By Russell Louis C. Ku
THE HOUSE Committee on Ways and Means on Monday approved a proposed law that scraps a 150% tax hike on private schools.
In a hearing, the panel approved the committee report and substitute House Bill 9913, which amends Section 27 (B) of the National Internal Revenue Code (NIRC) of 1997 to apply the 10% preferential tax rate to all proprietary educational institutions and nonprofit hospitals from Jan. 1, 2012 to June 30, 2020.
However, the bill states that no tax credit or refund can be granted due to this reduced tax rate during the period.
Under the bill, private schools will also be given a reduced tax rate of 1% from July 1, 2020 to June 30, 2023, as provided for under Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law. After the relief under CREATE expires, the tax rate will revert to 10%.
“The income of nonstock, nonprofit educational institutions not used actually, directly and exclusively for educational purposes shall be subject to the rate of tax under this subsection,” according to the bill.
The Bureau of Internal Revenue (BIR) recently suspended certain provisions of Revenue Regulations (RR) No. 5-2021 that excluded nonprofit private schools from availing themselves of the preferential tax and effectively increased the rate to the 25% regular corporate income tax.
“To ease the burden of taxation among proprietary educational institutions, especially during this time of COVID-19 pandemic, and taking into account the pending bills in Congress… to finally clarify the income taxation of schools, the implementation of the following provisions of RR 5-2021 dated 8 April 2021 are hereby suspended pending passage of such appropriate legislation,” the BIR said in RR No. 14-2021.
Albay Rep. Jose Ma. Clemente S. Salceda, chairman of the House Ways and Means committee, said via Viber that the tax hike would have forced private schools to lay off over 20,000 jobs, in addition to the 80,000 jobs already lost during the pandemic.
Mr. Salceda said in a separate statement the enactment of the bill along with the reduced tax rate under the CREATE law would allow 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 the next school year.”
He expects the bill to be passed with “very little” resistance on the House floor and hopes for the measure to be transmitted to Malacañang before the year ends.
“I do expect some amendments, particularly on the use of tax savings towards lower tuition. These are good amendments in principle, although the question of implementation is still there,” he added.
Coordinating Council of Private Educational Associations Managing Director Joseph Noel M. Estrada said the “overwhelming support” for the bill raises hopes it would be approved by Congress before the break in September.
“We hope for the enactment of the law before end of the third and last session of this 18th Congress,” he said via mobile message.
The counterpart measure, Senate Bill 2272, is pending in the Senate Ways and Means committee.