The Hidden Cost of Cutting Tax Subsidies on Faculty 

Muhammad Murtaza Noor

Islamabad: The recent finance bill  for the financial year 2024-25, presented by the federal government includes a significant policy shift that has caused considerable concern among university faculty members and researchers. 

The bill proposes the elimination of the 25 percent tax subsidy that was previously available to university faculty, resulting in an estimated 33 percent increase in their tax liability.

This policy change is expected to have far-reaching consequences, both for the financial well-being of university faculty and the broader higher education system in Pakistan.

The removal of the tax subsidy will substantially reduce the disposable income of university faculty members. With the increased tax burden, faculty members will face greater financial strain, potentially affecting their standard of living.

This policy change comes at a time when inflation is alreay rising, and many faculty members are struggling to make ends meet. The increased tax liability will exacerbate these financial pressures, leading to reduced financial stability for many educators.

Pakistan is already spending less on education including higher education.

Read More:https://thepenpk.com/preserving-academic-excellence/

According to the recent  Economic Survey of Pakistan, only 1.5 percent of total GDP was spent on education during the last financial year. With such meagre financial allocations, the challenges in the education sector can not be overcome.

As per the promises and commitments  made in election manifestos, the ruling  political parties should allocate at least 4 percent of GDP for the education sector. Without making education priority in practical terms, we can not make progress and produce educated and skilled human resource.

The implications of this policy change extend beyond individual financial hardship. Universities in Pakistan are already grappling with reduced funding and financial constraints.

The Association of Private Sector Universities of Pakistan (APSUP) and the Association of Private Medical Institutions of Pakistan (PAMI) though a letter addressed to President, Prime Minister,  Chairman Senate and Federal Finance Minister,  called for the immediate restoration of tax rebate for teachers, researchers and the reinstatement of sales tax exemptions for non-profit organizations (NPOs) and hospitals, as proposed changes in the Finance Bill 2024 threaten to severely impact the education and healthcare sectors.

The associations stressed the urgent need for the government to reconsider these budgetary measures to ensure the continued support and development of Pakistan’s education and healthcare sectors.

Moreover, Executive Council of Federation of All Pakistan Universities Academic Staff Association (FAPUASA) also expressed serious concerns over the end of the 25 percent tax exemption for the university faculty and researchers.

They called for an immediate increase in the salaries of BPS & TTS faculty members and tax rebate to 75 percent for faculty and researchers instead of vanishing it.

It is worth mentioning that 75 percent  tax rebate was introduced by former Prime Minister Shaukat Aziz to facilitate the university faculty and researchers.

The new tax policy will add to the challenges faced by higher education institutions in attracting and retaining qualified faculty, which is crucial for maintaining the quality of education and research.

Qualified educators are the backbone of any robust higher education system, and their dissatisfaction can lead to a decline in educational standards and research output.

One of the most significant concerns is the potential impact on the recruitment and retention of university faculty.

The increased tax burden may discourage highly qualified individuals from pursuing academic careers in Pakistan, opting instead for opportunities abroad where financial incentives might be more favorable.

This brain drain can weaken the country’s academic institutions, reducing their competitiveness on a global scale and hindering their ability to produce high-quality research and graduates.

Read More:https://thepenpk.com/sustainable-strategies-for-higher-education/

According to the vice chancellor of one of the leading universities, many qualified university faculty members are opting for joining foreign universities due to better financial packages and other perks.

In the long term, the policy could have detrimental effects on the quality of higher education in Pakistan.

Universities might struggle to fill faculty positions with adequately qualified candidates, leading to larger class sizes, reduced individual attention for students, and potentially lower educational outcomes.

Additionally, the research output, which is vital for innovation and national development, could suffer due to the departure of skilled researchers.

The elimination of the 25 percent tax subsidy for university faculty, as proposed in the new finance bill, represents a significant shift with potentially damaging consequences for higher education in Pakistan.

It threatens the financial stability of faculty members and poses serious challenges for universities in terms of faculty retention and recruitment.

In the context of already reduced funding for higher education, this policy change could further undermine the quality and sustainability of Pakistan’s higher education system, with long-term repercussions for the country’s development and competitiveness.

It is imperative that the government reviews this policy supporting the faculty and researchers who play a critical role in shaping the future of the nation.

The writer is analyst, higher education expert and columnist.