‘TRABAHO’ Bill to Reward high-performing Schools and Hospitals

The Department of Finance said that non-profit schools and hospitals that are performing well and following to high standards of service will continue to enjoy the current 10% low-income tax rate under the proposed corporate income tax (CIT) Reform Bill, pending in the House of Representatives.

The Tax Reform for Attracting a Better and High-quality Opportunities or TRABAHO Act, would incentivize private hospitals and educational institutions to upgrade the quality of service by granting them this special tax rate.

Under the Constitution, religious schools are exempted from paying the income tax given that they are organized as non-stock non-profit corporations and none of their net income belong or benefit any one.

The Commission on Higher Education (CHED) and Department of Education (DepEd) is setting a performance criterion and will evaluate schools, ensuring that students are able to go to schools that provide quality education. Meanwhile, the Department of Health will establish the criteria for private hospitals, assessing their performance and their eligibility for the tax incentive. The absence of a system evaluating educational institutions and encouraging them to improve their performance has made some of them “very profitable”.

The TRABAHO Bill provides for a transition period for schools and hospitals to improve their quality of service, before the subpar institutions are taxed a higher rate. There would be no change if the performance of school is good like UP, Ateneo, Lasa Salle, which are level 4 in accreditation. If the performance is not good, they will gradually pay the 15 or 20% tax, still lower than the regular 30% corporate income tax rate. Through a set of performance criteria by evaluation schools, encouraging them to improve by granting them low income tax rates, in effect, the Bill would help ongoing efforts to upgrade the quality of education, especially tertiary learning in the country.

The TRABAHO bill seeks to amend Section 27 of the National Internal Revenue Code by providing among others, a 10% income tax rate on “proprietary educational institutions and hospitals which are non-profit,” provided that “they comply with the established performance criteria to be determined and evaluated” by the CHED and DepEd, and the DOH. The Bill also states further that educational institutions and hospitals that fail to meet the performance criteria shall pay a tax of 10% on their taxable income 2 years after the effectivity of this Act. 15% in the succeeding 3 years, and 20% thereafter if the educational institutions and hospitals fail to meet the criteria.

Private schools, through the Coordinating Council of Private Educational Associates (COCOPEA), agreed with lawmakers to this performance evaluation and incentives system, but want (SUCs) or State Universities and Colleges to be also covered.

The TRABAHO bill also provides the earmarking of funds for universal health care and the grant of student vouchers so that revenues would go directly, helping those in need. The legislators prefer to give direct assistance to the beneficiary through vouchers for students and universal health coverage especially those who need medical treatment. Finance Secretary Carlos Dominguez III also said he was planning to discuss with CHED the possibility of directly giving subsidies to students, enabling them to choose the college or university they want to go to.

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