Palace backs tax hike on private schools


Posted at Jun 10 2021 05:58 PM

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Malacañang said on Thursday it supports a new regulation by the Bureau of Internal Revenue that raises the income tax rate of private educational institutions by 150 percent.

A group of private schools have asked the Court of Tax Appeals to stop the regulation that raises the income tax of proprietary educational institutions (PEIs) to 25 percent from the current 10 percent. 
Palace spokesman Harry Roque noted that Finance Secretary Carlos Dominguez III stood by the BIR, saying it followed the original definition of the Tax Code when it crafted the new ruling. 

"Nagsalita na po ang ating kalihim ng Department of Finance and we of course support the position of the Secretary of Finance," he said in a public briefing. 

(Our secretary of the Department of Finance has spoken, and we of course support the position of the Secretary of Finance)

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

The law that Duterte signed in March aims to cushion the COVID-19 pandemic's impact on struggling businesses, and schools' tax rates were reduced from 10 percent to 1 percent from July 1, 2020 to July 23, 2023.

In its petition for certiorari and prohibition, the Coordinating Council of Private Educational Associations of the Philippines (Cocopea) 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 petitioner 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 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.