BIR urged to recall 15 percent tax on education institutions

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City officials requested the Bureau of Internal Revenue (BIR) to completely recall Revenue Regulation (RR) No. 5-2021, as suspended by RR No. 14-2021, that aims to impose a 15 percent tax increase for private proprietor educational institutions in the country.

Under Resolution No. 621, series of 2021, local legislators stated that considering the pending bills in Congress that would correct taxation to non-profit propriety private schools in the country, including various schools in the city, it is more appropriate for BIR to completely recall RR No. 5-2021 to remove any speculation of the same being reissued amidst the pendency of corrective measures to the tax code as amended by Republic Act (RA) 11534.

The council admitted that had the controversial revenue regulation not been timely suspended by the BIR, many individuals would surely be directly affected, especially the students, needs-based scholars, parents and teachers, including non-teaching personnel.

Specifically, RR No. 5-2021 unilaterally and illegally inserted inconsistent and questionable interpretations to both Section 27 of the Tax Code as amended by RA 11534 and the very Constitution.

On April 8, 2021, BIR issued RR No. 5-2021 which sets out the implementing rules for the recently enacted RA 11534 as amended and creating therein new title XIII and for other purposes or the Corporate Recovery and Tax Incentives for Enterprises Act that effectively raised the income tax rate for private schools by 150 percent.

According to the council, the said law reduced the corporate income tax rate from 30 percent to 25 percent immediately or a 5 percent direct tax reduction with further incremental reduction down to 20 percent to be implemented over the next few years that already covers a 10 percent tax reduction which is seemingly advantageous as it reduces the tax burden of private entities in the entire country.

However, the body explained that in applying the next 25 percent tax rate to private schools operating nationwide through BIR RR No. 5-2021, the same arbitrarily disregarded a preferential 10 percent tax rate proprietary schools have been granted since 1968, despite their being no provision in RA 11534 repealing it and replacing it with a higher tax rate.

Further, BIR RR 5-2021 also completely disregarded a temporary provision in RA 11534 that reduced the present 10 percent tax rate to 1 percent during the Coronavirus Disease 2019 (COVID-19) pandemic as a form of economic relief to private schools operating in various parts of the country.

Consequently, the BIR has used RA 11534 that has the singular goal to reduce corporate income taxes to instead impose a tax increase of 250 percent on propriety schools until July 2023 and that the issuance of BIR RR 5-2021 is contrary to the spirit and intent of the law.

The council argued that BIR RR 5-2021 is considered to be a great burden to the schools, parents, students, teachers, employees, and other stakeholders in the private education sectors which is a large and vital partner of the government in providing quality education to the youth nationwide. Moreover, RR 5-2021 will add a heavy burden to many stakeholders of the private education sector in the middle of the ongoing health crisis where non-profit schools have yet to recover from the effects of the pandemic.

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