An organization of private schools called for the "immediate rectification" of a regulation issued by the Bureau of Internal Revenue (BIR) which would impose a "devastating" 25% corporate income tax on them.
The Coordinating Council of Private Educational Associations (Cocopea) said that unless rectified, the imposition outlined in Revenue Regulation 5-2021 "may force financially distressed schools to close down."
RR 5-2021 will impose a 25% corporate income tax on private schools, cancelling the 1% rate offered by the pandemic rescue package CREATE Act.
Cocopea said the BIR tax rate imposes "a very heavy burden on the private education sector at a time when schools are already struggling to survive as a result of first, the K-to-12 Act, and now the pandemic.
In a statement on Tuesday, June 1, Coordinating Council of Private Educational Associations (Cocopea) Managing Director Joseph Noel Estrada said that RR 5-2021 "will penalize, marginalize and discriminate against proprietary educational institutions with unfeasibly higher taxes that may force financially distressed schools to close down."
They said the new revenue regulation deprives private schools the preferential tax treatment of 1% from 10% during the pandemic under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law).
While the group lauded the CREATE law, Cocopea protested the BIR’s unilateral insertion of a condition that proprietary educational institutions must be "non-profit" to enjoy the reduced rate.
"(C)orporations nationwide will see their tax rate reduced as a result of CREATE, it is only proprietary educational institutions that have been singled out by RR 5-2021 for a devastating increase in tax rates," Estrada said.
According to Cocopea, RR 5-2021 "unilaterally" inserted the word "non-profit schools" in the definition of "proprietary schools."
"This modifier 'non-profit schools' is not found in the definition of proprietary schools in Section 27 ( B ) of the Tax Code. The condition for proprietary educational institutions to be 'non-profit,' aside from being a legal impossibility, was also not provided for by the CREATE Act," Cocopea said.
Data from the Department of Education (DepEd) showed that at least 865 private schools have suspended their operations for this school year due to low enrollment and inability to meet the requirements of learning management systems for the conduct of distance learning.
"The immediate impact will be seen in a sharp reduction of investments in classroom capacity and scholarships. The longer-term impact of RR 5-2021 would be that faculty and personnel are at greater risk of losing their jobs, and even the communities and small businesses built around schools will be significantly affected," Estrada said.
Philippine schools have stopped face-to-face classes for over a year now, forcing students and teachers to shift to distance learning. (READ: FAST FACTS: DepEd’s distance learning)
The DepEd earlier said it was eyeing August 23 as class opening for school year 2021-2022. If this pushes through, students would only have a six-week break – shorter from the usual two months. The current school year will end on July 10.
It's not yet certain if the next school year will also use the distance learning system, which has been criticized as the country appeared to be not fully prepared for it.
Several lawmakers and groups have been pushing for the resumption of limited face-to-face classes to "finetune" the system.