SPONSORSHIP SPEECH

Committee Report No. 311 on SB No. 2407

Tax on Proprietary Educational Institutions

Senate President Pro Tempore Ralph G. Recto

21 September 2021

If you recall, CREATE was marketed as the law that will save distressed companies from sinking in a sea of red ink. 

How such will be achieved can be found in the title itself: of using tax incentives for corporate recovery.

The idea is to lighten the tax load of companies to make them financially buoyant. 

So that whatever tax payments saved would allow them to meet payroll and keep operating.

But what if a certain provision of the law designed to reduce taxes is interpreted as increasing it? 

Then it is like throwing a life vest made of lead to a drowning man.

Which is what revenue officials did when they issued the revenue regulations on how they would implement CREATE’s specific provisions on private schools. 

In the BIR’s IRR, instead of getting a tax cut, private schools will be getting a tax hike, the only sector to suffer that fate. 

It is as if everyone was given a vaccine against COVID, but you were given the deadly virus itself. 

Proprietary educational institutions have been paying a preferential tax rate of 10 percent since 1953.

In response to the financial straits of private schools, the Senate and the House slashed this to one percent for three years, from July 1, 2020 until June 30, 2023.

But for reasons hard to fathom, BIR’s IRR raised this rate to 25 percent, so that the intended 90 percent tax reduction became a 150 percent tax increase. 

What was meant to be a stimulant transmogrified into a poison pill. A provision that was designed to evade bankruptcy would now seem to effect it.

When it was explained to them that they had wrongfully interpreted the law, and in such glaring fashion, BIR could have corrected itself, and proceeded to purge the erroneous provision from the IRR.

They could have consulted the Senate records on the debate to ascertain the legislative intent underpinning the provision.

But they refused, citing instead in a combination of face-saving and rearguard maneuver, their strict textual interpretation of the law, functioning more as grammar police than agents of the people.

So the only cure left to overturn the questionable fruit of “legislation by IRR” is for Congress to pass a legislation that will cure the said provision of its editorial ambiguity.

So this bill boils down to removing the vagueness caused by a missing comma. Another reminder that when crafting tax laws, syntax matters.

Because when the language of a tax provision can be subjected to multiple interpretations, citizens and common sense always lose to collections.

Mr. President: 

Private schools are COVID casualties too, and it is in the national interest to prevent them from going into permanent lockdown.

The type of bailout through tax relief is more economical on the part of the government than letting private schools close, as the latter would trigger a migration of learning refugees to public schools whose education must now be shouldered by taxpayers.

The annual budgetary cost of educating one SUC student was P80,000 a year ago. And for basic education, it is about P21,000.

This is clearly a case of the state foregoing revenues so it may not incur far larger expenditures later. This pandemic is creating a lost generation of learners whose reduced ability to earn in the future portends to be one of the greatest economic losses in our history.

But this disaster can be mitigated if government would count lost revenues in the education sector as investment for the future.

Let us pass this bill.