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TAXING HIGHER EDUCATION

Why it Hurts

Ishfaq Ilahi Choudhury
THE 7.5 percent VAT on the tuition fees of private universities was based on the hypothesis that rich and well-off parents send their wards to private universities. As universities already charge heavy tuition fees, a part of the tuition fees might as well go to the national exchequer, to probably support education of the poor and deprived. Let us examine if this hypothesis is true, or otherwise.
Contrary to popular belief, most private university students these days hail from middle and lower-middle class background and increasingly from low income groups too. Students who could not go to expensive top-rated schools or afford private coaching, stand little chance of passing in the highly competitive public university entrance examination. Keeping all other factors constant, a student from a well-to-do family, who went to a top school and could afford expensive coaching, has a far better chance to get admission in public universities compared to the ones who are deprived of these advantages due to their financial status. If we see the results of SSC and HSC examinations, we notice the domination of a few urban schools and colleges. Gone are the days when students from remote village schools would often top merit lists; it is now the monopoly of a few elites.
Under these circumstances, private universities emerged as alternatives for students who could not get into public universities, yet are deserving of higher education. We now have doctors and lawyers, engineers and architects, pharmacists and genetic engineers, sociologists and anthropologists who are graduates of private universities, pursuing their career in the public and private sector. In the field of banking and business, graduates from private universities are as competitive as anyone from public universities, and in many cases, they are doing even better. In fact, because of the strict and intensive academic regimen students have to go through in a private university, they fare better in a highly competitive and time-bound world of business and finance. Because private universities can give better individual attention to students, many go out to set up their own small enterprises, each creating new jobs and contributing to the national economy. Many students from private universities are now pursuing higher education abroad in top universities of the world. Some of them come back to join their alma mater as teachers.
I must, however, state that like public universities, private universities also have a wide variation of standards, and not all of them are doing well. There are serious shortcomings in some of the institutions; also, there are allegations of unethical conduct against some. It is the duty of the government, especially the University Grants Commission (UGC), to weed out those who fail to keep up the standard, though we are yet to see stern action against the defaulters.
Notwithstanding the limitations, private universities are increasingly becoming institutions of first choice for many students and guardians because of high academic standards, up-to-date curriculum, highly qualified faculty, strict adherence to the
academic calendar, and absence of political violence and enforcement of campus discipline. Campus safety is another reason that encourages guardians to send their wards, especially female wards, to private universities.
One of the reasons that hinder the growth of private universities is the lack of support and sympathy from the government. Unlike private schools, madrassas and colleges, the government does not provide any financial assistance to private universities. The UGC oversees the functioning of the universities, but it does not provide any grant to private universities. The only source of earning for a private university is the tuition fees collected from students. From this earning, the university has to pay the teachers and staff, arrange for books and stationery, laboratory equipment and chemicals.
Despite being a non-profit organisation, a private university has to pay electricity, water and gas bills at a commercial rate. The university also pays 4-15 percent VAT on all goods and services that it avails. Above this, the university has to pay income tax at the rate of 15 percent on any operating surplus left at the end of the year. This surplus is the only fund available to the university to go for future expansion and development. Yet, the National Board of Revenue (NBR) terms this surplus as 'profit', knowing full well that a private university operates as a trust and no one can make a profit out of it. There are, of course, some violators to the Trust Act, but the UGC or the Ministry of Education failed to act tough against the violators.
It is often alleged that private universities charge exorbitant fees and are making profits. However, if we compare per capita expenditure on students in DU, BUET or DMC vis-a-vis those of top private universities of Dhaka, we shall see that the per capita cost in a private university is less than that of a public university. The huge difference in tuition fees is because public universities and medical colleges are supported up to 95-98
percent with grants from the UGC, whereas private universities depend, as stated above, entirely on the tuition fees from the students. Media reports on the high salary offered to private university teachers is also not completely accurate because, unlike public ones, private universities do not offer on-campus housing and other government benefits.
Creation of new knowledge is one of the primary reasons why a university exists. New knowledge is created through research and development (R&D). Despite financial limitations, some of the top private universities spend a higher percentage of their budget on R&D than institutions like Dhaka University, BUET and others.
I would, therefore, argue that the government should create an enabling environment for the growth of private universities in the country. As a first step, the government should immediately rescind the order of imposing VAT on tuition fees. The government should remove VAT payable by universities of goods and services purchased, and withdraw income tax on the operational surplus. Meanwhile, the government should ensure strict financial and administrative transparency as well as high academic standards from all universities - public or private.
With the gradual rise of living standard, there is an increasing desire among parents to see a better future for their children. It is, therefore, quite common to see not so well-off parents sending their children to universities and it is also not unusual to see parents selling off their land or valuables to ensure that their children have access to good education that would ensure a brighter future. Given this scenario, can the government remain a bystander and not extend a helping hand to these parents?
The writer Is a retired air commodore and registrar of a private university.