I have read several articles in the papers referencing to President Museveni’s promise to scrap income tax on schools. Admittedly there seems to be scanty information about the reasons for this and the import of such an exemption. My immediate unease is the generalisation of the word ‘private’ in Uganda. In Uganda, anything labelled ‘private’ will usually mean an enterprise that is established for personal gain. Therefore, many of the articles I have read about this subject assume this to be the case. However, the more liberal meaning must be preferred here, that private refers to education institutions whose proprietorship is other than government or public ownership.
There are at least two truths that are pertinent to this discussion and which recent articles have ignored and hence have made flawed conclusions. The first is that education in general is a ‘public good’. That is, education is an essential good and is indispensable to national development.
Furthermore, all nations that have extricated themselves from the so-called ‘third world’ to a developed world have in particular, emphasised growing a higher education cadre of human resource. Of course, higher education cannot exist without the education levels that feed into it, or even the vocational education.
Let’s study countries such as Singapore and other ‘Asian tigers’, or the Republic of Ireland. All these are contemporary examples worth our consideration. There is also overwhelming evidence to show that more education results in other social-economic benefits. It has been said, “If you think education is expensive, try ignorance!” This dictum recognises, albeit humorously, the long lasting benefits of education against the indelible damage of ignorance to a society.
The second truth concerns the kind of support that government needs to extend to the public good availed in private education. I have never advocated for blanket tax relief to private education institutions, and indeed it can be harmful. The common practice in most nations is to first make a distinction between ‘for-profit’ and ‘not-for-profit’ (education) institutions. The same may be applied to health services as well.
We have argued often before the Finance ministry and before Parliament, that this delineation is vital to this discussion. There are unfortunately three impediments. One is lethargy about such distinctions. The second is the laziness to promulgate researched policies in Uganda. The third is a nation where truth and honesty are grossly undervalued such that the taxman distrusts every taxpayer. All taxpayers are guilty of tax evasion until proven innocent.
This distinction calls for definitions in law of the nature of a not-for-profit institution. This does not exist in any concrete way in Uganda. So how can anyone know which institution qualifies for tax relief and which one does not? Such a definition would come with regulatory stipulations to ensure the categorisation is adhered to.
If education is a public good, it is only right that government gives tax break support exclusively to not-for-profit private education institutions. It is self-evident that government owes education, and higher education as well, to its citizenry. When private education institutions offer education, they are in essence supporting government.
These institutions do not ask for direct financial backing from government. In fact, this is undesirable for many of these institutions as it may compromise their identity in the long-run. Therefore, in most nations, governments use tax relief as ‘financial support’ to not-for-profit education institutions; then government does not take away the money they need to grow.
There is further rationale in this practice. The students in private education institutions are as much citizens as those in public institutions. Their choice to study in private institutions is not a crime. In fact, public institutions are sustained by the taxes of all Ugandans. Taxing these institutions is double taxation as it levies a tax that is passed on to the same parents who have paid the taxes to run public institutions.
It is for this reason that many nations allow different levels of fees for national than for foreign students. It is argued that the national student has already paid the taxes to maintain the nation’s social and development infrastructure. The foreign student enjoys these services without contributing to them.
I need to say something about the caliber of students that go to private higher education institutions. It has been noted many times that students from rich families attend elite schools, which give them the silver bullet to access government scholarships.
Those from poorer families attend poorer schools, often scoring lower and missing government scholarships. They eventually end up in private institutions. I am sure even those who advocate for indiscriminate taxation of all private institutions will cringe from the idea that the poor be taxed to fund the rich in public institutions.
Finally, it is clear that public education institutions cannot absorb all the students on market. This is more than a fact of our unfortunate history, which made it difficult for new schools to be established. Even developed nations recognise and accept this necessity. Indeed, this alleviates the burden on government revenue that never suffices.
So these institutions must not be seen like an aberration or an enemy to public good. They deserve to be supported.
Education institutions that offer education for profit must be made to pay income tax, at least in the foreseeable future. However, the President is right to give tax relief to institutions that demonstrably ply back any surpluses into the institution to support government efforts to offer education to our people. Let us stop the hostile and ignorant opposition to such efforts.
Dr Senyonyi is the Vice Chancellor, Uganda Christian University