“Repercussions of a damaging policy crossed sectoral and political lines”
Congratulations to the Coordinating Council of Private Educational Associations (COCOPEA) and the Philippine Association of Colleges and Universities (PACU) for their successful legislative initiative with the enactment into law of Republic Act 11635 “An Act Clarifying the Income Taxation of Proprietary Educational Institutions, Amending for the Purpose Section 27 (B) of the National Internal Revenue Code of 1997, As Amended”.
RA 11635 rectifies the onerous provisions of the Bureau of Internal Revenue’s RR 5-2021. If enforced, this would have slapped a 150-percent increase on the income tax of private schools. This would have caused long-term consequences to a strategically critical ecosystem that affects not just the direct stakeholders of private educational institutions. Thousands of households that depend on thousands of linked small and medium enterprises that benefit from the business operations of private schools would also be affected.
Provisions of BIR RR 5-2021 would have denied private schools the preferential tax treatment mandated in the Constitution and imposed a 25-percent corporate income tax on them. This went against what President Duterte and Congress actually intended in the CREATE Law which rightfully provides much needed relief to the distressed private schools by a temporary reduction of the 10-percent tax rate that has been in effect since 1968, to 1 percent during the pandemic. Had this not been remedied, it would have been a colossal policy blunder of this administration that would have more than doubled the tax rate of private schools from 10 percent to 25 percent.
This controversial BIR tax regulation was announced at a time when the ECQ lockdown was causing widespread disruptions to all industries with the education sector taking the hardest hit. An April 2021 survey by PACU found that 50 percent of the respondents suffered a 10- to 50-percent decline in enrollment compared to 2020. Over one million of their direct stakeholders, teachers, students, and school personnel were affected by the health and economic crisis of the pandemic.
The educational system is a big booster of the economy as the sector’s operations support jobs, allied industries, and many small and medium enterprises in its community. Before these crises, the private education system was a vibrant ecosystem that has been the dominant producer of the country’s skilled workforce of professionals, managers, and technicians which according to most recent PACU data accounts for 74.9 percent compared to 25.1 percent from the State Universities and Colleges. This translates to more than 3.5 million from the private higher education institutions and about 1.8 million from SUCs. This is the critical economic role of private schools which is indispensable to our economic recovery.
We must also commend both Houses of Congress for their fast response to the cries of the private education stakeholders. Responding to the loud protests from both the private and public education sector, several lawmakers called for the revocation of the “erroneous” revenue regulation with both Houses of Congress convening special hearings and filing bills to rectify RR 5-2021. The House of Representatives quickly passed with 203 votes and no objections House Bill 9913 defining with finality the 10-percent preferential tax rate for proprietary schools as mandated in the constitution. The Senate swiftly reciprocated with unanimous approval of their counterpart legislation Senate Bill 2407. The bicameral proceedings sustained the urgency with the House adopting the Senate version as the enrolled bill for signature of the President. Republic Act 11635 was finally signed into law on December 10, 2021, just six months after the private schools started their protests against RR 5-2021.
In a recent statement of COCOPEA and PACU, they expressed their profound gratitude to the President and all legislators who supported the enactment of RA 11635 as the law will give many private schools “the needed boost for sustainability in the school years ahead, and this allows them to fully focus on the Learning Crisis and the COVID-19 pandemic that our country is currently grappling with.”
“We especially thank Senate President Vicente Sotto III, House Speaker Lord Allan Velasco, Senate Majority Leader Juan Miguel Zubiri, House Majority Leader Martin Romualdez, Senate Committee on Ways and Means Chairperson Sen. Pia Cayetano, House Committee on Ways and Means and primary author of the House Bill Cong. Joey Salceda, and Sen. Juan Edgardo Angara, primary author of the Senate version, as well as, Sen Minority Leader Frank Drilon, Sen President Pro Tempore Ralph Recto, Deputy Speaker Rufus Rodriguez and Cong. Kiko Benitez.”
The fast enactment of RA 11635 demonstrates how the repercussions of a damaging policy crossed sectoral and political lines and mobilized civil society and business groups to launch a determined campaign for urgent legislative action. Policy responsiveness is achieved when there are close consultations with stakeholders covering all dimensions with expert advice and sound data. This will help us avoid, or in this case correct, policy blunders in crafting government regulations.