A lawmaker on Wednesday warned that failure to correct the additional taxes imposed on private schools would constrain their labor force to shed another 21,661 jobs due to the tax rate adjustment alone.
House Ways and Means Committee chair Joey Salceda said a bill meant to intervene in the implementation of the recent regulation of the Bureau of Internal Revenue (BIR) increasing the tax rate of private educational institutions to 25 percent from 10 percent must be passed to help private schools hire more teachers and keep existing staff.
Salceda further noted that applying the reduced 1-percent preferential rate under Corporate Recovery and Tax Incentives for Enterprises (CREATE) law until 2023 would allow these schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire at least 12,996 teachers at the start of the next school year.
“But ultimately, the principle is that because education is constitutionally recognized as a value of the State, we cannot unduly burden schools with taxes,” Salceda said
Salceda, however, believes that the measure is now on “stronger ground” with the Department of Finance (DOF) and BIR expressing their support for the tax rate adjustments during a hearing by the Senate Committee on Ways and Means earlier this day.
“If the Senate acts on this quickly, as the House intends to do, we will clear this issue by the first week of August, which of course, is the start of the school year for many private schools,” Salceda said.
Salceda said he earlier secured a commitment of support from the BIR for the revision by legislation of the ambiguities in the CREATE law so that the private schools would be able to avail of the 1-percent tax rate up to 2023.
Under CREATE, the preferential tax rate of 10 percent imposed on proprietary educational institutions was reduced to 1 percent from July 1, 2020 to June 30, 2023, after which the tax rate shall revert to 10 percent.
In an aide-memoire to Speaker Lord Allan Velasco, Salceda warned that without action, these schools will be applied a rate of 25 percent or the regular corporate income tax rate, from the 10 percent some of them have complied with previously.