Palace defends tax hike on schools

Presidential spokesman Harry Roque. File photo from PTV video

MANILA, Philippines – Malacañang defended the Department of Finance (DOF) on Thursday for pushing for new income regulations that would effectively increase the income tax rate to be imposed on private schools.

The DOF supported Bureau of Internal Revenue (BIR) regulations that would increase income taxes on exclusive educational institutions run by joint-stock companies from 10 to 25 percent.

The BIR said only nonprofit and nonprofit schools can benefit from the 1% preferential tax rate under the Business Recovery and Tax Incentives for Businesses Act (Create).

BIR chief Caesar Dulay said the law was not intended to provide tax incentives to for-profit and scholarship educational institutions.

Private school associations challenged the settlement in the Tax Appeal Court (CTA) and warned it could result in the closure of already struggling schools amid the pandemic.

Presidential spokesman Harry Roque Jr. told a press briefing that the Palace supports Finance Secretary Carlos Dominguez III’s position that the BIR’s interpretation of nonprofit schools complies with the Create Act and established case law.

“We stay next [the] DOF notice that [the] BIR is correct, ”Roque said in a separate text message.

Absurd

In their petition to CTA, the Coordinating Council of Private Educational Associations and the Philippine Association of Colleges and Universities said the BIR regulations violate the tax code and the Constitution.

They said the BIR had inserted the word “non-profit” in the definition of “private educational institution” in the Tax Code.

The Tax Code did not contain the term “nonprofit” in relation to private schools, they said.

But senators called the BIR’s interpretation of the law “absurd” and demanded that the tax agency reverse the 150% increase in income tax it had imposed on private schools fighting for survive the pandemic, claiming the agency had “misinterpreted” a new tax measure.

Under the BIR regulation n ° 5-2021 (RR 5-2021), which entered into force on April 9, the income tax rate for so-called owner educational establishments managed by public limited companies would be increased to 25%. against 10% currently. .

“It is illogical, absurd and goes against the spirit of the law,” said Senate Speaker Pro Tempore Ralph Recto, referring to the Create law, which was passed in March. INQ

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