FG increases education tax to 2.5% in new Finance Act
THE Federal Government of Nigeria has increased the education tax for tertiary institutions across the country from 2 percent to 2.5 percent.
This is contained in the 2021 Finance Act.
Fiscal Policy Partner and Africa Tax Leader of PwC Taiwo Oyedele explained on Saturday in a zoom meeting while breaking down the implications of new taxes embedded in the 2021 Finance Act in the Nigerian Economic Outlook 2022 organized by the King’s Court, Redeemed Christian Church of God.
Oyedele said the educational institutions of public character would be liable to pay the company income tax (CIT), even though they were exempted formerly.
“Before this amendment, educational institutions of public character were not liable to pay CIT. Now, they would be liable. Moving on to tertiary education tax, the rate of the tax has been increased from two percent to 2.5 percent,” Oyedele said.
Giving a background to the development, he explained that the education tax was introduced in the early ’90s and it was very effective in enhancing the level of education.
However, he explained that the gains might now be lost.
“Education tax was introduced in 1993. The objective was very clear because it dealt with the heart of everything in terms of development, capacity, and performance of roles.
As at the time this tax was introduced, several Nigerian universities were in the top 1,000 rankings. Fast forward to 2022, they are no longer in the top 1,000.
“Now, we are increasing it from two percent to 2.5 percent. I think the challenges we have in the educational sector are more than throwing more money at the problem, especially since we can’t convince Nigerians how we have spent the money over the past 10 years. I hope the Tertiary Education Trust Fund (TETFund) would have a comprehensive report on how much they have been spending in terms of development, research, and scientific research,” he stated.
The chartered accountant, however, frowned at the increase in tax as the implications could affect the cost of tuition which could adversely affect the economy.
“While I can live with the tax increase, I don’t understand why we are taxing them (educational institutions) because everything points to the fact that we need more quality education for us to live in this new age.
“The implication is that the tax would go up by N260 billion in a year for the government but tuitions will go up, and this can come back to those of us who are parents. It may have a long impact on human development as we hope it doesn’t create a bigger problem than the solution we hope to address,” he noted.
He explained that the Nigeria Police Trust Fund imposed a levy of 0.005 percent to fund the Police, but the lawmakers did not provide who should enforce the collection of the tax. He noted that the Finance Act 2021 said the responsibility to collect that tax lied on the Federal Inland Revenue Service (FIRS).
As part of his remarks, he added that there was also the Fiscal Responsibility Act empowering government at all levels to be able to borrow for reforms of critical national importance. “This is aside capital expenditure and human development which is what we planned before,” he said.
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