BIR told to revoke IRR increasing taxes for schools

Senator Joel Villanueva today called on the Bureau of Internal Revenue to recall Revenue Regulation 5-2021 (RR 5-2021) that imposes a tax rate of 25% on private schools – a big jump from the previous 10% – because it is was based on an erroneous interpretation of a newly enacted law.

The BIR, in releasing RR 5-2021, cites the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act) as basis for the increase, which was signed into law in March of this year.

Under the said law, Villanueva said private educational institutions should enjoy a 9-percent reduction on their tax rate from 10% to 1% as a “lifeline” to cope with the ravaging effects of the pandemic on the economy. Instead, the senator was surprised to find out that what happened was the polar opposite.

“Agencies cannot legislate through IRR. They should always consult House and Senate records to discover the clear intent behind the provisions, especially ones that could be subject to multiple interpretations,” Villanueva, chair of the Senate labor committee, said.

“Always, the spring (agencies) cannot rise above the source (Congress). In the case of the tax break for schools, the unanimous intent of senators is that the tax of private educational institutions be reduced from the current 10% to 1%,” he added.

Private schools belonging to the Coordinating Council of Private Education Associations (COCOPEA) made their opposition to RR 5-2021 known to the public on Wednesday, June 3, after exhausting legal avenues to have the BIR correct the tax rate.

Villanueva agreed with the organization, saying the content of RR 5-2021 goes against the very intention of CREATE to help businesses by increasing taxes and providing relief not only to schools but to other industries as well.

“If CREATE was a measure that slashes corporate income taxes, then the legislative intent was that private schools should benefit from the across-the-board reduction,” the senator said.

“Thus, it would be illogical, unjust and baseless for the BIR to increase the tax rate of private schools as this goes against CREATE’s core principle and fundamental premise of reducing corporate income tax for all,” he added.

“If cigarette, alcohol and other makers of sin products will pay less corporate income tax under CREATE, why would BIR more than double the tax rate for schools?”