New BIR policy on private schools' tax rate 'damaging, ill-conceived' — COCOPEA

MANILA, Philippines — Private school officials have objected to the Bureau of Internal Revenue's new regulation hiking the tax rate in their institutions to 25%, warning that it could lead to closures and loss of jobs amid a pandemic.

In a statement on June 1, the Coordinating Council of Private Educational Associations urged BIR to amend its Revenue Regulation 5-2021, which it called as "ill-conceived and insensitive to the realities" of their members. 

"The unintended consequence of RR 5-2021 is to impose a very heavy burden on the private education sector," said lawyer Joseph Noel Estrada, COCOPEA's managing director, "at a time when schools are already struggling to survive as a result of first, the K-12 Act, and now the pandemic."

BIR's new move would set a 15% increase in private schools' tax rate from the original 10%, according to the group. 

Estrada added that the policy goes against the CREATE law, where propriety schools' income tax rate was temporarily reduced to 1% in the next three years.

COCOPEA protested the insertion of a condition that propriety schools would have to be non-profit to avail of the reduced rate, or else be subjected to the 25%. By definition, these institutions are those owned and operated by private individuals or groups.

"The condition for propriety educational institutions to be 'non-profit,' aside from being a legal impossibility, was also not provided for by the CREATE Act," Estrada added. 

He noted that schools' investments in classroom capacity and scholarships would be the first affected by the RR 5-2021. Its long term impact, Estrada said, would be of teaching and non-teaching staff at risk of losing their jobs. 

Since the onset of the health crisis, COCOPEA said nearly 900 private K-12 schools have shut down, while some private colleges and universities have halted operations.

The group is an umbrella network of five educational associations, which count some 2,500 institutions among its members. 

Estrada said they had to make their appeal public after exhausting all means yet with nor resolution from the Department of Finance and the BIR.

"RR 5-2021 would case severe damage to schools, parents, employees and numerous other stakeholders in the private education sector, which is a large and vital partner of the government in providing quality education nationwide," he continued.