Taxing the private universities is not good

Sun, 28 Jul 2013 Source: Bokor, Michael J. K.

By Dr. Michael J.K. Bokor

Wednesday, July 24, 2013

Our Parliament has come to notice again for doing a very bad thing. I have on several occasions pinpointed it as one institution that hasn’t helped us move the country forward and our MPs as being more interested in seeking their own interests than assiduously performing their legitimate duties to justify the huge expenditure made on them.

They may claim to be doing their best, but that best is our worst, which is amply confirmed by their latest move to amend the Internal Revenue Service Act for the removal of private universities from the tax exempt category.

Simply put, our Parliament has imposed taxes on private universities, which will invariably worsen the plight of those institutions, students, and the country at large. We have already heard complaints and protests from several quarters that this tax is uncalled-for. Parliament isn’t paying any attention to such concerns to warrant any shift nor is the government interested in any return to the drawing board. In effect, what Parliament has come out with is the fait accompli.

Hip… hip… hip… Hurray!! More money for development projects!! Election 2016, here we come!!!

But any thumping of chests at the passing of this amendment is next to mental retardation. Imposing taxes on private universities is wrong for several reasons. Private universities existed for 10 to 20 years and should be considered as an infant industry. Our country’s code on business supports this situation.

The Conference of Heads of Private Universities in Ghana (CHPUG) has strongly expressed its disapprobation. Its Chairman, Professor Kwesi Yankah, called it a “crucial time” for government to withdraw their tax exempt status at a time when a huge overflow of students unable to gain admission in public universities will need to be absorbed by private universities.

The CHPUG considers the withdrawal of the tax exempt status as a sad development in the history of private education and cautioned that they may be compelled to pass on any extra cost to students. That is where the problem thickens.

What is government’s response? The usual antagonism and impolitic talk, as is evident in this utterance:

“Deputy Education Minister in charge of Tertiary Education, Samuel Okudzeto Ablakwa, has dismissed concerns expressed by authorities in private universities over the removal their tax exempt status. According to him, all that government seeks to do is to tax the profit declared by boards of private universities. ‘We are not introducing a new tax…it is not an additional tax’, he insisted.”

This decision to impose taxes on the private universities reflects a weakness in our democracy. Before Parliament amended the IRS Act, was any consultation done with the management of the private universities and stakeholders to seek input from them to factor into the debate? Did Parliament even consider other sectors from which to maximize tax revenue? Or even the endemic problems in the country’s tax administration regime and why the revenue targets aren’t met perennially?

Reactions from several quarters to the amended Act prove that no prior consultation took place; thus, the MPs based their decision on only what they thought would solve the tax problem at that level. And the government has latched on to it as the panacea that has eluded it and its predecessors all this while. Unfortunately, it is a wayward and outrageous move that irks those of us who don’t see the need for private universities to be taxed at all. Instead, we expect the government to support them when necessary.

The private universities are playing an important role in our education system (and national development efforts, generally). Apart from picking up students from all disciplines, they have also contributed largely toward absorbing students who couldn’t be admitted into the public universities. Extra-curricular issues aside, these private universities also offer opportunities for students to pursue courses and programmes that are not available in the public universities. Specialization is their forte, and they operate on the basis of value-for-money, which is why they attract a good number of applicants every year. We need them to raise the bar!

Of course, the argument that they are profit-oriented may hold good but fall flat in the face of the major problems facing the country as far as placement of students in the universities is concerned. Considering the huge backlog of students who can’t gain admission into the public universities, shouldn’t it be gratifying that the private universities are stepping in to address that problem?

That is why basing the decision to amend the IRS Act and tax these private universities with the argument that they make “profits” is nonsensical. If profit-making should be the impetus for widening the tax net, why isn’t Parliament passing any law for the churches in Ghana to be taxed too? It is beyond doubt that these churches make profits and their founders/leaders or others in authority therein live in opulence. Why are they not being taxed too?

Clearly, by its decision, Parliament has put the government on the spot; and knowing very well the nature of the Ghanaian, I am more than persuaded that it is the government that will be blamed for the negative backlash concerning this tax on private universities.

The government has to be careful in handling this matter because it will bear the brunt of public anger. Already burdened by criticisms of incompetence—because it isn’t solving the problems worsening living standards—if it doesn’t act decisively, it will lose public goodwill all the more. It is not forced to implement everything coming from Parliament without question.

I opine that this decision by Parliament is politically damaging for the government and it must throw it back to the MPs for reconsideration. Unless the government has developed huge shock absorbers to soak up the agitations that will arise as soon as the Act begins being implemented, it should act swiftly to defuse the tension and create a congenial environment for the private universities to continue contributing their quota toward strengthening the country’s human resource base.

The government’s rhetoric on promoting human development efforts and enhancing formal/informal education is not being reinforced by what is unfolding. How can education at the tertiary level be facilitated with such measures? When impediments are being put in the way?

In previous opinion pieces, I drew attention to the loopholes in our tax administration regime and suggested measures to tackle them all to no avail. The government’s insistence on generating revenue from anything it considers as taxable will end up in smoke unless adequate steps are first taken to tackle the fundamental problems. The insistence on raising taxes sporadically isn’t beneficial. There are many other avenues to look at, and I expect those in charge of the Internal Revenue Service to do so.

As of now, the measures that the government has introduced at the Tema Harbour, for instance, are counter-productive, throttling importers and consumers and forcing businesses to gradually screech to a painful halt. The high taxes, duties, and levies apart, many other draconian measures combine with the high rate of corruption to paint a very nasty picture of the government.

Now that there is a move to tax condoms too, one can only cringe at the fact that some kind of madness has infected our leaders to such an extent that they appear to be more interested in strangling us to death than taking action to solve our existential problems.

The painful part is that the benefits of the tax money don’t trickle down to the people. Civil and public servants who pay income tax, for instance, don’t even know how their tax money is turned around to serve their interests in the long run. There is a general feeling that the tax money is not properly managed to be accounted for. The suspicion is that it is often lodged in the national coffers to be stolen through adroit means and shared by members of the cabal (as is the case of the judgement debt payments) or pumped into contracts for development projects that end up as white elephants after kickbacks have been snapped up. Nobody trusts anybody when it comes to public funds!!

Within this context, it is appalling that the government will support any move to tax private universities. It has many other avenues from which to generate funds and must look for them. The government must not destabilize the private universities; instead, it must support them in diverse ways to take on the responsibility of producing the human resources needed for national development. The government must be a loyal partner in development, not a greedy back-stabber. Taxing the private universities is not good.

But I know that once this Act has been amended and the government’s position on it made known, nothing will change anybody’s mind to do otherwise than implement the Act. Thus, the bitter pill will be rammed down the throats of the private universities for the poor students to swallow in turn. I expect agitations to erupt soon.

I shall return…

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Columnist: Bokor, Michael J. K.