With oil price hikes, possible jeepney phase-out, and hyperinflation, a lot of issues have been hounding public transport operators and commuters alike, especially in the wake of the pandemic. Commuters include not only members of the labor force but also students who allot a significant percentage of their “baon” to the cost of public transportation.
After two years of implementing distance learning, schools have already resumed physical classes. In fact, while some still conduct blended learning, more than half of the schools have already implemented a five-day face-to-face sessions. This translates to additional costs, especially for low-to-middle-income families that have been struggling even before the pandemic, living from paycheck to paycheck. Thus, even a small discount would be a significant respite from their economic woes.
Fortunately, Republic Act (RA) 11314 (or the “Student Fare Discount Act”) was enacted in 2019, mandating the government to: (a) establish a mechanism that ensures the mandatory grant of a student fare discount privilege; (b) enlist the cooperation and support of public transportation utilities in extending assistance to students as social responsibility through the observance of this privilege; and (c) encourage students, particularly the poor and underprivileged, to pursue quality education to secure their future and make them responsible citizens. And as a reminder to the public of the existence of such a law, the Bureau of Internal Revenue (BIR) on Feb. 20 issued Revenue Memorandum Circular 25-2023, supporting RA 11314.
The law covers all public transportation utilities such as, but not limited to, public utility buses (PUBs), public utility jeepneys (PUJs), taxis and other similar vehicles for hire, tricycles, passenger trains, aircraft, and marine vessels, but the application does not cover school service, shuttle service, tourist service, and any similar service covered by contract or charter agreement and with a valid franchise or permit from the Land Transportation Franchising and Regulatory Board (LTFRB).
Under the law, a student shall be entitled to a 20 percent discount on domestic regular fares upon personal presentation of their duly issued school identification cards (IDs) or current validated enrollment form, supported by the prescribed government-issued identification document, subject to an appropriate verification mechanism to be provided in the implementing rules and regulations. In the case of air public transportation utilities, the discount shall only apply to the base fare or the price of the ticket before taxes and costs for ancillary services.
The public transportation utility operators, on the other hand, may claim a tax deduction the student fare discount granted based on the cost of the services rendered. The cost of the discount shall be allowed as a deduction from gross income for the same taxable year that the discount is granted. The total amount of the tax deduction net of value-added tax, if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and the provisions of the Tax Code.
“Para” came from the Spanish word “parada” which means to stop. In this connection, the government should stop and pause to come up with measures like RA 11314 to show its support to the commuting public. While granting discounts is a good start, it is more important to address the root causes of the many issues connected with the public transportation industry in the country.
Maria Georgia Vida B. Florentino is an analyst from the tax group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Maria Georgia Vida B. Florentino or Manuel P. Salvador III through ph-kpmgmla@kpmg.com, social media or visit www.home.kpmg/ph.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.