Moalims

IT can be said with some justification that there is no tax on education except the one imposed by the federal government which is being collected by the Federal Board of Revenue (FBR) as an ‘advance tax’. The primary objective of it is not to burden low-income groups and to collect it from those who are in a position to pay.

Since it is being collected as an ‘advance tax’ at the rate of five per cent from parents who pay annual fee of their children above Rs200,000 per annum, it helps the FBR in monitoring the real income of educational institutions to collect due tax from them.

The ‘advance tax’ collected by educational institutions from parents is adjustable at the time of filing of tax returns against other income. This means it also gives an incentive to individuals to come into the tax net.

However, many argue that people in the higher bracket income should be taxed at a much higher rate so that the low-income people may afford to get their children educated. Higher taxes would also help improve government expenditure on education as percentage of GDP which stands among the lowest at 2.5pc and ranks 164 out of 173 countries.

Tax consultant Younus Rizwani Sheikh told Dawn that tax on education should be imposed because many private schools’ tuition fee and other charges are very high and it should be so designed that most of the schools should fall under the net.

However, he stressed, the FBR should disclose the amount collected on account of tax on education and where it is spent because the government keeps taxing people on different accounts but never discloses its utilisation.

Responding to a question, he said educational institutions’ income was being taxed by the FBR under ‘Tax rates for non-salaried individuals and AOPs with minimum income of Rs500,000 being taxed at 7pc and income exceeding Rs6,000,000 at Rs1,319,500 + 35 per cent.

Punjab Revenue Authority (PRA) Chairman Raheel Ahmed Siddiqui said sales tax on franchise schools was imposed at 16pc but the same was withdrawn on July 1, 2015. Therefore, sales tax on direct educational services was never imposed because the government does not want to make education any costlier.

He further said that Punjab Chief Minister Shahbaz Sharif is of the opinion that sales tax on education means more burden on the parents. There is no future plan to impose sales tax on education, he added.

Advisor to Sindh Revenue Board (SRB) Syed Mushtaq Kazmi said the provincial government has not so far levied sales tax on educational institutions irrespective of their income. If the government so desires, education could be classified as a service and sales tax could be imposed, he added.

He further said that the provincial government in the last finance bill did suggest imposing eight per cent sales tax on education but “somehow” it was deleted before reaching the provincial assembly. Responding to a question, Kazmi said that presently 42 services were being taxed by SRB with major being banking, insurance, port operations, telecom, hotels and restaurants etc

After the 18th Amendment, education was devolved to provinces and under new Article 25A, as has been inserted in Section 9 of the Constitution, “The state shall provide free and compulsory education to all children of the age of five to 16 years in such a manner as may be determined by law,” he maintained.

Kazmi said that when the state is responsible for imparting education, resources would be needed and there should be no confusion about imposing sales tax on educational services by all the federating units.

Published in Dawn, April 3rd, 2016