SENATE President Pro Tempore Ralph Recto urged the Bureau of Internal Revenue to rescind its ‘erroneous order’ imposing a 25 percent corporate income tax on private schools, saying it is a flawed interpretation of the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act.

“’Yung title pa lang ng batas, malinaw na kung ano ang intensiyon nito: corporate recovery and tax incentives,” Recto said.

“So how can the BIR invoke it to inflict a 150 percent increase on the income tax of private schools, which is directly opposite to what the law clearly intends?” he added.

Recto reminded CREATE is meant to bail out distressed private schools, but the BIR order further drowns them in a sea of red ink.

Prior to CREATE’s enactment, proprietary educational institutions have been paying a preferential tax rate of 10 percent since 1968, which the association of private schools also highlighted in an open letter.

Recto further said that senators, including him, have agreed unanimously to bring it down to one percent to help private schools evade bankruptcy during the pandemic.

The lawmaker stressed the BIR, in crafting the revenue regulation implementing the CREATE Act, should have consulted Senate records on the debate and correspondences to ascertain the legislative intent underlying that provision.

While he welcomed the amendatory bill filed by Sen. Juan Edgardo ‘Sonny’ Angara, Recto said nothing prevents the BIR from rectifying its oversight.

“The bill corrects the ambiguity caused by a missing comma. It is an editorial correction to probably satisfy some grammar police. But in applying taxes, let the intent be the primordial consideration. One missing comma should not cause misery to many,” he said.

The present language of Section 27 of the National Internal Revenue Code creates an ambiguity that leads to conflicting interpretation which the provision states that ‘proprietary educational institutions and hospitals which are non-profit shall pay a tax of ten percent on their taxable income except those covered by Subsection hereof: Provided, That beginning July 1, 2020 until June 30, 2023, the tax rate herein imposed shall be one percent.’

The BIR reads it to mean that proprietary educational institutions must be non-profit to qualify for the lower tax rates.

Recto said the BIR should unilaterally withdraw a regulation based on wrongful interpretation. “It is illogical, absurd and goes against the spirit of the law,” Recto stressed.