR’s move is “antistudents,” as this may only displace more of them after private schools are forced to close due to increased economic pressure amid the COVID-19 pandemic.

“Private schools are not mere business ventures, and the profit they are supposed to gain will not be the only thing that will suffer from this tax rate. Teachers could end up losing jobs, or students… forced to adjust and transfer if their schools are… shut down,” the senator said.

Hontiveros was referring to the BIR’s Revenue Regulation 5-2021, which serves to implement the income tax provisions of the Corporate Recovery and Tax Incentives for Enterprises Act (Create) Act, one of the tax reform measures of the Duterte administration covering private enterprises.

A Senate bill introduced by Sen. Sonny Angara, which Hontiveros also cited, pointed out that Revenue Regulation 5-2021 subjected propriety educational institutions to the regular tax rate of 25 percent, instead of “shoring [them] up during the pandemic with the much needed reduction… to 1 percent sought under the Create Act.”

Senate Bill No. 2272 seeks to adjust the tax rate for private schools as well as hospitals to 1 percent in the period of July 1, 2020, until June 30, 2023—the same period set by Revenue Memorandum Circular 76-2021 for private schools, which the BIR issued to clarify Revenue Regulation 5-2021.

‘Legal impossibility’

But lawyer Joseph Noel Estrada, managing director of the Coordinating Council of Private Educational Associations of the Philippines (Cocopea), said “The BIR clarification does not change anything except for their sample computation in the 5-2021 which was mathematically incorrect.”

He also pointed out that proprietary educational institutions are still also defined as “nonprofit” under Revenue Regulation 5-2021.

As the aforementioned Senate bill also noted, “Being proprietary and nonprofit is a legal impossibility, as in its general sense, proprietary means privately owned and managed and run as a profit-making organization while nonprofit is one not conducted or maintained for the purpose of making a profit.”

Estrada said, “Unless that is corrected, proprietary educational institutions are still subject to a regular rate of 30 percent, [or] 25 percent under Create.”

Decline

Hontiveros said she would pursue the measure introduced by Angara to “clearly and categorically cover proprietary institutions” in the tax benefit.

She said there were smaller and mission-driven private schools that serve the needs of remote areas, and these schools need a lifeline the most.

According to the senator, enrolment in private schools declined by 50 percent, which is equivalent to 2 million students.

Last year, some 250,000 private school students transferred to public schools, Hontiveros said.

“We cannot afford to lose more schools. We cannot further handicap our education system. Let us not add to the burden already borne by [our educational system],” she said.