Private schools ask court to halt tax hike

Jaehwa Bernardo, ABS-CBN News

Posted at Jun 09 2021 03:56 PM | Updated as of Jun 09 2021 04:12 PM

MANILA — A group of private schools has asked the Court of Tax Appeals to stop the implementation of a new regulation by the Bureau of Internal Revenue that raises the income tax of private educational institutions by 150 percent.

In its petition for certiorari and prohibition, with a prayer for a temporary restraining order and injunction, the Philippine Association of Colleges and Universities, Coordinating Council of Private Educational Associations of the Philippines (Cocopea), and around 30 private schools asked the tax court to stop the implementation of BIR Revenue Regulations (RR) No. 5-2021.

The new regulation raises the income tax of proprietary educational institutions (PEIs) from the current 10 percent to 25 percent.

The petitioners opposed a provision in RR No. 5-2021 which inserted the phrase "non-profit" in the definition of PEIs.

The new regulation said educational institutions must be "non-profit" to avail of the tax reduction under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Under the new law, which aims to cushion the COVID-19 pandemic's impact on struggling businesses, schools' tax rates were reduced from 10 percent to 1 percent from July 1, 2020 to July 23, 2023.

The petitioners argued that the new BIR regulation was inconsistent with Sec. 27 (B) of the Tax Code because the term "non-profit" only pertained to hospitals.

The petitioners told the tax court that if the BIR regulation is implemented, they "would not be able to avail of the 1% lowered tax rate in CREATE Law."

"This would cost more expenses to petitioners which could mean loss of job opportunities for its employees and worst, closure," they said.

Last June 1, the BIR wrote a letter to the Cocopea, "insisting that there was nothing inconsistent with the definition in RR 5-2021," according to the petition.

Sen. Sonny Angara, chair of the Senate finance committee, has filed a bill seeking to amend the Tax Code "to clearly indicate that the preferential tax rate shall apply to all prioprietary educational institutions, including those that are stock and for profit" and non-profit hospitals.

Several senators have also urged the BIR to rescind the policy, which is feared to lead to more school closures.

More than 800 private schools offering basic education ceased from operating last year, displacing thousands of students and teachers, according to data from the Department of Education.


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