The Bureau of Internal Revenue (BIR) has denied the request of an umbrella organization of private schools to revise and amend certain provisions of a revenue regulation issued by the tax agency, specifically on the definition of proprietary educational institutions.
Carlos Dominguez, Department of Finance (DOF) secretary, shared with reporters via Viber yesterday the BIR’s response letter dated June 2, to the request of COCOPEA, an umbrella organization of five leading private education associations.
COCOPEA, in a statement dated June 1, said it strongly protests the BIR’s insertion of a condition that proprietary educational institutions must be “non-profit” to enjoy the reduced rate of one percent.
“If implemented, this effectively cancels out the one percent rate under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), as proprietary educational institutions by direct implication would now be subject to the regular corporate rate of 25 percent,” COCOPEA said.
The BIR said in its letter the law does not intend to provide tax incentives to stock and profit-oriented institutions, but only to non-stock and non-profit educational institutions.
“For our part, the DOF agrees with the BIR that the Supreme Court has already clarified this matter in a number of landmark cases,” Dominguez said.
“Since the CREATE Law did not substantially amend Section 27(B) of the Tax Code, except for the provisional rate, we cannot provide a definition other than what has been provided by the Court,” he added.
COCOPEA said in its statement that the imposition of revenue regulation 5-2021 will “penalize, marginalize and discriminate against proprietary educational institutions with unfeasibly higher taxes that may force financially distressed schools to close down and trigger a radiating wave of economic disruption that will hit not just teachers and school personnel, but also the extensive network of linked small and medium businesses and livelihood activities of the host communities.” – Angela Celis
