DAD urges BIR to recall issuance raising income tax for schools

January 1, 2022 Metro BLISTT

BAGUIO CITY – Councilor Levy Lloyd Orcales called on the Bureau of Internal Revenue (BIR) to completely recall BIR Revenue Regulation (RR) 5-2021 which aims to impose a 15% income tax rate for private educational institutions.
In his resolution approved by the Baguio City Council, Oracles asserted that the said income tax increase is a “great threat” to the schools, parents, students, teachers, employees, and other stakeholders in the private education sector which is a large and vital partner of the government in providing quality education nationwide.
“This will add a heavy additional burden to many stakeholders of the private education sector in the middle of the COVID-19 pandemic where non-profit propriety private schools have yet to recover from the effects of the pandemic,” the councilor said.
On April 8, 2021, the BIR issued BIR Regulation (RR) 5- 2021 which spells out the implementing rules and regulations of the recently enacted Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act which effectively raised the income tax rate for private schools by 150%.
The Act reduces the corporate income tax rate of private schools from 30% to 25%, with further incremental reductions down to 20% to be implemented in the next few years.
This, according to Orcales, is seemingly advantageous as it reduces the tax burden of private entities in the entire country.
The implementation of BIR (RR) 5-2021, however, discards the preferential ten-percent tax rate that has been granted to proprietary schools since 1968. Oracles pointed out that there is no provision of RA 11534 either repealing the ten-percent tax rate or replacing it with a higher tax rate.
Oracles also underscored that BIR (RR) 5-2021 removes a provision of RA 11534 that reduced the preferential ten-percent tax rate to 1% during the COVID-19 pandemic as a form of economic relief to private schools.
The issuance of BIR (RR) 5-2021, according to Orcales, is “contrary to the spirit and intent of RA 11534.”
The councilor criticized BIR (RR) 5-2021 for having unilaterally and illegally inserted “inconsistent and questionable” interpretations to both Section 27(B) of the Tax Code as amended by RA 11534 and the Constitution.
Moreover, he stated that there is a need to recall the said issuance taking into account the pending bills in the Congress seeking to correct taxation to non-profit proprietary private schools in the country including the schools in the city.
(JGH/ABN)