Nuns storm heavens with prayers vs Kim Henares in tax case

MANILA, Philippines – The sisterhood is alive and kicking, thanks to Bureau of Internal Revenue Commissioner Kim Henares.

Clasping their rosaries, silently murmuring prayers and offering each other hugs and smiles, more than 20 nuns from different congregations packed the sala of Makati judge Maximo de Leon on Monday, January 6, to show their support for St Paul College-Makati in a tax case that could impact on private schools nationwide.

A few priests garbed in ordinary clothes also attended the hearing for a petition for preliminary injunction on Revenue Memorandum Order 20-2013, which requires non-stock, non-profit corporations to apply for tax exemption certificates from the BIR.

Nuns of different shades – from the Missionary Servants of the Holy Spirit, Dominicans, Franciscans, Benedictines, St, Paul Sisters and Daughters of Charity – came in full force and stormed the heavens with silent prayers before the court hearing began.

Henares was not around.

De Leon has issued a temporary restraining order on RMO-20-2013, which would have required private schools which failed to secure a BIR tax exemption certificate, to already pay taxes by Jan 1, 2014. This would have covered any income derived from their operations.

St Paul College-Makati, which is operated by the Paulinian Sisters, had challenged the RMO before the court. The school argued the BIR requirement effectively lifts the tax immunity granted to non-stock, non-profit educational institutions by the Constitution.

Superfluous requirement

On Monday, the school presented its 1st and only witness, directress Sister Teresita Bayona, to prove that the BIR requirement is superfluous and abusive.

Bayona testified that private educational institutions are already submitting financial statements to the Securities and Exchange Commission (SEC) and annual information returns to the Department of Finance (DOF) to show that all incomes are plowed back for educational purposes.

The Constitution and the National Internal Revenue Code state that non-stock, non-profit, private educational institutions are exempted from paying taxes from their income, provided that such are “actually, directly and exclusively” for educational purposes.

Jurisprudence has also upheld the tax immunity of schools, provided certain conditions are met.

Tax evasion

In a bid to plug tax leakages, the BIR has issued the challenged RMO on suspicion that some educational institutions could be using their tax exemption to avoid paying taxes for incomes that are not used for educational purposes.

Grilled by the judge, Bayona said schools – at least St. Paul College-Makati – are already submitting their financial documents to the SEC and the DOF to prove that all income from their operations were channeled back for educational purposes.

In cross examination, Office of the Solicitor-General lawyer Gian Carlo Yuson sought to establish the premise that the additional requirement from the BIR is no different from that of the SEC and the DOF.

But Bayona argued that the documents submitted to the SEC and the DOF were required of schools only to avoid penalties and fines. The BIR memo, on the other hand, threatens to lift the tax immunity of schools that failed to comply.

Considering the January 23 expiration date of the TRO, the school is seeking a preliminary injunction while the case is ongoing. A preliminary injunction will maintain the status quo while the case is pending.

It is not only St. Paul College-Makati that has sought to challenge the RMO.

St Paul resident lawyer Faustino Madriaga said other schools, like Ateneo de Manila University, Ateneo de Davao, and St Mary’s School in Tondo have filed respective cases before the courts to annul the BIR memo. – Rappler.com