September 24, 2018

While there is a need to raise taxes and rationalize tax exemptions to finance priority programs of government, this should be in a way that still recognizes the complementary role of private education.

The overall performance and contribution of the private education sector is comparable to that of the government or state schools. Here are some of the reasons:

FIRST, private education complements government’s capacity from elementary (9%), secondary (22%), and senior high school (46%), to tertiary (54.3%).  For SHS, private institutions provide majority of supply for ABM, HUMMS and STEM.

For Tertiary, private HEIs provide majority of supply (more than 50% of students) in CAR, NCR, and Regions 11, 12, 4, 10 and 3.

SECOND, private higher education account for more Centers of Excellence or COEs and Centers of Development or CODs in Engineering, ICT, Health, Teacher Education.

THIRD, quality of faculty is also comparable with 13% Doctorate, 40% Masters and 45% Bachelors; and

The performance in licensure exams between the public and private HEIs on average, from 2005 to 2015 are likewise comparable.

If the current version of TRAIN 2 bill is passed into law, this will further weaken private education given the recent challenges posed by the implementation of other government reforms:

  • The K to 12 Transition – with enrollment in Private HEIs at only 50% from 2016 to 2021, given the 8 enrollment years lost in college.
  • Free Tuition in SUCs and LUCs under RA 10931- with massive migration of students to the State Universities and Colleges.
  • Exodus of faculty to DepEd/SUCs as a result of the Salary Standardization Law.
  • The unreasonable regulation of tuition and other school fees making private higher education institutions unable to raise tuition significantly in order to raise salaries for faculty to compete with public HEIs and improve on quality.

CEAP therefore reiterates that non-stock non-profit educational institutions like those established by religious organization and foundations are exempt from income tax when their revenues and assets are actually, directly, and exclusively used for educational purposes as provided by the Constitution, no less. It cannot be taken away by a bill passed by Congress.


However, CEAP also supports the position of proprietary or profit educational institutions for a STATUS QUO on tax incentives currently enjoyed by them at 10% preferential tax rate.


We do not subscribe to the proposal that tax incentives must be conditioned upon compliance with performance criteria to be determined and evaluated by the Commission on Higher Education and Department of Education.


Private educational institutions as it is now are already heavily regulated by CHED and DepEd in terms of their curricula, educational programs and standards, and also in their ability to charge fees and increases. Tax exemption and incentives should not be tied up with institutional performance. After all, the mandate of CHED and DepEd is to set minimum standards and requirements for government recognition or authrotiy to operate. Quality assurance beyond government minimum standards is a function of accreditation, which is essentially a private function. In sum, the evaluation of performance of educational institutions is a matter lodged with the CHED and DepEd through existing regulations, and not with the BIR and DOF through the Tax Code.


Indeed, THE POWER TO TAX IS NOT WITHOUT RESTRICTIONS. The power to tax, to borrow from Justice Malcolm, “is an attribute of sovereignty. It is the strongest of all powers of government.[1] It is, of course, to be admitted that for all its plenitude, the power to tax is not unconfined. There are restrictions The Constitution sets forth such limits. If it were otherwise, there would be truth to the dictum of Chief Justice Marshall that the power to tax involves the power to destroy. [2]


[1] Sarasola v. Trinidad, 40 Phil. 252, 262 (1919)

[2] McCulloch v. Maryland, 4 Wheaton 316