May 27, 2024

Councilor Levy Lloyd Orcales called on the Bureau of Internal Revenue to completely recall BIR Revenue Regulation 5-2021, which aims to impose a 15 percent income tax rate for private educational institutions.
In his resolution approved by the city council, Orcales asserted the income tax increase is a “great threat” to the schools, parents, students, teachers, employees, and other stakeholders in the private education sector, which is a large and vital partner of the government in providing quality education nationwide.
“This will add a heavy additional burden to many stakeholders of the private education sector in the middle of the Covid-19 pandemic from the effects of which non-profit propriety private schools have yet to recover,” Orcales said.
On April 8, 2021, the BIR issued RR 5-2021 spelling out the implementing rules and regulations of the recently enacted Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act, which effectively raised the income tax rate for private schools by 150 percent.
The law reduces the corporate income tax rate of private schools from 30 to 25 percent, with further incremental reductions down to 20 percent to be implemented in the next few years. This, according to Orcales, is seemingly advantageous as it reduces the tax burden of private entities in the entire country. 
The implementation of RR 5-2021, however, discards the preferential 10-percent tax rate that has been granted to proprietary schools since 1968. Orcales said there is no provision in RA 11534 either repealing the 10 percent tax rate or replacing it with a higher tax rate. 
Orcales added RR 5-2021 removes a provision of RA 11534 that reduced the preferential ten-percent tax rate to one percent during the Covid-19 pandemic as a form of economic relief to private schools. 
The issuance of BIR RR 5-2021, according to Orcales, is “contrary to the spirit and intent of RA 11534.”
The councilor criticized regulation for having unilaterally and illegally inserted “inconsistent and questionable” interpretations to Section 27(B) of the Tax Code as amended by RA 11534 and the Constitution.
He added there is a need to recall the issuance taking into account the pending bills in the Congress seeking to correct the taxation to non-profit proprietary private schools in the country, including the schools in the city. – Jordan G. Habbiling