Press Release
July 1, 2021

Drilon reiterates appeal to DOF: Repeal or suspend erroneous BIR order raising tax on private schools

In anticipation of the incoming school year and airing fears that private schools who are already badly battered by the effects of the pandemic might be forced to pass on to the students the burden of paying for the exorbitant income tax, Senate Minority Leader Franklin M. Drilon underscored the urgency for the Department of Finance (DOF) to immediately repeal or suspend the implementation of the erroneous Bureau of Internal Revenue Regulation 5-2021 raising to 25-percent their income tax.

Drilon suggested that the Senate pass a resolution expressing the legislative intent of the Senate when it passed the CREATE Law and rejecting the patently erroneous interpretation of tax regime governing educational institutions.

He said the resolution should accompany Senate Bill 2272, filed by Sen. Sonny Angara, which seeks to clarify that the qualifier "non-profit" under Section 27(B) of the National Revenue Code only applies to hospitals and not to proprietary educational institutions.

"We did not amend the coverage of educational institutions. The BIR regulation ruled and interpreted it otherwise and redefined what is an educational institution for purposes of tax regime. That is totally an uncalled-for interpretation," Drilon said during the Committee on Ways and Means hearing Wednesday.

"The way the BIR interprets what we passed is entirely wrong. We support this amendment and we are confident that SB 2272 which clarifies the tax on educational institutions will be passed," Drilon said in an interview.

Drilon added the BIR order will continue to be the "sword of Damocles" hanging over private schools during the world's most uncertain times brought about by the continuing COVID-19 pandemic.

"Should the committee file a report favorably endorsing this bill, I would strongly suggest that a resolution which will put on record the legislative intent of the Senate as expressed during the plenary deliberations of the CREATE bill, accompany the Committee Report.

Drilon added, "What we will do is clarify the wording of the law. Let me stress that this is not an amendatory law, we are merely clarifying the erroneous interpretation. With more reason that the BIR and DOF should suspend the Revenue Regulation."

"It is reasonable to ask for suspension of BIR Revenue Regulation 5-2021 until we can correct this erroneous interpretation through a law. The Senate is not in session and we can only discuss this on the floor next month. The schools are already suffering from the pandemic. They have to decide by the opening of the school year how to handle this. There is urgency in this." Drilon said.

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