The federal government has increase in school tax for higher education institutions from 2% to 2.5%.
This is contained in the 2021 finance law.
Taiwo Oyedele, Fiscal Policy Partner and Head of Tax for Africa at PwC, explained in a zoom meeting on Saturday while breaking down the implications of the new taxes embedded in the Finance Bill 2021 in the Nigerian Economic Outlook 2022 organized by the King’s Court, Redeemed Christian Church of God.
Oyedele said public educational institutions would be liable for corporation tax (CIT), even if they were previously exempt.
“Before this change, public educational establishments were not liable for corporation tax. Now they would be responsible. Moving on to higher education tax, the tax rate was increased from 2% to 2.5%,” Oyedele said.
Giving an overview of the development, he explained that the school tax was introduced in the early 1990s and has been very effective in raise the level of education.
However, he explained that the winnings could now be forfeited.
– Advertising –
“The school tax was introduced in 1993. The objective was very clear because it touched the heart of everything in terms of development, capacity and exercise of roles. At the time this tax was introduced, a number of Nigerian universities were in the top 1,000 of the ranking. Fast forward to 2022, they are no longer in the top 1000.
“Now we are increasing it from 2% to 2.5%. I think the challenges we have in the education sector are more than throwing more money at the problem especially since we cannot convince Nigerians how we have spent the money over the past last 10 years. I hope the Tertiary Education Trust Fund (TETFund) will have a full report of its expenditure on development, research and scientific research,” he said.
The chartered accountant, however, disapproved of the tax increase as the implications could affect the cost of tuition, which could harm the economy.
“Although I can live with the increase in taxes, I don’t understand why we are taxing them (educational institutions) because everything indicates that we need more quality education to live in this new era.
“The implication is that the tax would increase by 260 billion naira in a year for the government, but the school fees will increase, and that may come down to those of us who are parents. This could have a long-term impact on human development as we hope it will not create a bigger problem than the solution we hope to solve,” he noted.
He explained that the Nigeria Police Trust Fund imposed a levy of 0.005% to fund the police, but lawmakers did not indicate who should enforce the collection of the levy. He noted that the 2021 budget law stipulated that the responsibility for collecting this tax rests with the Federal Inland Revenue Service (FIRS).
As part of his remarks, he added that there is also the Fiscal Responsibility Act which allows government at all levels to be able to borrow for reforms of crucial national importance. “This is apart from capital expenditure and human development, which we had planned before,” he said.