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To BIR: Suspend imposition of tax hike on private schools

Senator Win Gatchalian is urging the Bureau of Internal Revenue (BIR) to suspend the imposition of a 25 percent corporate income tax on private schools, warning that the added burden on struggling institutions amid the COVID-19 pandemic could lead to more school closures, job losses, and a more restricted access to education.


PASAY CITY, Philippines – Senator Win Gatchalian interacts with colleagues at the Senate during its session, 3 June 2021. Gatchalian is considering to file a resolution that would urge the Bureau of Internal Revenue (BIR) to suspend the imposition of the tax hike on private schools amid the pandemic. Photo by Mark Cayabyab/OS WIN GATCHALIAN

For the Chairman of the Senate Committee on Basic Education, Arts and Culture, BIR’s Revenue Regulation (RR) 5-2021 runs counter to the intention of the Corporate Recovery and Tax Incentives for Enterprises Act or the CREATE Act (Republic Act No. 11534) which seeks to impose a one percent tax rate on proprietary educational institutions for a three-year period. The law also provides that these institutions have to pay ten percent tax on their taxable income.

Under the CREATE Law, ‘proprietary’ means a private hospital or private school maintained and administered by private individuals or groups. These institutions should have an issued permit to operate from the Department of Education (DepEd), the Commission on Higher Education (CHED), and the Technical Education and Skills Development Authority (TESDA).

Based on RR 5-2021, however, proprietary educational institutions have to be non-profit to avail of the reduced tax rate. If these rules are imposed, private schools’ income tax rate would increase by 150 percent.

In an earlier statement, Gatchalian called the tax rule ill-timed considering how private schools are trying to stay afloat. He cited the March 2021 Labor Force Survey, which showed that the education sub-industry had the largest decrease in the number of employed persons from February to March 2021 at 248,000.

Last February, DepEd reported that 929 private schools did not operate for the school year (SY) 2020-2021. Citing a report from DepEd, the Coordinating Council of Private Educational Associations (COCOPEA) said in a statement that enrollment in private K-12 schools dropped by over 900,000 compared to the previous school year.

“Sa panahong karamihan sa ating mga private schools ay nahihirapang magpatuloy ng operasyon sa gitna ng pandemya, hindi napapanahon at hindi tamang patawan natin sila ng karagdagang buwis bilang dagdag pasanin,” said Gatchalian.

Gatchalian is also mulling to file a resolution that would urge the BIR to suspend the imposition of the tax hike on private schools.