VAT on Education The Issue Knocked the Throne of Government -By Abdullah Mamun

Cover Story

“Education is the most powerful weapon which you can use to change the world”. – Nelson Mandela.

Such education-like weapon needs to be kept sharp and operational – free from all sorts of inertia and backwardness which essentially interrupts the way to development- to make the operation successful. On the other hand, when this become entangled with ill-motivated  forces  or used as an instrument to gain concrete benefit which surpass the purview of the education, it results in devastating effects as a whole.
Education is the formal learning process usually at an institution like a school, college, or university with which an individual become enlightened to meet challenges and overcome obstacles of development. Education undoubtedly acts as the yardstick of any country’s progress and thus ensuring education for all is the foremost responsibility of the government to fasten this developmental progress. Government of Bangladesh declared education as a free service for the students up to a certain level which necessarily involves primary to higher secondary level. Hence, nothing can be better than the promise of our present government of making education free for all at every phase. But the decision they took  recently about levying VAT (Value Added Tax) on the admission, tuition and other fees at private universities was indubitably unexpected, illogical, and self-contradictory from a government of as such promise. The decision obviously marks the sign of backwardness of the nation. The NBR on July 4 issued a notification imposing 7.5 percent VAT on tuition fee of students of all private universities and medical colleges. It was originally proposed in the near Tk 3 trillion budget for 2015-16 fiscal year placed in the parliament by Finance Minister AMA Muhith.

Private Universities, the Container of Higher Education
If we analyze recently published H.S.C (Higher Secondary Certificate) or equivalent result, things will be clearer to us. In this year’s H.S.C or equivalent exams, 10.61 lakh students from 8,294 institutions took the HSC and equivalent exams that began on April 1. Of them, 7.38 lakh came out successful and the percentage of students passed under ten education boards stands at 65.84 with 42,894 GPA-5 scorers. The pass percentage has reduced by almost 10% whereas number of GPA-5 achievers 28100 than that of the last year’s result (Source: The Daily Star, 10th September, 2015).
According to statistics of the Education Boards’ Computer Centers, The combined pass rate in 10 education boards, including madrasa and technical boards, also came down to 69.6 percent from last year’s 78.33 percent. Although the number of students passed is increasing every year (except 2015), the number of available seats in the public universities remains almost same. From the statistics it is also seen that only about 37,000 seats are available in public universities while in private universities the number is 70,000. what is more, available seats for higher education in all the public and private universities, colleges offering medical, honours and degree education under the NU (National University) is nearly 4.37 lakh which is less than the number of students passed in this year’s H.S.C or equivalent exams. Under this huge scarcity of seats available for higher education it is obvious that many students having fairly good results would not find themselves in public universities. At present, a number of students from middle class background go to private institutions because there is a shortage of seats in public universities and medical colleges. Public universities cannot ensure seats for thousands of students who pass the HSC exams each year which is why they turn to the private. Besides, session jams and unhealthy political atmosphere on campuses also keep students away from public universities and medical colleges. Thus, they have no other option but to study in the private universities despite that large amount of educational expenses there.

Contradiction over Imposition of VAT
The Awami League-led government in 2010 imposed a 4.5 per cent VAT on private universities but was forced to backtrack from the decision in a month following demonstration by students. Finance minister Abul Maal Abdul Muhith in his budget speech on June 4, 2015 proposed the imposition of 10 per cent value added tax on private universities, private medical colleges and private engineering colleges which was finally reduced to 7.5% by the intervention of Prime Minister.
According to the University Grants Commission and Bangladesh Private Medical College Association, there are over 4 lakh students at 83 private universities and over 20,000 students at 64 private medical colleges in the country. From among them at best 15-20 private institutions can ensure quality education through maintaining the criteria set by the authorities. Many many private universities are often approved on the ground of political consideration. The result is very lower quality education and gross monetary profit. It helps to say ‘trading in the name of educating ’  even not  ‘trading through educating’. A private university student needs to spend Tk 5 to 7 lakh to complete a four-year graduate course while the government had fixed tuition fees at Tk 13.90 lakh for a private medical student to complete his or her course. It will be a huge burden on guardians if tuition fees go up further. The decision will further create hurdles in expansion of higher education in the country. Many guardians will lose interest in admitting their children to the tertiary level of education.  The government had taken a contradictory stand or a ‘dual policy’ by declaring private universities as non-profit organizations and at the same time imposing VAT on them. The government’s move is “unethical and contradictory” because Private Universities are Non Profitable Organizations (NPOs) that is dictated by the Private University Act 1992 and after the emendation of the Act in 2010  the provision remained the same, stating that such institutions will be non-profit organizations to cater to the needs of higher education. These are established not for gaining of any personal interest. It’s being said that education is non-profit and at the same time taxes are being levied. It is not justifiable to impose VAT on education as it is not a consuming product.
Although the government has withdrawn the decision of implementing 4.5 per cent VAT on tuition fees in the wake of protests by private university students but the kind of attitude government showed by taking the decision of imposing 7.5% VAT is a matter of tension among students, their guardians, and teachers. They were surprised thinking that how comes government could think of imposing VAT on the tuition fees—does education a product! What is more, the decision was taken ignoring the consequence of that on the students and their guardians.

