Private schools protest BIR’s new tax regulation

·3 min read

THE Coordinating Council for Private Educational Associations (Cocopea) has urged the Bureau of Internal Revenue (BIR) to recall its Revenue Regulations (RR) 5-2021, which increases the tax of proprietary educational institutions from 10 percent to 25 percent.

The Cocopea, an umbrella organization of five major private education institutions in the country, also appealed to President Rodrigo Duterte in an open letter dated Friday, June 4, 2021, to intervene and make possible the reversal of the new BIR regulation, which they deem as “damaging, discriminatory and illegal.”

The BIR RR 5-2021, issued last April 8, 2021, implements the new income tax rates on the regular income of corporations, on certain passive incomes and additional allowable deductions of persons engaged in business or practice of profession pursuant to the Republic Act 11534, or the Corporate Recovery on Tax Incentives for Enterprise Act or Create that amended the National Internal Revenue Code (NIRC) of 1997.

Under the BIR RR 5-2021, the income tax rates applicable to educational institutions which are proprietary (stock and profit) educational institutions will be 25 percent or 20 percent, for proprietary (non-profit) educational institutions it will be one percent (July 1, 2020 to June 2023) and 10 percent (July 1, 2023), while non-stock, non-profit educational institutions are exempt from paying the tax.

Cocopea managing director Joseph Noel Estrada said the new revenue regulations will not just cause “irreparable damage” to the proprietary educational institutions and stakeholders (which, he said, have yet to recover from the effects of the Covid-19 pandemic and the implementation of the K-12 program), but is also not consistent with the provisions of Create.

Estrada said the new tax regulation directly contradicts Create, which grants a temporary reduction of the concessionary income tax rate of proprietary educational institutions from 10 percent to one percent for the next three years.

He said Create, signed by Duterte on March 26, 2021, aims to assist sectors that are hit by the current pandemic, including educational institutions, especially since several educational institutions have been forced to close down because of low enrollment and many small schools reportedly closed even before the pandemic because of the free or near-free public education.

Moreover, the modifier “non-profit” school, the Cocopea said, is not found in the definition of proprietary school in Section 27B of the NIRC.

“The private schools strongly protest the BIR’s unilateral insertion of the condition that proprietary educational institution must be non-profit to enjoy the reduced rate, otherwise, they are subject to the regular corporate tax of 25 percent,” it said in a statement.

Rep. Rufus Rodriguez of Cagayan de Oro also filed House Bill (HB) 9577, which seeks to amend the first sentence of Section 27B of the NIRC.

Section 27B of the NIRC is presently worded as “Proprietary educational institutions and hospitals, which are non-profit...” while Rodriguez’ HB 9577 wants to change it to “Hospitals which are nonprofit and all proprietary educational institutions.”

He said that if this is not corrected, more private schools will be forced to close down or raise their tuition and fees which will be an additional burden to students and their families.

“You take out the private education, we will not have access to all because simply the public school system is not enough to cover all of our students and our learners,” he said during a press conference on Saturday, June 5. (WBS)

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