The House of Representatives passed a second reading bill yesterday that would set tax rates for property schools so they can take advantage of the 10 percent preferential rate on taxable income.
The Chamber passed House Bill No. 9913 by means of a vote, which is intended to clarify that the preferential tax rate of 10 percent, which is imposed for in-house educational institutions, will be reduced to 1 percent from July 1, 2020 to June 30, 2023, according to which the tax rate will be according to the law on restructuring and tax incentives for businesses set at 10 percent.
Albay Rep. Joey Salceda, author of the bill, said this would mean a 96 percent tax rebate for private schools from 2020 to 2023 and a 60 per cent tax rebate thereafter.
“This is the largest tax cut ever for any sector in the country’s history, and I am proud that we will be doing this for the sector that the Constitution values most – education,” Salceda said.
The bill is intended to intervene in the implementation of the latest ordinance by the Bureau of Internal Revenue and increase the tax rate for private educational institutions from 10 to 25 percent.
“Unless legislative action is taken, these schools will apply a rate of 25 percent, or the regular corporate tax rate, of the 10 percent that some of them have previously, if not now, then at a later date,” Salceda said.
He pointed out that the BIR has suspended implementation of Revenue Ordinance No. 5-2021, which would have increased private school income tax from 10 percent to 25 percent by defining corporate educational institutions as private and not-for-profit.
Salceda stressed the need to pass the law immediately to help private schools hire more teachers and retain existing staff through tax breaks.
“It will help private schools keep their teachers. They have already had to fire teachers because of the pandemic. I think the whole committee agrees that we should give them some relief, ”said Salceda.
He stressed that applying the reduced preferential rate of 1 percent under Create would allow schools to save the equivalent of 3.43 percent in compensation costs by 2023, which could help them recruit at least 12,996 teachers by the beginning of the next school year.
Salceda also expressed the hope that the bill could be sent to Malacañang for President Rodrigo Duterte’s signature before the end of the year.
“The Senate will not disagree. And I hope they could just adopt the home version as we do if their version is acceptable to us too. We did this with the POGO tax system. You could reciprocate for private schools, which is an extremely important sector, ”he said. * PNA