Higher education up the creek

Published June 21, 2024
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

IF memory serves me right, the following is from one of Mushtaq Yousufi’s books, possibly Zargazisht. He says that every time he went to his boss, who was a Scotsman, to ask for a raise, his boss would say, as soon as Yousufi entered the room, ‘Yousufi, it is good you are here, we have to fire some people’. Ten minutes later, Yousufi would leave the office very grateful that he was not one of those who was fired.

When the government first announced that it was cutting the budget for higher education, and later, with great magnanimity, announced it would restore it to last year’s level, it reminded me of this story. And the government also expects us to be thankful.

The number of universities keeps going up as provincial and federal governments bestow new charters and upgrade colleges. But the Higher Education Commission’s funds have not been increased for several years. This despite the inflation. It is not surprising that many universities, even the more established, older ones, are under grave financial stress.

This year, too, while the HEC budget did not go up, salaries went up by 20 per cent and inflation has been around 15pc. Public-sector universities, which the agency funds, will continue to hurt and the hurt will keep getting deeper. Some might face default on salary or pension payments as well.

But this year’s budget has more bad news for the higher education sector. Teachers and researchers had a 25pc income tax rebate (it was 50pc for the first few years) that had been given a couple of decades back. This has been taken away in this budget. This implies even if universities give a 15pc raise this year, with the removal of the rebate and with the income tax slab adjustments that have been imposed on salaried teachers/researchers, the latter will have less take-home than they did last year. And these are times of high inflation!

This year’s budget has more bad news for the higher education sector.

We have a shortage of teachers in Pakistan. At the higher education level, it has been hard to find or hold on to faculty. Our application pools have dwindled. Those with PhD degrees do not want to come back to Pakistan, and many of those who are here want to leave. Many have left, and many others continue to look for opportunities abroad.

Hitting the salaries of teachers and researchers in this manner and in these times clearly shows that the government does not attach much priority to education despite all the rhetoric about an education emergency. It is not as if this measure is going to give the government any sizable amount of revenue. But it will have a big impact on individuals who have been hit and on universities and their budgets.

Another taxation proposal is also set to strike not-for-profit universities. Currently, the tax commissioner is empowered to issue exemption certificates in cases where a person’s income is exempt from tax as is the case with not-for-profit universities. These universities rely on this certificate to ensure that no tax is withheld on their behalf by withholding agents.

The Finance Bill 2024 proposes to withdraw the commissioner’s power to issue exemption at 100pc and allows him/her to only issue exemptions at a lower rate. This will hurt in two ways. For not-for-profit universities this means that tax will be held in their name but they will not be able to adjust this tax as they will not have any tax liability to adjust against at the end of the year. And getting refunds from the FBR is not easy and everyone knows that it will not happen. So, the working capital needs of universities will be hurt and a liability will be created against the FBR for no reason.

This change will also create opportunities for nepotism, favouritism and rishwat where commissioners will be lobbied to issue exemption certificates at a higher percentage rate. It is a harsh proposal that will not give the government any revenue and will not raise tax income but will open the door for lobbying for refunds as well — again, leading to more graft and nepotism.

If all of this were not enough, the government, in its belief that the Pakistani people read too much and should be doing other things, has raised the general sales tax on books. Books have become a lot more expensive over the last two to three years due to a) an increase in the price of paper and b) devaluation. As it is, the local book business is not a huge one and the recent price hikes have hit it badly.

The rise in GST will hurt even more. Imported books have become expensive and retailers have been seeing the impact. Raising GST on books will make it even more difficult to sell books. Educationists were already very concerned about the lack of a reading culture vis-à-vis our youth. On the one hand and as part of the education emergency, the government has been introducing ‘reading’ hours in schools to improve foundational learning, and on the other, GST on books has been raised.

More taxes are needed. But it cannot be a policy that we just impose taxes blindly wherever we see an opportunity to be able to extract or extort taxes. We have to realise that taxes have consequences. We are doing poorly in education already. We have been cutting funding for higher education and funding for school education is barely keeping up with inflation. Parents are hurting due to rising tuition fee and other costs.

To hit the education sector through the various tax measures mentioned seems very unfair. One hopes that the Senate and House debate on the budget will take these issues into consideration.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

Published in Dawn, June 21st, 2024

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