Proposal for tax on graduates is shot down
THE NATIONAL Treasury appears to have shot down proposals for a tax on graduates to fund higher education.
The Budget review said several groups had put forward the idea of a graduate tax to be levied directly on all university graduates.
The proposal followed student protests last year that led to government announcing several adjustments to university fees and appointing a commission to assess the feasibility of free higher education and training.
The review stressed that given the budget constraints, allocating more funds for post-school education would require either reprioritisation of funds from other programmes or an increase in tax revenues. The idea of a graduate tax offered several potential advantages, including effectively targeting private returns to higher education.
However, it said such a tax was unlikely to raise the revenues needed to fund universities. “In 2011, there were about 1.3 million individuals who had completed a degree, and about 80 000 individuals graduated in 2014.
“The National Treasury estimates that if each new graduate faced a one percentage point increase in their marginal tax rate, the tax would raise about R200 million in the first year.
“If the increase applied to
all graduates, it could generate about R3 billion annually,” it said. But the review said the 26 public universities spent R59.8bn to operate in 2015.
It said the National Development Planrecognised that South Africa needed high quality education and training to build a skilled and capable workforce to support inclusive growth.
Finance Minister Pravin Gordhan said yesterday that a substantial allocation to higher education was again proposed in the Budget, adding R5bn in the outer year of the medium term expenditure framework to the R32bn previously announced.
“The government has provided funds to ensure that no student whose combined family income is below R600 000 per annum will face fee increases at universities and technical and vocational education and training (TVET) colleges for 2017.
“All poor students who applied and qualified for National Student Financial Aid Scheme awards, and who have been accepted by a university or a TVET college, will be supported,” he said.
Gordhan added that given the magnitude of student funding requirements, it was imperative that a clear road map was developed towards better higher education and training.
“It must clearly indicate how society will achieve access, opportunity, financing and support for students in the university and further education sectors,” he said.
Gordhan said several broad principles would assist in finding the way forward, adding that the government was determined to address the challenges identified in post-school education and training in a phased manner with resources taken into account in determining the pace with which these could be addressed.