THE chairman of the House Committee on Ways and Means on Thursday warned that underperforming and low-quality private schools and hospitals will be slapped with higher taxes under the “Tax Reform for Attracting Better and High Quality Opportunities,” or the proposed “Trabaho” law.
Rep. Dakila Carlo E. Cua of Quirino, the panel chairman, said from the current 10 percent, the government may impose 15-percent to 20-percent taxes depending on the performance of schools and hospitals once the proposed Trabaho law becomes a law.
“Our objective is to put some discipline here. If your school is performing, you have the right sets of faculty with masteral degrees and it’s improving, then you should enjoy the [current] 10-percent [tax rate] by all means. But if your quality is suffering and your students [are] not really getting the value of their investment in your school, then it should not be encouraged,” Cua said in an interview.
Under the House Bill 7982, or the proposed Corporate Income Tax and Incentives Reform Act, proprietary educational institutions and hospitals shall pay a tax of 10 percent on their taxable income. Provided that they comply with established performance criteria to be determined and evaluated by the Commission on Higher Education (CHED), Department of Education (DepEd) and Department of Health (DOH).
The bill said education institutions and hospitals that fail to meet the established performance criteria shall pay a tax of 10 percent on their taxable income two years after the effectivity of the proposal, 15 percent in the succeeding three years, and 20 percent thereafter.
“Currently, all schools—except foundations, Catholic and religious schools are paying zero tax—but the proprietary or for-profit [schools], they are paying preferential rate of 10 percent. In the new regime, all low-quality standard schools and hospitals will [face] a higher tax rate,” he added.
“Eventually, they [school and hospitals] actually be closed down because they are not complying with the standards,” he added.
For his part, Finance Undersecretary Karl Kendrick T. Chua said companies should prove to the government that they deserve to keep their tax perks.
“If they want to pay lower tax they have to be first good schools and hospitals,” Chua said.
Moreover, Rep. Cua said they already asked the stakeholders from hospitals and schools to give the government the criteria that they think is fair to them. They were also offered to be part of the evaluation team for transparency.
The lawmaker, however, assured that the incremental revenue from the payment of education institutions and hospitals will be used back in a form of a voucher or subsidy from the government.
Under the bill, incremental revenue from tax payment of education institutions that fail to meet the established performance criteria shall fund a student voucher program to be implemented under the CHED and DepEd.
The measure provides that the incremental revenue from tax payment of hospitals that fail to meet the established performance criteria shall fund the universal health-care program to be implemented under the DOH.
Also, House Bill 7982, which was recently approved by the House Committee on Ways and Means, provides for the structural adjustment fund for five years to compensate workers that may be displaced by the implementation of this measure to mitigate its negative impact, as well as to improve the employability of workers.
Besides rationalizing fiscal incentives, the bill also seeks to lower corporate income tax.
From the current 30 percent, the bill said the rate of corporate income tax shall now be 28 percent beginning January 1, 2021; 26 percent beginning January 1, 2023; 24 percent beginning January 1, 2025; 22 percent beginning January 1, 2027; and 20 percent beginning January 1, 2029.