Gov’t to reward well-performing schools, hospitals with incentives

The Department of Finance (DOF) said non-profit private schools and hospitals that perform well and adhere to high standards of service would continue to enjoy the current low income tax rate of 10 percent under the proposed corporate income tax reform bill.

Finance Undersecretary Karl Kendrick Chua said the “Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) Act pending in the House of Representatives would incentivize private hospitals and educational institutions to upgrade their quality of service in order to be granted this special tax rate.”

Chua doused concerns and misapprehensions the measure would translate to higher tuition payments.

The bill does not cover religious schools, which under the Constitution, are exempted from paying income tax provided that they are organized as nonstock, non-profit corporations and no part of their net income shall belong or benefit any member, organizer, officer or person.

He added the bill aims to ensure that students are able to go to schools that provide quality education, through a set of performance criteria to be determined and evaluated by the Commission on Higher Education (CHED) and the Department of Education (DepEd).

“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,” Chua said.

Chua said the TRABAHO bill provides for a transition period for schools and hospitals to improve the quality of service they render, before the subpar institutions are taxed a higher rate.

Chua said the absence of a system to evaluate educational institutions and encourage them to improve their performance has made some of them “very profitable,” citing as an example a school with a gross revenue of P1.4 billion in 2015 and a net income of P624 million.

“This means that under 10 percent tax regime, the school paid taxes of only P61 million even though it did not meet any of the performance criteria set by CHED, and was able to pay dividends of P250 million,” Chua said.

Finance Secretary Carlos Dominguez III said this example shows that “half of the dividends were actually paid for by the public” or the country’s taxpayers.

“Now, 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 it is not helping the students,” Dominguez added.