Clarification by NBR
The National Board of Revenue (NBR) (on 12.09.15) issued a fresh clarification regarding the VAT issue. It asserted that students will not have to pay the VAT as indirect tax is already included in the tuition fees. There is no room for a spike in tuition fees as it is the university authorities’ responsibility to pay VAT, not the students’. But question arises when it is talked about the source of income of private university authority. Authority involves trustee board, syndicate, vice chancellor and relevant statutory body. None of them are not consumers. Now the question is -are the stated authorities will pay tax from their personal income for university. If not, from where authority(?) will pay taxes?
Citing rules, the revenue collector said VAT is determined based on the total price for service rendered by a business or a company or an organisation. It said the total price for service may be of two categories — VAT inclusive price and VAT exclusive price. If the price of service and VAT are not mentioned separately, then the VAT is already included in the total price paid for the service, it said adding there are specific rules on how to calculate VAT from VAT inclusive price. Since the imposition of VAT on private universities in June 2015, the tuition fees students pay are counted as VAT inclusive price. For further clarification, the NBR gave an example. If a university received Tk 1,00,000 as tuition fee, 7.5 percent VAT (Tk 6,976) will be deducted from it and the rest will be regarded as the total price. So the government will get Tk 6,976 and the university Tk 93,023.

Adding Salt to the Injury of Private Goers
There may have a generalized perception of people that private university students belong to rich family which is not absolutely true. Yes, there are students coming from rich family background but most of them are from upper-middle or middle class families simply because of the reason that despite having better results they are not being able to get admitted in public universities as the scarcity of seats while students coming from financially sound family are usually going abroad for completing their higher education. Students coming from upper-middle or middle class families are thus bound to study in the private universities spending a huge amount of money as they have no other alternatives.
Moreover, as good private universities are Dhaka centric and most of these don’t have any accommodation facility, students coming from outside Dhaka city have to bear accommodation expenses apart from the huge educational expenses. It is really difficult for an upper-middle or middle class guardian to bear such a large amount of expenses.
In such a circumstance the government’s decision of adding VAT on tuition fees of private nation-building factories just added salt to the injuries of the vanguards of the nation.

Massive Protest and Government’s Stand
Protest against VAT on education is continuing from the beginning of imposition of tax on 15th June. Peaceful rallies, sit-in programs, human chain and submitting memorandum to the authorities were the ways of protest. Urges were made to the government from students, teachers, civil society persons and eminent citizens including political personality to remove tax from education. But none paid any heed to such urge and protest. Private university students intensified their protest programme against the imposition of VAT a day after police fired rubber bullets at an anti-VAT demonstration of East West University students in the capital’s Rampura on 9th Sptember. 30 students and a teacher became severely injured following the incident. Being sympathized to their injured and tortured fellow university mates students from all 83 private universities came to street along the country. The protest of 10th September in the capital was spontaneous, unprecedented and remarkable and was peaceful without making a single hit to the public property. Though public life became so hard due to day-long protest, any untoward event was happened. Such peaceful protest without any political involvement was also unprecedented in Bangladesh. But immediate after the evening a group of people arranged with sticks attacked on the peaceful protest while they were chanting “Joy Bangla”. Many front-line dailies including  Prothom  Alo of 11th September published this news with the picture. This incident indicates government’s zero tolerance to any protest programs like any other political protest programs whatever the legality it may have. That’s why it engaged its police forces and political hoodlums to retard the protest by making indiscriminate torture and oppression.

Taxing Education and Constitutional Rights
Education is a fundamental right. The constitution guarantees the right of citizens to choose the kind of education to be given to their children. Taxing private providers of education adversely interferes with this right, so it cannot be countenanced as a matter of principle. While government has a duty to facilitate minimum standards and lawful regulation of private education providers, it also has to make sure that legislative and taxation changes do not unfairly discriminate against people who choose to go private. It is manifestly the case that the imposition of VAT would not deliver any net benefits for the public which would justify this move. Over 450,000 students already attend private universities. They play a crucial role by providing healthy competition and fulfilling the rising demand for higher education in Bangladesh. Making attendance at them costlier will only impose hardship and hinder the government’s ability to increase access to higher education.
The nation cannot afford to tax private universities. Restricting them will in practice only serve to shift resources around and incentivize more people to go abroad, while doing nothing to improve access to public universities. With spaces at public universities in short supply, it is not in the public-interest to hamper the basic rights of citizens by taxing private universities.

