House OKs on final reading bill defining tax rates for proprietary schools

The House of Representatives on Monday approved on final reading a proposed measure which aims to define the tax rates for proprietary schools.

Voting 203-0-0, the chamber approved House Bill 9913 or the Act Clarifying the Income Taxation of Proprietary Educational Institutions.

This measure aims to extend the tax relief granted under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.

It seeks to clarify that the preferential tax rate of 10% imposed on proprietary educational institutions will be reduced to 1% from July 1, 2020 to June 30, 2023, after which the tax rate shall be set to 10% under the CREATE law.

Albay Representative Joey Salceda, principal author of the bill, said this would constitute a 96% tax discount for private schools from 2020 to 2023, and a 60% tax discount thereafter.

"That is the largest ever tax cut to any sector ever in the country’s history, and I am proud that we will do it for the sector the Constitution values the most—the education sector,” Salceda said.

The bill will also "intervene" in the implementation of the Bureau of Internal Revenue's (BIR) Revenue Regulation No. 5-2021 increasing the tax rate of private educational institutions to 25% from 10%.

Senator Ralph Recto had earlier asked the BIR to rescind the regulation, saying that it stemmed from a "flawed" interpretation of the CREATE Act. Senator Sonny Angara also filed a bill in the upper chamber citing the regulation's "erroneous" interpretation.

Last month, the BIR suspended the implementation of the regulation.

Salceda said HB 9913 would help private schools keep their teachers.

"Private schools represent some 378,637 jobs. The income tax increase, if made effective, represents about 5.72% of compensation income, which could force the already dwindled private education labor force to shed another 21,661 jobs due to the tax rate adjustment alone,” he said. — BM, GMA News