The Coordinating Council of Private Educational Associations, which groups more than 2,500 member private educational institutions from five national educational associations and four regional educational associations from around the country, asked President Rodrigo Duterte to endorse during his sixth and final State of the Nation Address on July 26 as priority legislation the proposals to clarify the taxability of proprietary educational institutions.
“In particular, we hope the president calls on Congress to put on high priority House Bill No. 9596 and Senate Bill No. 2272 which seek to finally put to rest the conflicting interpretations on the applicable tax rates for proprietary educational institutions and in a manner that allows these institutions to 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,” COCOPEA managing director Atty. Joseph Noel Estrada said in a statement.
“The urgency of this legislative intervention to amend Section 27 (B) of the National Internal Revenue Code of 1997, and make BIR Revenue Regulation 5-2021 consistent with the spirit of both the CREATE Law, and the 1987 Constitution, cannot be overemphasized,” said Estrada.
COCOPEA warned that if HB 9596 and SB 2272 would not be certified as urgent, the continued implementation of Bureau of Internal Revenue’s RR 5-2021 would increase the tax rate on private schools by 150 percent, from the 10 percent that has been in effect since 1968 to 25 percent, rather than reduce it to 1 percent during the pandemic and its aftermath, as envisioned by the Duterte administration and Congress when they signed CREATE into law.
“This would add a heavy additional burden and cause seriously harm the many stakeholders of the private education sector, at a time when it is already fighting for survival amidst the pandemic. Many individuals will be directly affected by this government policy, such as the academic, athletic, working students and need-based – scholars, and faculty and staff,” COCOPEA said.
Even members of the communities built around schools, such as school uniform sewers, cafeteria workers, carinderias, sari-sari stores, dormitories, janitorial/security services, school bus drivers/helpers, bookstores, book suppliers, and informal businesses around the campuses, will be severely affected. Furthermore, it will limit faculty, staff development, and the improvement of facilities and innovation activities, according to the group.
COCOPEA said the increase in tax rate under RR 5-2021 would affect the viability of private schools forcing them to implement cost measures that will result in fewer funds to plow back for capital improvement such as buildings, laboratories, and facilities, to increase the salaries and benefits of employees, and to invest in research and capacity building of faculty to ensure quality education.
Students and their parents in the private education sector will likely carry part of the burden with higher tuition and other school fees. This regulation will result in many parents opting to pull their children out of private schools due to lack of financial resources, according to COCOPEA.
“In the aftermath of the economic impact of the pandemic on the families of learners, it would be almost impossible for many in the private education sector to recover without some government assistance,” the private schools said.
Since the start of the pandemic, almost 900 private basic education schools have already closed, and several private higher education institutions had suspended operations.
The Department of Education reported on March 1, 2021, that enrollment in private K-12 schools dropped by over 900,000 learners versus the prior school year. In higher education, a survey conducted by the Philippine Association of Colleges and Universities (PACU) in April 2021 indicates that over 50 percent of respondents experienced a decline in enrollment of 10 percent to over 50 percent in School Year 2020-21 versus the prior year.
“Over a million students, faculty, and school personnel in private schools have been impacted by the pandemic to date,” according to COCOPEA.
“The evolution of the country's education system has now reached a critical point. We are deeply concerned that the continued decline in the private sector’s share of enrollment and the persistent inability to optimize public-private complementarity would mean lost opportunities for faster achievement of an adaptive, innovative, and inclusive economy,” the group said.
COCOPEA said the president’s influence over the lawmakers would be crucial in pushing for these measures in the remainder of the 18th Congress. “With the pandemic and the rapid unfolding of FIRe (Fourth Industrial Revolution), the government certainly must heed more than ever the Constitutional mandate to develop an efficient and integrated education system built on the complementary contributions and strengths of both private and public education sectors,” it said.
COCOPEA noted that Finance Secretary Carlos Dominguez expressed several times that the agency supports the passage of the proposed bills to clarify this urgent matter once and for all. This position of the DOF was echoed by BIR deputy commissioner Marissa Cabreros at the House committee on ways and means hearing on June 14, 2021. The same DoF position of support for the enactment of corrective legislation was reiterated by DoF Assistant Secretary Dakila Napao at the Senate hearing on June 29, 2021.
“We therefore reiterate our call for expedient corrective action, through administrative or legislative enactment, as the private education sector is now in a very critical period of evaluating its capability to sustain its operations as school opening nears,” COCOPEA said.