Uganda needs a not-for-profit law
May 20, 2009
LAST week Uganda Christian University (UCU) was listed along with some rather wealthy entrepreneurs as a “tax defaulter†(The New Vision May 7) and receiving unfair “tax waivers†(The New Vision May 8). Whatever the merit of Government awarding t
By The Rev. Prof. Stephen Noll
LAST week Uganda Christian University (UCU) was listed along with some rather wealthy entrepreneurs as a “tax defaulter†(The New Vision May 7) and receiving unfair “tax waivers†(The New Vision May 8). Whatever the merit of Government awarding tax incentives to businessmen, our situation is quite different.
However, the publicity serves to highlight a basic need in the governance of Uganda: an effective not-for-profit law. More than 10 years ago, Uganda, at the insistence of the World Bank and the International Monetary Fund, abolished tax benefits for all charitable non-profit organisations, including income (corporation) tax and Value Added Tax (VAT). I shall limit my argument to the case of higher education.
Last year, I found myself campaigning to exempt not-for-profit universities from corporation tax. The happy result of this effort was the budget announcement last June that henceforth all educational institutions would be exempt from corporation tax. While I am gratified by this decision, it also worries me because it does not distinguish between for-profit and not-for-profit schools. The next Government may decide that it cannot afford this “gift†and withdraw it.
Five years ago, I lobbied Parliament on behalf of the Vice-Chancellors’ Forum to revise the VAT statute to include not-for-profit universities in a schedule for tax exemption. I was advised that Government was not prepared to enact such a provision for fear it would be abused, but that universities could apply for exemption on a case-by-case basis. This is the origin of the “tax waivers†reported last week.
I am grateful that our university has received some relief from this offer, but it is potentially unfair. So what is the solution: to tax universities to the hilt?
Before jumping to this conclusion, let me point out that the same newspapers publish regular articles claiming that university fees are too high for poor families. I am touched that many families struggle to pay school fees at all levels. At UCU, we have scholarships for 800 students, more than 10% of the total. But that still is only 10%.
What do we do? Some would say, just keep the fees as they are. That is fine so long as you think of education as sitting with a barefoot teacher under a mango tree, with no PhDs, books, computers or laboratories! But if Uganda wants to compete in the global education market, it must be prepared to pay for it.
The National Council for Higher Education estimates that the “unit cost†of a university education ranges from sh9m to sh27m per student per year, depending on the course of study. Now compare that with the fees charged at any university in this country. Nowhere close!
But don’t we get direct Government support? Over the past nine years, UCU has received direct transfers from Government totalling sh25m. It is simply a fact of Government policy that primary and secondary education get the lion’s share of funding, with public universities getting the remainder.
Some people think because I am American and the Church of Uganda is Anglican that we get huge amounts of external funding. That is not true. Yes, many of those 800 scholarships come from overseas sponsors. However, like all other private universities in this country, 95% of our recurrent income comes from fees from students.
Finally, there is an assumption that no one runs an institution without “eating†part of its proceeds. This is sad. There is a long history of missionaries and martyrs in Uganda who gave their all for love of God and fellow man. Several of the new universities have this religious foundation and motivation.
But even if some universities are truly charitable, won’t others cheat? No doubt some will try. That is why we have a National Council for Higher Education, charters and annual external audits. Why punish those who abide by the law for fear that some might break it?
I believe Uganda has come of age and needs a well-written not-for-profit law. I believe donor patrons should accept such a law and hold recipients accountable. Then I would not have to apologise for being a “tax defaulter.â€
The writer is the Vice-Chancellor Uganda Christian University
LAST week Uganda Christian University (UCU) was listed along with some rather wealthy entrepreneurs as a “tax defaulter†(The New Vision May 7) and receiving unfair “tax waivers†(The New Vision May 8). Whatever the merit of Government awarding tax incentives to businessmen, our situation is quite different.
However, the publicity serves to highlight a basic need in the governance of Uganda: an effective not-for-profit law. More than 10 years ago, Uganda, at the insistence of the World Bank and the International Monetary Fund, abolished tax benefits for all charitable non-profit organisations, including income (corporation) tax and Value Added Tax (VAT). I shall limit my argument to the case of higher education.
Last year, I found myself campaigning to exempt not-for-profit universities from corporation tax. The happy result of this effort was the budget announcement last June that henceforth all educational institutions would be exempt from corporation tax. While I am gratified by this decision, it also worries me because it does not distinguish between for-profit and not-for-profit schools. The next Government may decide that it cannot afford this “gift†and withdraw it.
Five years ago, I lobbied Parliament on behalf of the Vice-Chancellors’ Forum to revise the VAT statute to include not-for-profit universities in a schedule for tax exemption. I was advised that Government was not prepared to enact such a provision for fear it would be abused, but that universities could apply for exemption on a case-by-case basis. This is the origin of the “tax waivers†reported last week.
I am grateful that our university has received some relief from this offer, but it is potentially unfair. So what is the solution: to tax universities to the hilt?
Before jumping to this conclusion, let me point out that the same newspapers publish regular articles claiming that university fees are too high for poor families. I am touched that many families struggle to pay school fees at all levels. At UCU, we have scholarships for 800 students, more than 10% of the total. But that still is only 10%.
What do we do? Some would say, just keep the fees as they are. That is fine so long as you think of education as sitting with a barefoot teacher under a mango tree, with no PhDs, books, computers or laboratories! But if Uganda wants to compete in the global education market, it must be prepared to pay for it.
The National Council for Higher Education estimates that the “unit cost†of a university education ranges from sh9m to sh27m per student per year, depending on the course of study. Now compare that with the fees charged at any university in this country. Nowhere close!
But don’t we get direct Government support? Over the past nine years, UCU has received direct transfers from Government totalling sh25m. It is simply a fact of Government policy that primary and secondary education get the lion’s share of funding, with public universities getting the remainder.
Some people think because I am American and the Church of Uganda is Anglican that we get huge amounts of external funding. That is not true. Yes, many of those 800 scholarships come from overseas sponsors. However, like all other private universities in this country, 95% of our recurrent income comes from fees from students.
Finally, there is an assumption that no one runs an institution without “eating†part of its proceeds. This is sad. There is a long history of missionaries and martyrs in Uganda who gave their all for love of God and fellow man. Several of the new universities have this religious foundation and motivation.
But even if some universities are truly charitable, won’t others cheat? No doubt some will try. That is why we have a National Council for Higher Education, charters and annual external audits. Why punish those who abide by the law for fear that some might break it?
I believe Uganda has come of age and needs a well-written not-for-profit law. I believe donor patrons should accept such a law and hold recipients accountable. Then I would not have to apologise for being a “tax defaulter.â€
The writer is the Vice-Chancellor Uganda Christian University