No lifeline for schools
The newly enacted Corporate Recovery and Tax Incentives for Enterprises law is supposed to provide a lifeline to businesses that have suffered during the COVID pandemic. Instead private school operators, already facing a challenging school year, are up in arms against a revenue regulation implementing CREATE, which they complain effectively raises their corporate income tax by a whopping 150 percent.
In releasing Revenue Regulation 5-2021, the Bureau of Internal Revenue and Department of Finance deny any misinterpretation of CREATE and the Tax Code. The BIR has argued that amending RR 5-2021 would be tantamount to subsidizing profit-oriented educational institutions.
The pandemic and the consequent economic conflagration combined with the shift to blended learning compelled many parents to transfer their children from private to public schools where tuition is free. Others decided to stop their children’s schooling altogether.
As of March this year, the Department of Education counted 1.1 million students from kindergarten to Grade 12, aged 5 to 17, who failed to enroll. DepEd came out with the figure after pollster Social Weather Stations released a survey in February showing that as of last November when the poll was taken, approximately 4.4 million school-age Filipinos were not enrolled.
Regardless of the actual figure, the drop in enrollment, combined with the additional expense for the needed equipment for blended learning, forced the shutdown of 865 private schools nationwide this school year. Some may no longer reopen. The closures have meant job losses and have also affected the enterprises built around schools.
With CREATE, the Coordinating Council of Private Educational Associations was looking forward to a preferential tax rate of one percent for three years from July 2020. Instead, under RR 5-2021, the reduction was applied only to proprietary nonprofit educational institutions, while those for profit would effectively have to pay 25 percent, up from the 10 percent they have been paying since 1968, according to Cocopea.
The BIR insists that the definition of proprietary educational institutions as non-profit is in the Tax Code. CREATE, however, is meant to assist distressed private enterprises. The 150-percent jump in the tax of private schools clearly goes against the intent of CREATE, and could drive several schools to go under. Malacañang and Congress may have to step in before this happens.