Correct a glaring policy flaw

Louie C. Montemar, Education Fellow of the Stratbase ADR Institute and Professor of Sociology and Political Science

In a statement released recently by the Coordinating Council of Private Educational Associations (COCOPEA) and the Philippine Association of Colleges and Universities (PACU), private schools nationwide urged legislators to immediately pass into law pending bills that would permanently resolve the tax controversy that increased the sector’s income tax rate by 150%.

As a backgrounder, it is necessary to first point out that on July 28 of this year, the Department of Finance (DoF) approved Bureau of Internal Revenue (BIR) Revenue Regulation No. 14-2021 (RR 14) that “suspends the implementation of certain provisions of RR No. 5-2021 relative to taxation of proprietary educational institutions,” which was issued on April 8. Revenue Regulations No. 5-2021 imposes an onerous tax policy that, among others, more than doubles the 10% tax rate applied to private schools since 1968 to 25%. This is highly questionable, especially in the context of the economic slump that we all face under the current pandemic which has already caused the closure of no less than at least 900 private learning institutions since last year, displacing tens of thousands of students, education workers, and a whole slew of businesses allied to educational service delivery.

In fact, this policy move totally ignores and in effect counters the spirit of the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act. This law was passed just last March to supposedly grant tax relief for companies in financial need, provide transparent tax provisions, and to further increase the competitiveness of the country. The CREATE Act actually set a 1% tax rate for private school operations, a time bound alleviation measure to counter the disruptive effects of COVID-19.

It needs to be underscored that private schools have been diligent, innovative, and agile partners of government in actually making education more accessible to Filipinos. It also needs to be understood that school closures since last year include the negative impact on allied services or businesses, as a school in a community actually creates a local socio-economic ecosystem. If a school closes, whether public or private, other businesses in the community are also adversely affected. Indeed, BIR’s RR 5–2021 puts at extreme risk the economic situation of so many private education institutions across the archipelago. It even negates the education nurturing government program called the GASTPE or Government Assistance to Students and Teachers in Private Education and other supportive reforms initiated by the President.

COCOPEA, in its most recent statement regarding the issue, stressed that a “curative legislation” is necessary and not just the suspension order from the BIR as “it may be withdrawn again or reversed anytime by the BIR and DoF given the history of revenue issuances on this matter.”

Hence, COCOPEA now urgently appeals for the swift approval of House Bill 9913, sponsored by Representative Joey Salceda, Deputy Speaker Rufus, Representatives Kiko Benitez, Luis Villafuerte, Mark Go, Joy Tambunting, and co-authored by 68 other congressmen, and Senate Bill 2272 sponsored by Senator Sonny Angara and supported by 15 other senators.

It is not an overstatement that these need to be consolidated and signed into law as soon as possible before the new school year starts this coming September. Moreover, time is of the essence given the calendar of congressional sessions, as the Philippine Congress is about to start its annual budget deliberations.

In a survey done last April by the private education network PACU, it was found out that “over 50% of their survey respondents, which are their member private schools with higher education program offerings, have experienced a decline in enrollment of 10 to 50+% in SY 2020-21 compared to the prior schoolyear.” This translates to over a million students, faculty, and school personnel in private schools being displaced or less academic programs to enroll in.

Undeniably then, our esteemed members of Congress need to listen to the voice of the private schools as represented by COCOPEA and PACU. This is not the time to further regulate and levy higher taxes on these private sector service institutions. The imperative to provide them with better public support has become more evident. As several our legislators have already taken the lead, we sincerely hope that the other members of the House of Representatives and the Senate would follow suit. Let us not allow an ill-conceived revenue policy make an already serious situation even worse. Ignoring the CREATE Law and enforcing BIR’s RR 5–2021 is like rubbing salt on the gaping wounds of our beleaguered educational system.

In the interest of the whole nation, BIR’s RR 5–2021 must be rescinded and the private school system be further supported to survive through these troubled times. A new law is needed immediately to correct this glaring policy flaw and to enliven the flagging private education ecosystem.

This article was originally published in BusinessWorld.

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