Opposition senators asked the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) to withdraw the regulation slapping a 25% corporate income tax on private schools. 

Senate Minority Leader Franklin Drilon made the appeal on Wednesday, June 30, during the Senate committee on ways and means hearing on Senate Bill (SB) No. 2272, which aims to help correct BIR’s “erroneous” Revenue Regulation (RR) No. 5-2021.

“What we’re asking you is to remove the uncertainty – especially that our education institutions are suffering from the effects of the pandemic – if we can give them immediate relief and remove their anxiety by repealing the revenue regulation,” said Drilon.

“We can still do the legislation, but in the meantime, can you withdraw this regulation? So that there is no sword of Damocles hanging over the education institutions?” he added.

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Drilon explained that SB 2272 does not directly amend BIR’s tax regulation, but rather only clarifies a provision in the law that senators believe was the root cause of the agency’s faulty interpretation of the preferential tax rate for private schools.

RR 5-2021 will impose a 25% corporate income tax on private schools, cancelling the 1% rate offered by the pandemic rescue package, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. 

Private schools are up in arms over the tax rule, arguing that this would likely increase tuition and put another burden on parents already struggling to cope with the coronavirus pandemic.

SB 2272 – primarily written by Senator Sonny Angara and co-authored by 12 others – would make a slight change in the wording of Section 27(B) of the National Internal Revenue Code of 1997 to clarify that propriety educational institutions or private schools are covered by the preferential tax rates.

Senator Risa Hontiveros agreed with Drilon, saying the new tax rule must be repealed before the new school year starts.

“Because the strongest impact of a correct action is if it’s done with the right timing. The Minority Leader is asking the DOF to do the right thing now and to prevent harm now by withdrawing that revenue regulation, precisely before this new school year starts,” said Hontiveros. 

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DOF Assistant Secretary Dakilo Napao said the agency supports SB 2272, echoing a statement already made on June 7 by DOF Secretary Sonny Dominguez. But Napao told senators he would still need to consult Dominguez regarding the senators’ appeal to rescind RR 5-2021. 

Dominguez earlier backed SB 2272’s goal to clarify the language in the tax code, but he believes there is no immediate need to revise BIR’s revenue regulation private schools.

“There’s no urgency to change the RR at the moment. The quarterly income tax returns that the schools have to file are provisional. Final returns for 2021 are due next year,” said Dominguez. 

Angara said he understands the dilemma of the DOF and the BIR if the tax regulation is rescinded. He said Congress and the executive branch would need to forge a compromise on whether RR 5-2021’s withdrawal would be applied proactively or retroactively. 

“I suspect the position of the BIR and the DOF is a practical one. Because if they withdraw it, it may be seen as an acquiescence to the interpretation and they would have to refund everything that has been paid in the past,” said Angara. 

“Eh ‘di problema ‘yun para sa kanila. Saan sila kukuha sila ng pera, eh hirap na hirap na tayo mangkolekta?,” he added.

(That’s a problem for them. Where would they get the money when we’re already having trouble with collection?)

The Coordinating Council of Private Educational Associations and the Philippine Association of Colleges and Universities already filed a petition before the Court of Appeals (CTA) to stop the BIR’s new tax regulation. – Rappler.com