For exempting private universities from tax payments
Saturday, 8 March 2008
Abul Quasem Haider
THE Private University Act was enacted by Jatiya Sangsad on August 09, 1992, setting the objectives of expansion of trouble-free higher education for all and creation of worthy citizens. The government later allowed the establishment of 54 private universities.
Of late they have been brought under the orbit of income tax assessment. Tax has been imposed on these universities. The private universities and the academic community in the country view this situation as discouraging for the expansion of higher education. The private universities should be exempted from taxation because historically, educational institutions enjoyed income tax exemption to encourage public welfare.
The government, in a notification of December 31, 1980 of the Internal Resources Division of the Ministry of Finance, exempted the income of the private universities from tax. It had exempted the income of universities and other educational institutions running solely for educational purposes and not for profit making.
In 2002 also an order allowed, exemption of income of any university or any other educational institution, which is not operated commercially, from tax. It was applicable for medical colleges, dental colleges, engineering colleges and other institutions imparting education on information technology.
The non-government universities were established solely for educational purposes and not for profit making. These universities are not operated as business organisations. The order of 1980 and 2002 kept the non-government universities outside the orbit of income tax on justifiable grounds.
The private universities operate as autonomous institutions under the provisions of the Private University Act of 1992 and the Act of 1998.
The President, as the chancellor appoints the vice-chancellors, pro-vice-chancellors and the treasurers of these universities. The non-government universities are recognised as institutions solely devoted to the pursuit of education.
The two laws enacted by parliament in 1992 and 1998 treat the non-government universities as educational institutions. The laws provide clear direction for operation of a private university and leaves no scope for business operation in the name of a university.
The non-government universities maintain their records of accounts in conformity with the law as per the format given by the University Grants Commission and not in conformity with Companies Act or any other law controlling a business operation.
The accounts are drawn as an educational institution as far as the same relate to accounts of receipts and payments, income and expenditure accounts and the balance sheet. No profit and loss accounts are drawn-up since the same is not relevant to an institution solely devoted to education and not for making profit.
The laws enacted by parliament has no provision for assessing income tax on the non-government universities. The assessment made for educational institutions operated on commercial basis cannot be applicable to the non-government universities covered by laws exempting them from income tax. The laws enacted by parliament take precedence over any other rules or regulations.
The non-government universities are not businesses organisations. Business organisations' transactions involve exchange of goods or services for money. The private universities collect fees to meet the cost and expenses of providing the education. They do not sell degrees, diplomas or certificates.
Students have to earn their qualifications by acquiring knowledge in the relevant subjects. They cannot claim certificates of qualification as a matter of right just because they had paid the fees. After paying all the fees they might fail as well. Payment of fees is no guarantee that a university would confer a degree upon a student. But in sharp contrast, payment received by a business organisation requires it to deliver the goods or services ordered for.
Income tax is not imposed on any university in the SAARC countries or anywhere else in the world. In conformity with the practice of supporting higher educational institutions in the region and around world, the government should withdraw its order imposing income tax on the private universities.
The non-government universities are contributing to equity and access to higher education in the country. A World Bank Review of 1990 found marginal impact of public spending on the disadvantaged section of the society. The higher educational institutions, run with public funds, are almost exclusively populated by children of professionals, businessmen, civil servants and teachers.
The advent of non-government universities and the mandated allocation of the seats for the poor but meritorious students created a situation for equity and access to higher education. Besides, the non-government universities, without spending public funds, encourage entry to higher education through additional support in different forms to create social mobility and to some extent contributes to the government's poverty reduction strategy. So, the imposition of income tax on non-government universities is not justifiable for reasons of equity and social justice.
The University Grants Commission's annual report, placed before parliament through the government, described the non-government universities as non-profit organisations. It recommended to the government to issue an order in this respect.
The non-government universities are non-profit, non commercial institutions for imparting education in different discipline including science, literature and fine arts. The government order imposing income tax on the private universities failed to make a distinction between commercially-run educational institutions and the non-commercially run institutions. Assessment of tax on commercial institutions run for profit may be justifiable but on non-commercial institutions operating on non-profit basis it has no logic or justification. From the perspective of constitutional right of access to education for human resources development it cannot be also justified.
The operational surplus fund of the non-government universities, if any, are utilised for the development and expansion of the universities, including the procurement of land, construction of buildings, expansion and modernisation of laboratories, upgradation of libraries or research facilities, student amenities, payment of salaries to the faculty and the like. The surplus, spent in the form of capital or revenue expenses, can in no way be termed as profit. No part of it is paid or transferred or distributed directly or indirectly to the founders or members of the founding organisation by way of dividend, bonus or otherwise.
The some order, however, exempted from taxation the incomes of the non-government colleges and universities that provide medical, dental, engineering and information technology education. It is, therefore, logical and natural to extend the exemption to all non-government universities.
