Senators on Wednesday called for the immediate suspension of the Bureau of Internal Revenue regulation that seeks to raise the corporate income tax on private schools to 25% to ease their burden with the school year set to open.
The Senate Committee on Ways and Means tackled Senate Bill 2272 which seeks to correct the "erroneous" interpretation on Section 27(b) of the National Internal Revenue Code. Private schools and hospitals are currently taxed at 10%. Under the CREATE Law that seeks to lower corporate income taxes, private schools will be taxed 1% from July 1, 2020 to June 30, 2023.
The BIR, however, issued Revenue Regulation 5-2021 last April which states that proprietary educational institutions have to be non-profit to avail of the reduced tax rate, otherwise their tax rate would be 25%.
Sen. Sonny Angara, who authored Senate Bill 2272, argued that private schools cannot be proprietary, or run by a private organization, and non-profit at the same time. The "non-profit" provision is intended for hospitals, not on proprietary educational institutions, he said.
During the hearing, Senate Minority Franklin Drilon asked Finance Asst. Sec. Dakila Elteen Napao if the DOF and the BIR could suspend the implementation of the revenue regulation considering that the two agencies support Angara's bill.
Sen. Risa Hontiveros also stressed the need to suspend the revenue regulation as soon as possible, as the new school year is about to begin.
Napao said the DOF was amenable to supporting the measure so long as the ambiguities would be clarified by legislation and that it would be applied prospectively.
Drilon assured Napao that the Senate would still deliberate on the measure even as the revenue regulation had been suspended.
"We can commit to the good secretary that we will include a special provision in Senate Bill 2272 that it shall be prospective in effect so that the BIR will not be subjected to claims for refund," he said.
"But that does not invalidate our request that the regulation revenue should be immediately suspended at the very least if not revoked," he added.
On Drilon's assurance, Napao said he would consult with Finance Sec. Carlos Dominguez about the senators' request and get back to them in a week's time.
The House Committee on Ways and Means recently approved their version of the measure which brings back the income tax rate on private schools to 10%. This also allows them to avail of the 1% tax rate from July 2020 to June 2023 under the CREATE Law.
