Senators to BIR: Withdraw income tax hike on 'distressed' private schools

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Metro Manila (CNN Philippines, June 6) — Senators fear that more private schools would be forced to close down as the Bureau of Internal Revenue moves to increase their income tax rate by 150%.

Both Senator Nancy Binay and Senate President Pro Tempore Ralph Recto urged the BIR to drop the new tax rule imposed on private schools, stressing this was contrary to the aim of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which seeks to cushion the impact of the coronavirus.

The lawmakers shared the same sentiment that schools have been greatly hit by COVID-19 as the Philippines continues its battle against the pandemic, forcing students and teachers to embrace distance learning.

"Marami na nga sa ating mga private school ang nagsara na dahil sa pandemya. Kung ipapatupad ang revenue regulation na ito, siguradong mas marami pa sa kanila ang tuluyan nang magsasara," Binay was quoted as saying in a statement Sunday.

[Translation: Many of our private schools have been shut down due to the pandemic. If this revenue regulation will be implemented, surely more of them will close down.]

"CREATE is meant to bail out distressed private schools. The BIR order further drowns them in a sea of red ink," Recto said late last week.

The BIR seeks to impose a 25% corporate income tax on private schools, up from 10%.

The order, Recto said, is "erroneous" and "absurd."

"How can the BIR invoke it to inflict a 150 percent increase on the income tax of private schools, which is directly opposite to what the law clearly intends?" Recto said.

According to Recto, senators "agreed unanimously" to further cut the tax rate to just 1% "to help them evade bankruptcy during the pandemic."

Senator Sonny Angara, meanwhile, filed Senate Bill No. 2272 as he sought to amend a section in National Internal Revenue Code to clarify the BIR regulation for private educational institutions.

Angara said the wording in the Tax Code may have caused confusion and wrong interpretation of the BIR.

"The bill corrects the ambiguity caused by a missing comma. It is an editorial correction to probably satisfy some grammar police. But in applying taxes, let the intent be the primordial consideration. One missing comma should not cause misery to many," Recto said.