Senators shocked by 150% jump in private school tax

Senators are strongly appealing to the Bureau of Internal Revenue (BIR) to reconsider increasing the income tax of private schools from 10% to 25% – a whooping 150% increase.

Senators Ralph Recto, Juan Edgardo Angara, Joel Villanueva, Sherwin Gatchalian and Nancy Binay said this violated the intent of Republic Act 11534 to raise revenue while granting relief to businesses, including private schools, gravely affected by the pandemic.

They added the BIR had a “wrong” interpretation of RA 11534, grossly twisting the spirit of the measure, that can lead to many private schools going bankrupt.

It is ridiculous, the lawmakers stressed, for the BIR to more than double the tax of private schools (who had been paying 10% in the past) when RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises (Create) Law precisely brought down the corporate income tax of all other businesses to 25% in order to help them recover from the lockdown-induced recession.

“The title alone of the law [Create] clearly shows its intention: corporate recovery and tax incentives,” Recto had pointed out. He echoed serious concerns raised earlier by Villanueva and Angara who had moved to file a bill redressing BIR’s interpretation of the Create law through its Revenue Regulation (RR) 5-2021 that imposes a 150% increase on the income tax of private schools.

The BIR had earlier rejected the appeal of the Coordinating Council of Private Education Associations (Cocopea) opposing RR 5-2021. The group wrote the appeal after exhausting legal avenues to have the BIR correct the tax rate.

Gatchalian said, “the BIR must suspend its revenue regulations because that is not the true intent of senators in the Create law. The senators intended to grant discounts to private schools because many of them—900, in fact—have closed down. Many schools lost students; so the senators would really rather spare them from paying taxes for the meantime,” he said.

Gatchalian said he was dismayed that “the opposite happened—those [schools] paying 10% are now told to pay 25%.” Gatchalian chairs the Senate’s basic education committee.

Meanwhile, Sen. Binay asked the BIR to “have a heart, spare schools from being taxed” excessively.

“Many of our private schools have closed because of the pandemic. If this revenue regulation is enforced, certainly many more schools will shut down,” Binay said.

“We passed the Create Law to help businesses survive the effects of the pandemic through tax incentives. The law plainly states the need to create a more equitable tax incentive system that will allow for inclusive growth and generation of jobs. There is nothing in the law that intended to add to the burden of the schools,” Binay said.

Binay said she supports Senate Bill 2272 filed by Angara, which seeks to amend a section of the National Internal Revenue Code and correct the erroneous interpretation on the tax imposed on private schools.