Dumbfounded and Pertinacious Finance Minister on VAT!
Chairman of Private University Trustee Board and vice-chancellors of various universities with the severe protest from students urged education minister to take step to withdraw the 7.5 percent VAT over tuition fees. The Finance Minster has ruled out the possibility of withdrawing VAT on the private university tuition fees stating that the universities charge hefty fees from their students and as such extra VAT would not be a problem.
Expressing dissatisfaction over the movement of private university students for reducing value added tax (VAT) on their tuition fee, the minister said: “It cannot be accepted that they cannot give 7.5% VAT while they are able to pay Tk 30,000-50,000 as tuition fee.” In response to the protests of students, Muhit  claimed that, they (private students) daily expend nearly or more than 1,000tk but I just wanted 75tk . What a whimsical and ridiculous assertion on a national issue. Finance Minister AMA Muhith reiterated (on 12.09 15) that the VAT on private universities will not be withdrawn. “We have to expand the scope of revenue collection. To do so we need to push different areas. At same day another programme, Muhith said students will not bear the brunt of VAT this year “What I think is … this time no student is going to be charged [the VAT]. They [universities] will pay it from what [tuition fees] has already been collected.” The finance minister also asked students to be cautious from next year so that the authorities could not collect extra money from them. “If you are not alert enough, they [the university authorities] might impose it [VAT] on you in different ways in the coming year.”

The Final Fate of VAT
In the face of continuous student protests in Dhaka and other cities, the government has finally withdrawn the 7.5 percent VAT on private universities as well as medical and engineering colleges. The National Board of Revenue (NBR) issued a special order to this end (on 14th September at night), with retrospective effect from June 4, the day the government imposed the VAT in the current budget.
According to NBR notification, the cost of education in private universities and medical and engineering colleges was already high and imposing the VAT would further increase the cost. Therefore … the service of private universities and medical and engineering colleges are being exempted from the value added tax (VAT).
The finance ministry announced through a press release the government decision to lift the VAT. The ministry said the government did not want to create obstacles in the educational institutions and cause public sufferings. “Considering the issue from this angle, the government has decided to withdraw 7.5 percent VAT imposed on private universities, medical colleges and engineering colleges in the fiscal year 2015-16,”
As it was mentioned before, earlier in 2010, the government imposed a 4.5 percent VAT on tuition fees of private universities. The decision triggered a huge uproar and the students took to the streets in protest. Following days of demonstration, the government lifted the VAT.

Pressing Reasons behind the Withdrawal
Some issues worked out to press the government to withdraw the VAT. In particular, to prevent student protests from taking a turn for the worse.  Public sufferings due to the demonstrations and keeping the ruling party popular among young voters, especially students, were also important factors behind the government decision to withdraw the 7.5 percent VAT. The government is in continuous fear of loosing ill got power as many issues like quota in BCS, University teachers’ demand for fair remuneration, price hike of essentials and such others in public hand to take to the street. All issues converging in one point may be the cause of deposition of the throne. The government may realize that, avoiding demands from the students historically results in self-destructive effects. Failure of the strategy followed by law enforcers and ill attempt from the political hoodlums to deter the protestors.
Actually, what was mentioned in the notification by NBR as the reasons of withdrawal of VAT is nothing  but eyewash and totally a matter of flattering with the  people at large. The government attempted to collect money from the private university students through the mechanism of VAT (!) for the payment of proposed ambitious salary structure for the government employees. But government’s projection is nipped in the bud as strong protests were raised by the tenacious students with the support from the peoples from many walks of life. Government proceeds with trial and error method. This is the second time that government had to backtrack itself from the same issue perceiving dire consequences. It is trying to extract proper lessons from the protests already held.

Finally, it can hardly be overemphasized that most of the private universities are making a salutary contribution in imparting higher education to a large number of students in a context where the public universities could not have accommodated them. Therefore, government should not go forward with such a decision like levying VAT on tuition fees which would only be an irony in ensuring higher education nothing more than that. Rather they should take necessary initiatives to ensure quality education in the private universities as standard of education is not up to the mark in most of those universities that will help students to be enlightened person and proved to be as true human resources for the country. People give government the foremost power to take any decision but with that great power government possess great responsibility; they can’t ignore that responsibility, they can’t simply take any decision without thinking the resultant consequences.

The writer is graduate student of Public Administration at the University of Dhaka.