AN association of private schools petitioned Malacanang Friday seeking intervention from President R. Duterte to reverse a Bureau of Internal Revenue’s (BIR) ruling barring for-profit educational institutions from availing of a 1% tax rate.
The Coordinating Council for Private Educational Associations (COCOPEA) is seeking the recall of the BIR’s Revenue Regulation (RR) 5-2021, which excluded for-profit educational institutions from availing of the reduced rate, as authorized by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law. For-profit schools were initially required to use the regular corporate income tax rate of 25%.
The BIR has staked out the position that the CREATE law tax rate only applies to non-profit
proprietary schools, in line with the policy in the National Internal Revenue Code (NIRC).
“We appeal to you, Mr. President, to make our tax laws consistent with your vision and the constitutional mandate of ensuring access to education for all Filipinos. Specifically, RR 5-2021 unilaterally and illegally inserted wording inconsistent with both Section 27 (B) of the Tax Code as amended by CREATE, and the Constitution,” according to the petition, a copy of which was sent to reporters Friday.
“We appeal for your intervention because we have exhausted all other administrative avenues by requesting various government offices, including the BIR and the Department of Finance, to revisit and reverse those provisions of RR 5-2021, to no avail,” it added.
The CREATE law reduced the corporate tax rate for proprietary educational institutions to 1% from 10% for three years from July 2020 to July 2023.
COCOPEA claims the BIR improperly limited the eligibility for the lower tax rate to non-profit schools.
Separately, Senator Ralph G. Recto called on the BIR to reverse its ruling.
In a statement Friday, Mr. Recto said the BIR adopted “a flawed interpretation” of the CREATE law.
“CREATE is meant to bail out distressed private schools. The BIR order further drowns them in a sea of red ink,” Mr. Recto said.
Mr. Recto said private educational institutions have been paying a preferential tax rate of 10% since 1968 and senators agreed to bring it down to 1% until June 30, 2023 “to help them evade bankruptcy
during the pandemic.”
He said the bureau should have consulted the Senate in drafting its revenue regulation.
Senator Juan Edgardo M. Angara filed Senate Bill No. 2272 Thursday to clarify the tax treatment of private schools.
The measure will amend the Tax Code, indicating that the preferential tax rate applies to proprietary education institutions, including those that are stock and for profit, and non-profit hospitals. — Beatrice M. Laforga, Vann Marlo M. Villegas
