It is not a good idea to burden private education with more with new taxes.
If government needs more money for its Build! Build! Build! ambitions, it should not get this from institutions build! build! build!ing the nation’s leadership and professional competence of tomorrow. On the contrary, the private institutions which educate the human capital of tomorrow in the best interests of the economy should be incentivized to invest more in education.
After the ill effects of the Enhanced Basic Education Act (RA 10533)) and of the Universal Access to Quality Higher Education Act (RA 10931) on private education, there should be no more taxes imposed on it. Private higher education was adversely affected by State policy as basic education was finally reformed, causing lost college cohorts and corresponding losses of multi-billions to the private sector as senior high school (SHS) was introduced nationwide. Programs of private higher education are today adversely affected by State policy as loss of enrollment due to students migrating to state universities and colleges (SUCs) or local colleges and universities (LCUs) where education is free. In one of our school’s education programs renowned for its history of 100% passers in the LET exams, all its students migrated to an SUC where enrolment was free.
As TRAIN2 or TRABAHO is considered, the proposal to remove the preferential income tax rate on private stock or for-profit schools is misguided. Even if this proposal does not affect non-stock non-profit schools, adversely affecting private schools will further weaken the total system of Philippine education that relies on the complementary functioning of schools subsidized by government and schools sustained by the private sector. The fact that my thumb is not wounded by cutting into my index finger does not mean that my hand is not hurt by a misguided blow.
Non-stock non-profit schools are free of taxes because of the contribution they make in their very operation to the system of quality education for which the State is responsible. It is for this contribution that they are free of taxes.
SUCs and LUCs get government subsidies because of the contribution that they make to the education system in their operation.
The special 10% income tax rate that is enjoyed by the so-called proprietary schools recognizes the importance of the contribution of these private schools to the same system of education already in their operation. The basic and higher education delivered by these schools benefits the public weal at no cost to the State. At no substantial cost to the State, society benefits from the learners these schools output who comprehend the demands of human dignity and human society, learn analytic geometry and calculus, learn the basic sciences and their applications in technology; the nation benefits from the leaders educated by these schools with a sense of the common weal and the professionals able to run the economy, build bridges, protect the environment and run the government.
Neither the (SUCs) nor the (LCUs) on the one hand, nor the nonstock-non-profit school on the other hand are held to more than minimum standards in order to get their government subsidies (SUCs and LCUs) or to operate as exempt from tax. Therefore, the proposed above-minimum performance standards for private HEIs to qualify for their preferential 10% income tax rate are inappropriate.
Performance standards above the minimum requirements do not justify the 10% preferential rate, already justified in the school’s operation, but justify further incentives for outstanding performance like further tax reductions or further state support for the school in scholarships, grants for enhanced faculty development or facilities improvement.
Therefore, the sole criterion for the 10% income tax should be the minimum standards for operation of a school, not accreditation standards which recognize above-minimum performance. While accreditation does recognize minimum standards, it requires above-minimum achievement of excellence, institutional fitness for purpose, and satisfaction of stakeholders. Incentives for the better performance of accredited private schools should be in terms of faculty development, support for outstanding instruction, funds for robust research and rewards for responsiveness to stakeholders.
Removing the preferential 10% income tax rate based on the school’s operation would today only discourage further private-sector investment in education, with the private sector’s track record for quality and innovativeness.
The less private sector school output educated Filipinos at no cost to the State, the more the State must spend to educate Filipinos with taxpayers’ money. It is illusory to think the State has unlimited resources for this purpose.
Finally, all schools, public or private, that fail to meet minimum standards should not be taxed more, but properly regulated, i.e., notified of their need to meet minimum standards within a certain deadline, failing which they could be disciplined or closed. Taxing schools more for not meeting minimum standards does not correct the poor performance of the schools. It only brings government more income for screwing students with lousy education.