EGYPT: Private universities hit by revenue tax

Egypt's private higher education institutions, which have sprung up in recent years, are considering raising tuition fees following a decision by the government to levy a 20% tax on their annual revenues. The tax move came as a surprise to institutions and will have negative impacts on universities and parents, said Khaled el-Tokhi, chairman of the board of trustees at the privately owned Misr University for Sciences and Technology near Cairo.

"Private universities, which are basically non-profit institutions, will find themselves forced to hike up fees in the next academic year," el-Tokhi told University World News. "The new tax will erode allocations for scientific research in these universities too," he added.

On 5 May the government rammed a draft bill on a package of economic measures through parliament. The measures included increases in fuel and tobacco prices, and in vehicle licence fees. Tax breaks for private educational institutions were scrapped. The measures were endorsed by parliament, dominated by the ruling National Democratic Party, on the same day - bringing the government under heavy fire from the opposition.

Answering its critics, the government said the measures were necessary to finance a 20% hike in public sector salaries, which President Hosni Mubarak announced in a May Day address. Officials estimated the cost of the pay rise at LE12.5 billion (US$2.8 billion).

Egypt, a major North African and Middle Eastern country of 76 million people, has 18 government-run universities attended by 2.3 million students, according to official figures. Until the early 1990s, higher education was dominated by state universities. But with these under-funded institutions bursting at the seams with students, the government allowed the creation of fee-paying universities. In the past 18 years, 16 private universities have been established. No confirmed figures are available on the number of students they teach.

The new institutions, established mostly in new communities outside the Egyptian capital, have attracted enrolments from wealthy parents who used to send their children to receive higher education in countries such as Lebanon, Romania and Hungary. Students with low grades from secondary school examinations, who find it hard to secure a place at state universities, also apply to fee-paying institutions.

Disappointed at the removal of tax breaks, some owners of private institutions say they may have no option but to raise fees by as much as 30%. Others say the new tax will drive them out of the business.

"Levying a tax on private universities and schools is set to damage Egypt's image abroad because education worldwide is not subjected to taxes," said Sayed Tunisi, who heads the board of trustees at the private Sixth of October University, 38 kilometres south of Cairo.

Tunisi suggested that the government rather oblige students in private universities to pay a certain sum of money to be channelled to the public treasury. "We are in a developing country which needs to encourage scientific research. But this bad decision puts scientific research efforts at stake," he told University World News.

Professor Mohamed Nabil Soliman Deabes, co-founder and chair of trustees of the Modern University for Information and Technology, another private university outside Cairo, proposed that government levy an extra 5% on fees paid by students. The money raised could be pumped into a special fund to assist poor students, Deabes said.

Under Egyptian law, private institutions are entitled to increase annual fees by 5%. But Deabes said his university applied this right only to new students.

According to Mohamed Farid Khamis, a leading businessman and board chairman of the British University in Egypt, private institutions are not in a position to hike student fees because of strong rivalry among them to attract more enrolees. But Khamis told reporters the original aim of the tax exemptions was to encourage investors to set up private universities as the government was not able to do this.

"It is high time that private universities showed gratitude to the state, now that they have become strong and have made gains," he said.

Jaber Awad, dean of the Higher Institute for Sociological Studies in Qena, 600 kilometres south of Cairo, believes the government should have conducted thorough studies and consulted private higher education leaders before making the taxation decision:
"It is unfair to levy the same tax on higher education institutes which charge each student only LE500 (US$90) per year, compared to other institutions whose students fork out thousands," he told University World News: "This tax, which coincides with increases in prices of equipment necessary for education, may force many private education establishments to close their gates."

Protesting the tax, owners of private institutions (including schools) lodged an urgent memorandum with parliament, demanding that the tax be annulled, according to press reports. They stated that cancellation of their tax break violated Egypt's commitments to a Unesco agreement that obliges signatories to offer different kinds of support to education dissemination and exempt educational institutions from taxes. The owners also argued it would be unfair to tax all revenues because a portion is usually used to fund expansion, maintenance work, and research and development efforts.

Prime Minister Ahmed Nazif has sternly warned private higher education institutions against raising fees. "The government will not allow a new burden to be placed on students and their parents," he told the local press - adding that no such step could be taken without approval from the Ministry of Higher Education.