PRIVATE SCHOOLS are asking President Rodrigo R. Duterte to endorse as a priority bill the measure that will clarify the industry’s tax treatment following a dispute with the tax authorities over such schools’ eligibility for the reduced corporate tax rate.
In a statement Tuesday, the Coordinating Council of Private Educational Associations (COCOPEA) said it hopes Mr. Duterte will ask legislators to prioritize House Bill (HB) No. 9596 and Senate Bill (SB) No. 2272 in his sixth and last State of the Nation Address on July 26.
The bills aim to clarify the taxability of proprietary educational institutions, after a recent memorandum by the Bureau of Internal Revenue (BIR) excluded for-profit private schools from availing of the preferential corporate income tax rate, which had been lowered to 1% from 10% as a temporary relief measure authorized by the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).
Without official clarification through legislation, the BIR will continue to impose the regular 25% corporate income tax rate on for-profit private schools and only apply the 1% tax rate to non-profit institutions.
“The evolution of the country’s education system has now reached a critical point. We are deeply concerned that the continued decline in the private sector’s share of enrollment and the persistent inability to optimize public-private complementarity would mean lost opportunities for faster achievement of an adaptive, innovative, and inclusive economy,” COCOPEA Managing Director Joseph Noel M. Estrada said.
“The President’s influence over the lawmakers is therefore crucial in pushing for these measures in the remainder of the 18th Congress,” Mr. Estrada added.
The association of over 2,500 private schools has been disputing the “erroneous interpretation” of the BIR on the applicable tax rate for proprietary educational institutions.
CREATE lowered the preferential tax rate to 1% until June 30, 2023 to help the hard-hit sector recover from the impact of the coronavirus pandemic.
However, the BIR in Revenue Regulations (RR) No. 5-2021 stated that only non-profit institutions can avail of the lower tax rate while the rest will be subject to the regular 25% tax.
The bureau stood by its RR in its reply to COCOPEA.
HB 9596 has yet to undergo first reading while its counterpart SB 2272 is awaiting committee approval.
COCOPEA warned that if the bills are not passed, the high tax rate will harm the sector already weakened by the pandemic.
Expansion plans as well as programmed salary increases for teachers will have to be delayed if institutions need to cut costs to deal with the taxes.
Schools may also be forced to partially pass on the cost burden to parents through higher tuition, Mr. Estrada said.
He said nearly 900 private elementary schools have shut down since the pandemic started last year, while a number of private higher education establishments suspended their operations.
Enrollment in elementary schools dropped by 900,000 while half of colleges and universities reported a 10-50% decline in enrollment for the 2020-2021 school year, he said citing official data.
“We note that the Department of Finance through Secretary Carlos G. Dominguez III has expressed several times that it fully supports the passage of the proposed bills in order to clarify this urgent matter once and for all,” Mr. Estrada said.
“We therefore reiterate our call for expedient corrective action, through administrative or legislative enactment, as the private education sector is now,” he added.
The Education department said classes for the upcoming school year will start on Sept. 13. — Beatrice M. Laforga