Private school associations lauded the House Committee on Ways and Means for approving a proposed bill to enable proprietary schools to avail of the 10-percent preferential rate on taxable income and further avail of the lifeline extended by the CREATE Act in the form of reduced rate of 1 percent from July 1, 2020 to June 30, 2023.
The Coordinating Council of Private Educational Associations (COCOPEA), Davao Colleges and Universities Network (DACUN), Association of Private, State Colleges and Universities in Region XI (APSCUR XI), Bicol Association of Private Colleges and Universities (BAPCU), CESAFI Association of Cebu Private Schools and other educational associations in the country welcomed the approval of House Bill 9596 by the House Committee on Ways and Means chaired by Rep. Joey Salceda.
HB 9596, authored by Salceda, and other complementary bills aim to amend Section 27(B) of the Tax Code and its definition of proprietary educational institutions while House Resolution No. 1877 filed by Rep. Mark Go calls on the BIR to revoke RR 5-2021 to help private schools survive the economic crisis amid the COVID-19 pandemic.
The Bureau of Internal Revenue issued Regulation No. 5-2021 (RR 5-2021) on April 8, 2021 to raise the income tax on stock and for-profit private schools to 25 percent and stated that private schools were not entitled to preferential tax treatment which reduced the corporate income tax rate from 25 percent to 10 percent.
Private schools pleaded with the legislators to intervene and help the education sector “from the imminent, grave and irreparable damage of the implementation of Revenue Regulation 5-2021 to education.”
“We are glad that many of our legislators, including the honorable chairman [Salceda], have risen to set in motion the process of enacting a law that would leave no doubt and no room for conflicting interpretations as to the preferential tax rate for proprietary educational institutions,” said Atty. Joseph Noel M. Estrada, managing director of COCOPEA.
Estrada said the COVID-19 pandemic heavily affected the finances of private educational institutions, with almost 900 schools forced to close and 900,000 basic education students transferring or dropping out.
He said the pandemic also drastically reduced enrollment in higher education, with 50 percent of schools suffering from declines of 10 percent to 50 percent in registration. This resulted in downsizing and retrenchment of school personnel to prevent school closures. The challenges of adapting to flexible and online learning also severely weakened the sector and impacted many stakeholders, he said.
“But the biggest blow to the continuity of education and sustainability of our institutions came at a time when we were hoping for relief from the government under the CREATE Act, with the issuance of RR 5-2021,” said Estrada.
“Even as we believe that learning must continue and quality education must thrive, the private education sector cannot do this alone. We need government intervention to help us address the ongoing learning crisis and to nurture an empowering environment that will result in an accessible educational system with competitive global standards,” he said.
The groups thanked Salceda and proponents of similar bills including Deputy Speaker Rufus Rodriguez, Rep. Kiko Benitez, Rep. Sharon Garin, Rep. Mark Go and other legislators for continuing to stand firm for education.
“The fast enactment of this bill into law will extend the relief that we need under the CREATE Act, and in the long term empower the private education sector to perform its complementary role as a vital partner of the State in delivering quality education to our Filipino youth,” Estrada said.
Salceda said the Bureau of Internal Revenue made a commitment of support for the revision by legislation of the ambiguities in the law so that, “they will be able to avail of the 1-percent tax rate up to 2023.”
Under the proposed bills, for-profit private schools would be subject to the preferential corporate income tax rate of 10 percent, allow them to avail of the Corporate Recovery and Tax Incentives for Enterprises Act tax relief rate of 1 percent from July 2020 to June 2023.
Salceda said the preferential tax rate would help private schools hire more teachers and keep existing personnel. Salceda said private schools were employing 378,637 individuals.
Salceda said applying the CREATE law until 2023 would allow these schools to save 3.43 percent of compensation expenses, which could help them rehire at least 12,996 teachers at the start of the next school year.
Image credits: AP/Aaron Favila