Taxing non-government universities goes against the public interest as they are contributing to public welfare in many ways.
Chaos and anarchy in the government universities led to the enactment of the Private University Act to facilitate trouble-free higher education in Bangladesh. The goal of the law has been realised through the establishment of 54 non-government universities, recording six per cent of student enrolment in higher education.
The relevance of private universities to socio-economic needs is reflected in the employment records of their graduates.
Much needed discipline in the academic arena has also been established in the non-government universities by eradicating the session jam. Academic life in these universities is free of student and faculty politics.
As there is no burden on the public exchequer, it allows better funding and reform of the public institutions. The estimated saving to public exchequer is more then Taka 250 billion.
Non-government universities are also market responsive, reflecting global perspectives in higher education.
Brain drain has been minimised through retaining students and faculty and attracting faculty and young scholars, who would otherwise go abroad. They are also earning foreign exchange for the country by admitting foreign students.
The establishment of non-government universities has set in motion, a home-grown reform in higher education, which has begun to produce positive results.
The knowledge-based culture created by non-government universities may eventually overtake 'muscle culture', provided the government's attention shifts from regulating inputs to measuring outputs.
The acid test of such output is the value of their graduates in the job market. The private universities changed the very method of higher education in the country.
Private universities should, therefore, be exempted from all kinds of tax, just like the medical, dental and engineering colleges and polytechnic institutes are exempted.
The government should withdraw the tax imposed upon fixed deposit receipt (FDR) of private universities. If it does not withdraw this tax private universities will not be able to build their fund for future development.
No new law is required for private universities. Only a few amendments to private university acts 1992 and 1998 can achieve the objectives.
Bangladesh has more than the required number of private universities. Alternatively, eligible students to study in university are not sufficient in number. Again, standard of education can not be raised to the mark for want of qualified teachers. The government should take a long term plan for the standardisation of secondary and higher secondary education to make the students eligible for higher education.
Greater co-operation and supervision from the Ministry of Education and the University Grants Commission (UGC) are required for an improvement of the standard of education and its expansion. The government should facilitate the private universities in the area of higher education. Specific time-frame should be set for these universities to achieve targeted development. Given the facilities, the private universities would, one day, become more viable seats of learning.
They deserve government's support by way of tax exemption to be able develop further.
The writer is Chairman, Eastern University and Vice Chairman, Association of Private
Universities of Bangladesh
THE Private University Act was enacted by Jatiya Sangsad on August 09, 1992, setting the objectives of expansion of trouble-free higher education for all and creation of worthy citizens. The government later allowed the establishment of 54 private universities.
Of late they have been brought under the orbit of income tax assessment. Tax has been imposed on these universities. The private universities and the academic community in the country view this situation as discouraging for the expansion of higher education. The private universities should be exempted from taxation because historically, educational institutions enjoyed income tax exemption to encourage public welfare.
The government, in a notification of December 31, 1980 of the Internal Resources Division of the Ministry of Finance, exempted the income of the private universities from tax. It had exempted the income of universities and other educational institutions running solely for educational purposes and not for profit making.
In 2002 also an order allowed, exemption of income of any university or any other educational institution, which is not operated commercially, from tax. It was applicable for medical colleges, dental colleges, engineering colleges and other institutions imparting education on information technology.
The non-government universities were established solely for educational purposes and not for profit making. These universities are not operated as business organisations. The order of 1980 and 2002 kept the non-government universities outside the orbit of income tax on justifiable grounds.
The private universities operate as autonomous institutions under the provisions of the Private University Act of 1992 and the Act of 1998.
The President, as the chancellor appoints the vice-chancellors, pro-vice-chancellors and the treasurers of these universities. The non-government universities are recognised as institutions solely devoted to the pursuit of education.
The two laws enacted by parliament in 1992 and 1998 treat the non-government universities as educational institutions. The laws provide clear direction for operation of a private university and leaves no scope for business operation in the name of a university.
The non-government universities maintain their records of accounts in conformity with the law as per the format given by the University Grants Commission and not in conformity with Companies Act or any other law controlling a business operation.
The accounts are drawn as an educational institution as far as the same relate to accounts of receipts and payments, income and expenditure accounts and the balance sheet. No profit and loss accounts are drawn-up since the same is not relevant to an institution solely devoted to education and not for making profit.
The laws enacted by parliament has no provision for assessing income tax on the non-government universities. The assessment made for educational institutions operated on commercial basis cannot be applicable to the non-government universities covered by laws exempting them from income tax. The laws enacted by parliament take precedence over any other rules or regulations.
The non-government universities are not businesses organisations. Business organisations' transactions involve exchange of goods or services for money. The private universities collect fees to meet the cost and expenses of providing the education. They do not sell degrees, diplomas or certificates.
