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Taxing the private universities
is not good
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…
• E-mail: mjbokor@yahoo.com
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