Congress asked to probe new BIR guidelines for tax exemption of schools

Thursday, January 23, 2014

Kabataan Partylist Rep. Terry Ridon has filed a resolution directing the House Committee on Ways and Means to probe the legality of Bureau of Internal Revenue Memorandum Order (RMO) 20-2013, which subjects educational institutions to a new tax-exemption certification procedure. 

In House Resolution No. 711 filed on January 22, Ridon called on Congress to summon BIR commissioner Kim Henares and several other concerned parties to discuss the implications of RMO 20-2013, which is unconstitutional in the legislator’s view as it “threatens to remove the tax-exempt status of schools granted by the Constitution merely in the event of failure to secure a certification from the BIR.” 

Section 4(3), Article XIV of the 1987 Constitution states that “all revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties.” 

However, in RMO 20-2013 issued by BIR last July 22, 2013, new policies and guidelines on tax-exempt certification were issued, wherein educational institutions were required to submit several revenue documents. According to the BIR, this move aims to “enhance monitoring” of tax-exempt corporations and plug tax leakages “arising from inaccurate interpretation of relevant tax laws and administrative issuances.” 

Ridon has earlier called this move an “act of bullying” by the BIR, and surmised that it is part of the bureau’s “high-profile shame campaigns” devised to “blunt its institutional failure to meet collection targets.” 

“Aside from legal issues, the implementation of RMO 20-2013 may have corollary effects to students, such as higher tuition and other school fees and the threat of actual closure of their schools,” Ridon said in HR 711. 

Ridon noted that the Makati Regional Trial Court has also issued a temporary restraining order on RMO 20-2013, thereby tangentially strengthening the argument against the memorandum’s legality. 

The Makati RTC TRO was the result of a motion from St. Paul College of Makati, which argued that the memorandum will result in an “irreparable injury” if implemented. In its motion, St. Paul College explained that BIR Commissioner Henares “had adjudicated for herself, and has delegated to her officials, and personnel of the BIR, the power to grant, bestow, cancel, revoke or deny the tax exemption granted by the Constitution,” thus usurping even legislative and judicial powers to “grant, bestow, cancel, revoke or deny the tax exemption granted by law.”

“Congress should look carefully into this matter, as RMO 20-2013 breaches several constitutional guarantees and even the separation of powers in government,” said Ridon, who is a member of the House Committee on Ways and Means.###