Students have to earn their qualifications by acquiring knowledge in the relevant subjects. They cannot claim certificates of qualification as a matter of right just because they had paid the fees. After paying all the fees they might fail as well. Payment of fees is no guarantee that a university would confer a degree upon a student. But in sharp contrast, payment received by a business organisation requires it to deliver the goods or services ordered for.
Income tax is not imposed on any university in the SAARC countries or anywhere else in the world. In conformity with the practice of supporting higher educational institutions in the region and around world, the government should withdraw its order imposing income tax on the private universities.
The non-government universities are contributing to equity and access to higher education in the country. A World Bank Review of 1990 found marginal impact of public spending on the disadvantaged section of the society. The higher educational institutions, run with public funds, are almost exclusively populated by children of professionals, businessmen, civil servants and teachers.
The advent of non-government universities and the mandated allocation of the seats for the poor but meritorious students created a situation for equity and access to higher education. Besides, the non-government universities, without spending public funds, encourage entry to higher education through additional support in different forms to create social mobility and to some extent contributes to the government's poverty reduction strategy. So, the imposition of income tax on non-government universities is not justifiable for reasons of equity and social justice.
The University Grants Commission's annual report, placed before parliament through the government, described the non-government universities as non-profit organisations. It recommended to the government to issue an order in this respect.
The non-government universities are non-profit, non commercial institutions for imparting education in different discipline including science, literature and fine arts. The government order imposing income tax on the private universities failed to make a distinction between commercially-run educational institutions and the non-commercially run institutions. Assessment of tax on commercial institutions run for profit may be justifiable but on non-commercial institutions operating on non-profit basis it has no logic or justification. From the perspective of constitutional right of access to education for human resources development it cannot be also justified.
The operational surplus fund of the non-government universities, if any, are utilised for the development and expansion of the universities, including the procurement of land, construction of buildings, expansion and modernisation of laboratories, upgradation of libraries or research facilities, student amenities, payment of salaries to the faculty and the like. The surplus, spent in the form of capital or revenue expenses, can in no way be termed as profit. No part of it is paid or transferred or distributed directly or indirectly to the founders or members of the founding organisation by way of dividend, bonus or otherwise.
The some order, however, exempted from taxation the incomes of the non-government colleges and universities that provide medical, dental, engineering and information technology education. It is, therefore, logical and natural to extend the exemption to all non-government universities.
Taxing non-government universities goes against the public interest as they are contributing to public welfare in many ways.
Chaos and anarchy in the government universities led to the enactment of the Private University Act to facilitate trouble-free higher education in Bangladesh. The goal of the law has been realised through the establishment of 54 non-government universities, recording six per cent of student enrolment in higher education.
The relevance of private universities to socio-economic needs is reflected in the employment records of their graduates.
Much needed discipline in the academic arena has also been established in the non-government universities by eradicating the session jam. Academic life in these universities is free of student and faculty politics.
As there is no burden on the public exchequer, it allows better funding and reform of the public institutions. The estimated saving to public exchequer is more then Taka 250 billion.
Non-government universities are also market responsive, reflecting global perspectives in higher education.
Brain drain has been minimised through retaining students and faculty and attracting faculty and young scholars, who would otherwise go abroad. They are also earning foreign exchange for the country by admitting foreign students.
The establishment of non-government universities has set in motion, a home-grown reform in higher education, which has begun to produce positive results.
The knowledge-based culture created by non-government universities may eventually overtake 'muscle culture', provided the government's attention shifts from regulating inputs to measuring outputs.
The acid test of such output is the value of their graduates in the job market. The private universities changed the very method of higher education in the country.
Private universities should, therefore, be exempted from all kinds of tax, just like the medical, dental and engineering colleges and polytechnic institutes are exempted.
The government should withdraw the tax imposed upon fixed deposit receipt (FDR) of private universities. If it does not withdraw this tax private universities will not be able to build their fund for future development.
No new law is required for private universities. Only a few amendments to private university acts 1992 and 1998 can achieve the objectives.
Bangladesh has more than the required number of private universities. Alternatively, eligible students to study in university are not sufficient in number. Again, standard of education can not be raised to the mark for want of qualified teachers. The government should take a long term plan for the standardisation of secondary and higher secondary education to make the students eligible for higher education.
Greater co-operation and supervision from the Ministry of Education and the University Grants Commission (UGC) are required for an improvement of the standard of education and its expansion. The government should facilitate the private universities in the area of higher education. Specific time-frame should be set for these universities to achieve targeted development. Given the facilities, the private universities would, one day, become more viable seats of learning.
They deserve government's support by way of tax exemption to be able develop further.
The writer is Chairman, Eastern University and Vice Chairman, Association of Private
Universities of Bangladesh