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Private schools say new BIR circular retains 150% tax hike

A new circular issued by the Bureau of Internal Revenue maintains the "onerous" 150-percent tax hike policy threatening the private educational system, according to a group of private schools.

Coordinating Council of Private Educational Associations of the Philippines managing director Atty. Joseph Noel Estrada said in a statement Revenue Memorandum Circular 76-2021 released by the BIR dated June 11, 2021 merely clarifies the illustrative example computations in the controversial Revenue Regulations No. 5-2021 and does not rectify the onerous 150-percent tax hike provision.

"Aside from correction of mathematical computations in the examples, there is no change whatsoever in the BIR’s current tax policy, which imposes a 25-percent tax on proprietary educational institutions, in contravention of the CREATE [Corporate Recovery and Tax Incentives for Enterprises Act] law," Estrada said.

COCOPEA, an umbrella organization of five leading private education associations, earlier described RR 5-21 as “damaging, discriminatory and illegal” as it will more than double the tax rate on private schools from the 10 percent that has been applied to them since 1968 to 25 percent.

Estada said RR 5-2021 is prejudicial to proprietary educational institutions as the definition of "proprietary educational institutions" being "non-profit" is unchanged pursuant to BIR's interpretation.

"Moreover, there is nothing in the RMC 76 that clarifies or changes the position of the BIR in its letter dated June 2, 2021, which claims that proprietary educational institutions have never been intended by the Constitution, the National Internal Revenue Code and any other law to be entitled to a preferential income tax rate, including the concessionary tax rate under the CREATE Act," he said.

"Unless there is an official clarification from the BIR that removes the 'non-profit' qualification in RR 5-2021 for proprietary educational institutions to enjoy the preferential tax rate of 10 percent under Section 27 (B) of the Tax Code which is further lowered to 1 percent under the CREATE Act, we do not see any change at all in the existing tax policy that we are appealing to be corrected," he said.

Estrada said, however, that with the issuance of RMC 76-2021, it shows that the BIR could issue a clarificatory or corrective memorandum anytime. "This gives us hope that the next clarification would be a substantial one that disposes the contentious issues on RR 5-2021, particularly the 'non-profit' qualification which mistakenly bars stock for-profit schools from the lowered tax rate under the CREATE Act, as intended by CREATE’s authors," he said.

"We continue to exhaust all our administrative, legislative and judicial remedies to correct and stop the implementation of RR 5-2021 on behalf of our member institutions affected, and more importantly, their many stakeholders--students, parents, faculty and other school workers, alumni and small enterprises dependent on school operations, to spare us all from the destructive consequences of RR 5-2021 including the closure of more schools," Estrada said.

COCOPEA earlier said RR 5-2021 would impose a very heavy burden on the private education sector at a time when schools were already struggling to survive as a result of the K-to-12 Act and now the pandemic.

The private schools said “the BIR’s arbitrary move to enforce a 150-percent increase in the tax rate during this deep recession is ill-conceived and insensitive to the realities of the education sector.”

Topics: BIR , Cocopea , RMC 76-2021 , RR 5-2021 , CREATE , Joseph Noel Estrada , private schools
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