House bill on private school taxes now up for plenary debates

Albay Rep. Joey Salceda. FILE PHOTO

MANILA, Philippines — A House bill seeking to clarify that the 10-percent preferential income tax rate applies to all proprietary educational institutions, including for-profit schools, is now up for plenary consideration.

The House ways and means committee passed a still unnumbered substitute bill which seeks to amend the National Internal Revenue Code (NIRC) to define the tax rates of proprietary schools to allow them to avail of the preferential tax rate of 10 percent, which is reduced to 1 percent until June 2023 under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

After 2023, the 1-percent preferential tax rate under CREATE will again be set at 10 percent.

“During the briefing, we reached a consensus and came up with a draft which also adopted some recommendations of the Coordinating Council of Private Educational Associations. The draft clarified that the preferential tax rate, now 1 percent of their taxable income under CREATE, applies to all proprietary schools,” committee chairman Albay Rep. Joey Salceda said.

The substitute bill approved by the ways and means panel was based on the measure principally authored by Salceda.

Salceda’s bill was meant to intervene in the implementation of the recent regulation of the Bureau of Internal Revenue (BIR) increasing the tax rate of proprietary private educational institutions to 25 percent from 10 percent.

The BIR has already suspended the order hiking the said tax rate on private schools following backlash from several lawmakers, who said the increase violates the spirit of CREATE.

Salceda pointed out that the reduced 1-percent preferential rate under CREATE until 2023 would allow these schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire at least 12,996 teachers at the start of the next school year.

“It will help private schools keep their teachers. They already had to fire teachers due to the pandemic. I think the whole committee agrees we should provide them relief,” he said.

The bill, he added, will also “absolve the private schools of the legal liability to pay back taxes during the period when the law was unclear as to their treatment.”

“But the aim is also to ensure that the BIR is also absolved from any refund liabilities. It’s a good compromise and was the premise of the agreement between me and the BIR,” Salceda added.

This, in response to a request from private school associations for the removal of a clause in the bill preventing refunds due to the rate reduction.

The bill was then transmitted to the House Committee on Rules so that the measure can be processed for the plenary session Monday afternoon.

“By tomorrow, we will sponsor this measure on the House floor. Hopefully, before the year ends, this bill will be on President Duterte’s desk,” Salceda said.

JPV