Why we should not impose VAT on “Privately Provided Public Goods”, like Education?


Dr. Sikder Md. Anowarul Islam

‘Private University Education’ is theoretically privately provided public goods. But the basic difference between private goods and public goods are: private goods are maximizing utility directly through exchanging transactions by monetary terms. But public goods are non- rival and non-excludable, and must be provided by the Government ownerships.

The policy makers may not be conscious about privately provided public goods like higher education in Bangladesh. They are asking Value Added Tax (VAT) on tuitions or they are imposing the same burden on private universities. If the private university agrees to provide VAT on tuitions or any education products-they may be free implicitly to provide privately produced public goods as they agreed to supply on behalf of the Government as per “Private University Act.2010”.

Because, when Government asked to pay VAT on tuitions, they officially agreed that private university education in Bangladesh is industrial goods, and the private university authority may take this opportunity to make private education as industrial goods in their future interest, and the global best brand of education industry may take this opportunity to enter into our promising market. They will sell private education in the competitive market. As well as, they may take more tuition fees for branding of their education product. And gradually, Government needs not to be accredited private universities by UGC and the PU act.

In many industrial countries, when they want to provide high quality education through research and development in private sector, they take high tuitions to provide high quality education on average graded students.

Hence, rich can take this opportunity, and teachers are well paid and corporate environment emerged in this sectors. It is very difficult to make efficient average graded students without quality and smart teachers in this sector. But unfortunately, they are costly. Imposing VAT on education will increase the cost of service in university education in long run. If the tuition fees are intervened by the Governments in some other reasons, private university cannot afford quality teachers especially educated from industrial countries like Japan, USA and European countries. The quality of equation will decrease with a vision to exporting quality human resources in industrial countries since the quality insured by price in industrial countries.

Already private university market trend is reducing due to unavailability of quality teachers by indigenous foreign educated graduates. And they, Private University Management (MOM), have no intention to upgrade their existing human resources except new recruitments when they drastically need. This tendency will cost more for private universities in long run if the senior or quality faculty crises are started to begin.

We are asking to supply private sectors for privately provided public goods of higher education by the Private University Act-2010, at the same time, we want to treat them as industrial goods by asking or imposing VAT on tuitions.

Why this duality for higher education in Bangladesh? Who will benefit by this imposition on VAT in private higher education sector? Either Government, or Private University (PU) stakeholders, or someone else! (Revised Publication of Facebook Page, “Business and Economic Post” on September 11, 2011 )

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