The Market Monitor Minding the Nation's Business
Private school associations are urging the Senate to expedite the approval of a bill that aims to rectify a Bureau of Internal Revenue regulation imposing a 150% increase in taxes.
In a joint statement, officials of private schools are urging the Senate Committee on Ways and Means, chaired by Senator Pia Cayetano, to expedite the passage of Senate Bill (SB) 2272, “in order to rectify with finality the flawed interpretation of a provision under the Corporate Recovery and Tax Incentives for Enterprises [Create] Act.”
The statement was signed by Coordinating Council of Private Educational Associations (Cocopea) Chairman and Philippine Association of Colleges and Universities (PACU) President Anthony Jose M. Tamayo and Cocopea Managing Director Joseph Noel M. Estrada.
They said the flawed interpretation was stated in Revenue Regulation (RR) 5-2021 by the Bureau of Internal Revenue (BIR).
Introduced by Sen. Juan Edgardo M. Angara, SB 2272 amends Section 27(B) of the National Internal Revenue Code of 1997.
Cocopea and PACU noted that BIR RR 5-2021 imposes a 150% increase in the corporate income of private educational institutions and deprives them of “the much-needed tax relief intended by the Create law’s authors in both the Senate and the House of Representatives.”
Tamayo and Estrada said that as of September 13, enrollment in private schools in basic education for school year (SY) 2021 to 2022 is only at 1.443 million. This figure is down 57% from the 3.376 million enrollment in SY 2020 to 2021 and down 66% from 4.305 million in SY 2019-20 before the pandemic.
They added that most private schools won’t be expecting a substantial increase on these numbers from late enrollees, “as classes in public schools also begin and many private school students were expected to transfer.”
According to a Cocopea survey, more than 80% of respondents reported that the economic difficulties of students and their families, and the resulting migration to public schools, state and local universities and colleges are the main drivers of the decline in enrollment. More than 250 member schools participated in the survey.
“To cope with the steep decline in enrollment, 71% of respondent schools are considering the implementation of a ‘no work, no pay’ scheme,” the survey revealed. About 64% are considering the retrenchment of employees to remain afloat, the survey results bared.
In addition, 55% of survey respondents are considering closing their schools. These closures would be in addition to the 865 private schools that suspended operations last school year, as reported by the Department of Education.
Rep. Joey Salceda, chairman of the House Committee on Ways and Means, said the income tax increase sought in RR 5-2021 represents about 5.72% of compensation income. Salceda said applying the tax hike could force the already dwindled private education labor force to shed another 21,661 from the 378,637 jobs in the private schools.
On the other hand, applying the Create rate of 1% until 2023 would allow these schools to save an equivalent of 3.43% of compensation expenses, which could help them rehire at least 12,996 teachers at the start of this school year, the lawmaker has said.