‘TRABAHO will provide incentives to well-performing schools, hospitals’

NON-PROFIT private schools and hospitals that perform well and adhere to high standards of service will continue to enjoy the current low income tax rate of 10 percent under the corporate income tax (CIT) reform bill pending in the House of Representatives, the Department of Finance (DOF) said.

Finance Undersecretary Karl Kendrick Chua said the bill, dubbed the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) Act, would “incentivize” private hospitals and educational institutions to upgrade their quality of service to be granted this special tax rate, as he sought to correct misapprehensions about the measure supposedly resulting in 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 non-stock, non-profit corporations and no part of their net income will belong to or benefit any member, organizer, officer or person.

Chua said the TRABAHO 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).

The Department of Health (DOH), meanwhile, will establish the criteria for private hospitals to assess their performance and their eligibility for the tax incentive, he said.

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 added.

Finance Secretary Carlos Dominguez III pointed out that 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?” Dominguez said. “Basically, we are supporting this school even though it is not helping the students.”

“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.

Data gathered by the DOF from the CHED show that among private higher educational institutions (HEIs), more than 50 percent of the faculty in sectarian institutions have graduate degrees, while with private non-sectarian, non-profit schools only 29 percent have faculty members with graduate degrees. (PR)