Graduate tax would not be fair – economist

The ongoing issue of the cost of tertiary education in South Africa, together with the #FeesMustFall movement, lead to the establishment of a Fees Commission of Inquiry into university funding. Universities South Africa has reportedly suggested that working graduates should be taxed to help fund tertiary education costs.

Mike Schussler, director at economists.co.za, has said that a proposed university/graduate tax would not be fair as just a tax. “I think that government loans must first be collected by those that got them and now also earn more than R6 000 pm. Or perhaps say R10 000 pm. That would help fill the university funds (quota) again and this can and should be collected by SARS. Loans must be paid back by the people who benefitted from them. Those that did not get a government loan but a private bank loan have to already pay that back so they would pay double if they also have to pay a university tax.”

In addition, Schussler highlighted that this is not a sustainable way to fund tertiary education. Universities rather need to be funded via payments made by students or loan repayments. “We need quality education and committed students who understand that it is their money that they will have to pay back,” whether they make it or not. If they do not make it or even if they do make it.”

While not certain on the exact implications that such a tax would have on the tax base in South Africa, Schussler noted that it would hurt the tax paying population. Schussler stated: “An extra 25% tax on the minimum of 18% would actually really hurt. I think we really need to think about this and how much is charged.”

Schussler concluded by highlighting that the user-pays-principle is utilised in other services, such as toll roads, and questions why this principle is not implemented for people that receive study loans.

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