Latest update March 28th, 2024 12:59 AM
Apr 04, 2017 Features / Columnists, Peeping Tom
The decision to implement the value added tax on private tuition fees is myopic. It strictly based on raising tax revenues while undermining a much more important source of revenue through educational exports.
It is not properly thought out. It fails to take account of the value of education in general to all areas of national life. It also fails to consider the benefits government derives from private education. It assumes that the demand for educational services relative to price is inelastic.
It is wrong. The government has been enticed by the fact that school fees at certain private schools collectively total more than two billion dollars per year. This means that government, by applying VAT to private tuition fees can rake in more than 240 million per year.
What the government does not realize is that once parents have to pay 14%, the enrollment levels will decline, because right now there are persons who are throwing box-hand and borrowing money to pay their children’s private school fees. So once those fees increase, those parents will not be able to afford to send their children to private schools. The government’s tax take will therefore be reduced.
The VAT on private school fees does not just apply to private nursery, primary and secondary schools. It will also apply, if it has not done so already, to those schools engaged in offering educational services to non-nationals such as the private medical schools and the proposed law school.
The private medical schools attract a great deal of persons from overseas. Their tuition fees are paid for by their parents and sponsors. It is a source of foreign exchange and is akin to export earnings, since its represents inflows to the country.
The reason why these foreign students and the many others who will follow have chosen Guyana, is because of the comparative advantage of studying and living in Guyana while studying. There are few countries in this part of the world, except for Cuba, where you can earn a medical degree at such a cheap cost as is charged by the local medical schools. Housing and food costs are also relatively cheap compared to other destinations in the Caribbean.
The reason why investors have entered into an agreement to establish a law school in Guyana is because of Guyana’s comparative advantage in providing such a service. Those behind the project have already said that it will cost students less to pursue the Legal Education Certificate here rather than elsewhere. They were hoping to attract students from outside of Guyana was well. They were not aware of the time that VAT on private tuition fees was on the table. Now that they are, it will cause them to examine how much of their comparative advantage has been eroded.
VAT on private tuition fees is myopic because it fails to consider the linkages between private education and other areas of the economy. Private education can be a money-spinner for Guyana. Investors have recognized this, and it for this reason that private medical schools and other educational services are being established here.
The VAT on private education is anti-competitive. It is based on a narrow vision of simply making money for the government rather than generating wealth within society.
Instead of taxing private education, the government should have been incentivizing education, because it benefits every single sector. The costs to business and government of having to train workers are high. Private education is a means to help government reduce these costs. But you cannot encourage private education if you are going to tax the students’ tuition fees.
The tax is going to scare away investors. Which investor is going to want to come to Guyana and have to deal with a 14% VAT on the educational services provided, on top of the high income and corporation taxes which are due? Investment in private education is going to dry up.
The VAT on private tuition fees is discriminatory. It will turn-off investors, because they probably have never heard about VAT on private education in the Caribbean.
The VAT on private school fees will have to be borne by students. It will make education costlier. It will make Guyana’s private educational services more expensive.
Guyana should be selling itself as the place for people to come and study because of the relative cheap cost of education, housing and cost of living. Instead we are selling ourselves as taxers of private education.
THIS IDIOT TELLING GUYANA WE HAVE NO SAY IN THE 50% PROFIT SHARING AGREEMENT WE HAVE WITH EXXON.
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