DoF proposes student vouchers instead of tax cuts for schools

THE DEPARTMENT of Finance (DoF) is considering vouchers for students in lieu of granting lower tax rates for all for-profit schools regardless of performance.

In a statement, the DoF denied that its proposed second tax package would remove tax perks enjoyed by all schools and hospitals, adding that the incentives will only be taken away from organizations that fail to meet performance standards set by the Commission on Higher Education (CHED), the Department of Education (DepEd), and the Department of Health (DoH).

“If they don’t meet [the criteria] why should we subsidize [schools which] don’t meet the criteria. Basically, we are supporting this school even though they are not helping the students,” Finance Secretary Carlos G. Dominguez III was quoted in the statement as saying.

“We prefer to give the assistance directly to the beneficiary through vouchers for students and universal health coverage for those who need medical treatment,” Finance Undersecretary Karl Kendrick T. Chua said, noting that implementing such assistance will be easier with the enactment of the National ID law.

The Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, currently being deliberated in the House plenary, proposes to cut corporate income tax rates gradually from 30% to 20%, while rationalizing corporate income tax incentives.

Senator Paolo Benigno A. Aquino IV has argued that the TRABAHO bill will lead to higher tuition fees and medical bills after it removes the 10% income tax rate for schools and hospitals.

The DoF noted that some schools have been profiting from the tax incentive despite having poor passing rates in licensure exams, low accreditation levels, and only a few faculty members holding advanced degrees.

It said that of over 6,000 nonsectarian higher educational institutions, only 8% have at least a level one accreditation with CHED, and 29% have faculty members with graduate degrees.

The Finance department also noted that the non-performing schools only have a 37% average passing rates on licensure exams.

The Finance department noted that one school earned a P624 million net profit in 2015 and paid P61 million in taxes, and was able to pay dividends worth P250 million even though it did not meet performance criteria set by CHED.

“Surprisingly the school did not meet any of the criteria but is also profitable,” said Mr. Chua.

The DoF however clarified that religious, non-stock, and non-profit schools will continue to be exempt and the 10% special rate will continue to apply to nonprofit schools and hospitals.

However the bill also states that schools and hospitals that meet the performance criteria will still enjoy lower rates within their industries.

“Those that fail however to meet the established performance criteria shall pay a tax of 10% on their taxable income two years after the effectivity of this Act, 15% in the succeeding three years, and 20% thereafter if the educational institutions and hospitals fail to meet the established criteria,” according to the bill.

“Schools and hospitals that are up to standard need not worry. We need to make sure that our children study in good schools and that we go to hospitals that provide quality medical care,” Mr. Chua said.

He said that the TRABAHO bill will encourage private hospitals and educational institutions to upgrade to qualify for the special tax rate.