Tax on private universities: Must we make education more costly?
The mounting pressure on the government by international lenders to broaden the purview of revenue collection is no secret. An unpopular decision to freeze the accounts of at least 12 private universities makes the financial distress obvious. The National Board of Revenue (NBR) did not lose a moment to claim all previous dues soon after it heard that the Appellate Division had ruled in its favour. In 2007, the NBR imposed a 15 percent income tax on private universities, leading to 46 petitions and a 2016 ruling by the High Court declaring it illegal and scrapping three previous tax orders. The long legal battles finally saw these decisions overturned in February this year, clearing the way for the NBR to impose income tax on private universities, accrued ever since their inception.
One could interpret this action as a punishment for non-profit educational ventures that aim to enhance Bangladesh's higher education landscape. Instead of having a constructive and empathetic approach towards private universities, the decision displays a penalising attitude. The timing of freezing these accounts—just ahead of Eid-ul-Fitr—amplifies the manifold distress as it directly affects the livelihoods of countless university staff, as the chairman of the Association of Private Universities of Bangladesh (APUB) rightly points out. Imagine the plight of the university staffers, who may now struggle to make ends meet during a time of joy and celebration due to delayed salaries and festival allowances. Picture the students, already grappling with post-pandemic challenges, now uncertain about the cost of their education. Conversely, the frozen bank accounts will mean that the universities will be unable to pay some of the utility services, VAT, AIT and other related taxes, making the government lose out on some of its income. The decision came rather abruptly, as the universities were waiting for the full verdict to be made available before they could legally respond. The decision is myopic as it fails to recognise the big picture in which private universities operate.
The University Grants Commission (UGC), the supervisory body of both public and private universities in the country, offers a rationale for the 1992 law through which private universities were established. "The number of public universities is meagre in proportion to the population and the demand for higher education in the country. Higher education is hampered by limited seats and a deficit in the national education budget," says the UGC Annual Report 2020.
While public universities are fully subsidised to cater education to our nationals, private universities run solely through the tuition fees of their students. The boards of trustees are required to provide the initial land and financial endowments, but the operational and development costs are realised from the revenues earned from tuition fees alone. The additional tax will likely force the university management to increase fees, affecting the students and their guardians. The sector, which has shown remarkable promise over the last three decades, might even start seeing a downslide in its enrolment. The decisions made in boardrooms and courtrooms have, therefore, failed to recognise not only education as a public good with societal benefits, but also the human toll of imposing tax on it.
An empathetic and constructive solution would entail creating an educational financing system for students who want to benefit from the private system. What we have is a system in which, while some students have access to nearly free or inexpensive education, others, who make up an equally important portion of the country's human resource pool, must pay a discriminatory education tax on top of the private expense of their education. It's time to invest in education equitably, not tax the pathway to progress.
A comparative analysis of our university system, available in the UGC Annual Report 2020, might help us understand the contributions made by private universities. In 2020, there were 3,14,930 students in public universities with a teacher-student ratio of 1:20. In the same year, private universities saw an enrolment of 3,28,689 students with a teacher-student ratio of 1:22. Both sectors contribute nearly equally to the country's higher education growth. The government spends Tk 1,55,298 per student in the public system, including its establishment and operational costs. In contrast, in the private system, the annual cost per student is Tk 71,536.
Still, in 43 public universities, 18-20 percent of the seats were not filled in the first-year bachelor (32,943 admitted against 39,405 seats) and master's (16,070 admitted against 20,312 seats) programmes, respectively. These numbers along with the simultaneous growth in enrolment at private universities testify to the growing preference for the latter.
The government's objective of becoming a developed nation by 2041 would require educated citizens and competent human capital. All the developed nations have prioritised high-quality education for sustainable development through adequate budgetary provisions. Severe resource restrictions force us to fall short of the six percent GDP threshold earmarked by Unesco. Most of the allocated two percent share goes to the public sector. In the private system, where students do not receive any public funds or space, the young people who are expected to join their cohorts from the public system to become future leaders and developers of the country deserve minimum government support for their educational opportunities. Only when the public and private sectors collaborate can we achieve the country's human capital development goals.
Taxing the delivery of education is, therefore, a poor public policy. Should the government discover that the members of the boards of trustees are significantly benefiting from private universities, it should ensure adherence to personal income tax laws. The audit should mandate greater transparency. There should be monitoring cells to ensure that no commercial profiteering organisation operates under the name of education and engages in certificate business. There are indeed some bad actors who have given the sector bad names by syphoning money for personal benefits like seating allowances, luxury cars or business deals. But one should not penalise the students and teachers who have made this sector a viable option by halting brain drain, encouraging promising faculty members with advanced research degrees to return home and work in a congenial atmosphere, and maintaining an academic calendar without any political disruptions.
An empathetic and constructive solution would entail creating an educational financing system for students who want to benefit from the private system. What we have is a system in which, while some students have access to nearly free or inexpensive education, others, who make up an equally important portion of the country's human resource pool, must pay a discriminatory education tax on top of the private expense of their education. It's time to invest in education equitably, not tax the pathway to progress.
Dr Shamsad Mortuza is professor of English at Dhaka University.
Views expressed in this article are the author's own.
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