"The President should immediately pass the law."
With all the raging controversies and multi-layered crisis of the pandemic plus heating political intramurals, it looks like another issue has emerged. There have been news reports that some regional offices of the Bureau of Internal Revenue (BIR) are still imposing the already-suspended onerous provisions of BIR Revenue Regulation 5-2021 that slapped a 300-percent increase in income tax because of an apparently arbitrary interpretation of the CREATE Act and violated the 10% preferential tax for private schools provided in the Constitution.
The recent statement of groups representing 2,500 private educational institutions with over 300,000 school personnel – the Coordinating Council of Private Educational Associations, Davao Colleges and Universities Network, Association of Private, State Colleges, and Universities in Region XI, Bicol Association of Private Colleges and Universities, CESAFI Association of Cebu Private Schools, and the Philippine Association of Colleges and Universities (PACU) -- raised the sector’s alarm over reports from their members that, “some BIR regions continue to impose a 30-percent income tax rate citing BIR RMC-67 series of 2012” and that “these BIR regions continue to argue that RR 14-2021 which suspended RR 5-2021 applies prospectively and does not apply to assessments involving prior fiscal years.”
This is yet another instance of the bureaucratic disconnect in the BIR or, if I am to put on my mischievous thinking cap, may be an attempt by some quarters of the agency to shake down some hapless private schools in their territory. Pure speculation, of course, but not impossible -- and should prompt a serious probe by the Department of Finance and both Houses of Congress.
The BIR itself suspended the implementation of Revenue Regulation (RR) No. 5-2021 that imposes a 25-percent corporate income tax on private schools back in July. Even more significant is the laudably responsive and speedy action of the House of Representatives and the Senate in passing the rectifying legislation amending problematic provisions through a clarificatory bill that PACU President Dr. Anthony Tamayo said, “would serve as the lifeline of these educational institutions from the incorrect implementation of Sec. 27B of the Tax Code that puts them at the brink of closure.”
Since this issue was raised in June, there was wide outrage in what is characteristically a meek and well-mannered sector already in deep crisis and before the lockdowns closed down all face-to-face classes. According to latest enrollment data, private schools have been hit hard with only 1.9 million students enrolled compared to 4.3 million before the pandemic.
The socio-economic implications are nothing short of catastrophic. For every school affected, there are hundreds of linked businesses and thousands of stakeholders displaced when operations close down. Schools are not just critical to the development of our human capital; the education sector is in itself a key economic driver as it supports an interlinked network of businesses and livelihood ecosystems.
According to Department of Education data, there are over 800 small private schools facing closures due to low enrollment and lack of capacity to conduct distance learning. This means that millions of stakeholders that rely on school operations are now suffering from this economic fallout.
The crisis of the private educational institutions is part of an even bigger and long-term socio-economic disaster that Socioeconomic Planning Secretary Karl Chua disclosed during a Senate hearing in September. He raised the damaging consequences of continued closure of schools.
Sec. Chua said, “We estimate that productivity loss over the next 40 years is going to be around P11 trillion for the one year where we had no face-to-face schooling. This is over the entire working life span of a person.”
He pointed out that the lack of face-to-face (classes) will limit the learning ability of students and that has a permanent effect over the lifespan of students while they are in the labor force.
This is a disturbing outlook that emphasizes the urgency to safely re-open our school system. The fact that we are among only two countries (Venezuela is the other) unable to resume classroom teaching reflects on how the country is lagging behind in handling the pandemic crisis. Quite obvious, the key to reopening our schools is the full vaccination of all students and school personnel.
The strategic impact of the education sector and linked industries offer a myriad of reasons why the government must help our whole school system -- not just to survive, but to have the capacity to be globally competitive, if not excelling in molding a nation of highly productive citizens ready to thrive in the new post pandemic world.
Going back to this issue of what I would speculate may be rogue moves by some BIR regional branches (hard to believe they did not get the memo) to violate their own order to suspend imposition of BIR 5-2021, it would best for all to have the law immediately signed by the President already so our private schools can have their much deserved tax relief mandated by the CREATE Act and focus on their mission to educate our children.