Three dimensions of the VAT controversy shed future light: taxing education; the booming private university sector; and the country's development imperative. A cross-sectional analysis shows, though the 7.5 per cent VAT proposal was a logical consequence of the country's neo-liberal underpinning, its timing was neither effective nor efficient for overall welfare.
As a growing market transaction, education is subjected to taxes in any neo-liberal society. Tuition fees typically cover classroom instruction and varsity infrastructural costs, while the state's infrastructural costs stem from such invisible supports as monitoring net university performances, paving the pathways to classes, and securing the environment. A virtuous cycle ensues when the student graduates find a job, contribute to the economy, and innovate a product, service, or talent. As the university's stock-market value and the state's gross domestic product (GDP) rise, the need for more specialised training spins the education wheel to ever-higher thresholds.
State taxes may be legitimate, but timing matters, especially as it relates to the country's developmental stage. In advanced economies, establishment and infrastructural costs, as well as wages, pension, and all government programmes demand high tax revenues. Imposed upon education, they can also harmonise the number of graduates with market demands: instability from having too many graduates finding too few jobs, or too few graduates unable to feed job demands, can be regulated. However, and this is the key for countries like Bangladesh, taxing students in developing countries removes a vital modernisation building-block (education), ultimately breeding a vicious cycle: disincentives to getting educated drive out incentives, disabling both university reputation and the country's growth, a process that repeats itself while shifting to increasingly lower thresholds.
Bangladesh is at such a stage where it must not only satisfy specific MDG (Millennium Development Goal) targets in a very short time for which education is critical, but the very progress already made to expand literacy cannot but culminate in varsity training eventually. Any tax collides with the MDC rationale. Besides, to harness its middle-income status, Bangladesh must produce a pool of economic, political, and social pace-setters, for whom education here and now is vital. By waiting another decade or two to tax education, the government would reap handsome rewards in the quality of the graduate pool amid the quantitative improvement that the country's growth-rate conveys.
Secondly, though the country's booming private education market sets it up for tax targeting, it also reaffirms an educational demand being far from satiated. Taxing that market when it has saturated is the more text-book approach that would not do us much harm to follow. Forty years ago, the country did not have any private universities, but the 79 approved by the University Grant Commission (UGC) until 2015 (as against 37 in the public sector) in conjunction with the high UCG disapproval rate (at least 12 campuses by 2015) suggests how an application fee for all applicants could be a softer and more palatable tax, while also dissuading weak applications from being submitted. The rent collected would not match what the proposed 7.5 per cent VAT revenue would fetch, but then the expected VAT revenue is too small to rationalise as being necessary for the country's proliferating development needs in the first place. Shifting it elsewhere exposes a redundancy also worth calibrating.
Third, since this development imperative drove the tax proposal, could not the same revenue be obtained from a less sensitive sector, one that reflects conspicuous consumption rather than our education birthright? Without getting into the highly-taxed automobile imports, could not a moderate tax on recreational clubs or foreign travel net the same revenue at lower costs, and even lower disruption, for all? Of course, these would not be popular since taxes never are, but neither club members nor foreign travellers would band together to block streets and disrupt traffic at the expense of typical day-to-day businesses? These stoppages rupture the slowly resurging businessmen confidence following the disruptive 2013-4 hartals and obborodhs: foreign businesses pondered emigrating, domestic businesses stood on the brink of bankruptcy, and foreign visitors delayed their trips while our own desirous travellers might have found a foreign destination more appealing than a domestic, thus unnecessarily impinging our foreign exchange balances? With the education market still below capacity, why dampen it further when alternate revenue sources exist?
Retreating from the tax proposal indicated the protagonists (the government and students) can be on the same page. Reaping the harvests should become the common goal: MDG fulfilment and middle-income status consolidation would generate a befitting background to celebrate our 50th anniversary festivities if we allow that to happen. One important step has been taken in this respect.
The writer is Professor, International Relations, formerly Universidad Iberoamericana,
Mexico City.
inv198@hotmail.com
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