THE Senate approved on second reading on Wednesday a measure amending the tax code in order to reverse the Bureau of Internal Revenue’s controversial circular that increased by 150 percent the corporate income tax (CIT) of proprietary private schools already reeling from the pandemic.
Late Tuesday, it ended deliberations on the clarificatory SB 2407 that was authored by Sen. Juan Edgardo Angara to correct the BIR’s misrepresentation of lawmakers’ intent in crafting the Corporate Recovery and Tax Incentives for Enterprises (CREATE).
And, with the apparent unanimous mood in the Senate to champion the appeal of desperate private schools, Majority Leader Miguel Zubiri projected second and third reading approval as soon as possible.
Angara filed the amendatory bill soon after the BIR issued a circular after the passage of CREATE, which slapped proprietary schools with a 150-percent CIT hike.
Because of the pandemic lockdowns’ impact on business, CREATE had granted relief to all other businesses buy reducing their CIT rates from 30 percent to 25 percent.
The BIR circular put the schools on par with the businesses, but by slapping them with 25-percent tax, it effectively brought up the taxes they have been paying, or 10 percent—or a 150-percent hike.
Senate President Pro Tempore Ralph Recto on Tuesday paved the way for plenary deliberations introducing remedial legislation on the Tax on Proprietary Educational Institutions, embodied in Committee Report 311 on Senate Bill 2407.
“If you recall, CREATE was marketed as the law that will save distressed companies from sinking in a sea of red ink,” Recto noted, adding: “How such will be achieved can be found in the title of the bill itself: of using tax incentives for corporate recovery.”
The senator added: “But what if a certain provision of the law designed to reduce taxes is interpreted as increasing it? Then it is like throwing a life vest made of lead to a drowning man. Which is what revenue officials did when they issued the revenue regulations on how they would implement CREATE’s specific provisions on private schools.”
Recto recalled that with the BIR’s implementing rule (IRR), “instead of getting a tax cut, private schools will be getting a tax hike, the only sector to suffer that fate. It is as if everyone was given a vaccine against Covid, but you were given the deadly virus itself.”
Noting that proprietary educational institutions have been paying a preferential tax rate of 10 percent since 1953. He added the Senate and the House, in response to the financial straits of private schools, slashed this to 1 percent for three years, from July 1, 2020 until June 30, 2023.
“But for reasons hard to fathom, BIR’s IRR raised this rate to 25 percent, so that the intended 90-percent tax reduction became a 150-percent tax increase,” adds Recto, ruing that “what was meant to be a stimulant transmogrified into a poison pill, a provision that was designed to evade bankruptcy would now seem to effect it.”
The lawmaker said BIR refused to correct itself, “so the only cure left to overturn the questionable fruit of ‘legislation by IRR’ is for Congress to pass a legislation that will cure the said provision of its editorial ambiguity.”
He further clarified that “this bill boils down to removing the vagueness caused by a missing comma. Another reminder that when crafting tax laws, syntax matters. Because when the language of a tax provision can be subjected to multiple interpretations, citizens and common sense always lose to collections.”