Tax on colleges likely to affect education quality

JAKARTA (JP): The government's plan to start taxing higher education institutions could have negative consequences on the state of education in Indonesia, a leading college administrator says.

Bunyamin Ramto, the chairman of the BMPTS, the communication forum encompassing all private higher education institutions, warned on Saturday that the tax could force some colleges to close down, or, in the case of the larger colleges, to reduce the range of subjects they offer in order to cut costs.

He said many of these private colleges are already suffering financial losses, others are barely breaking even.

"Most private universities, especially those outside Jakarta, have not even reached the break-event point," Bunyamin said.

"The tax would deter their efforts to enhance the quality and quantity of education services", he told reporters after meeting with other forum executives.

He said the more established universities use their financial surplus to subsidize faculties that are not profitable.

The Ministry of Finance early this month sent around a circular to remind all the foundations managing private colleges that they all, with no exceptions, must pay income tax for virtually all revenues generated .

The circular said that admission fees, administration fees, tuition fees and all other incomes derived by colleges will be subject to income tax beginning this month. The rule is based on the newly-revised 1994 tax law. Previously, foundations were exempt from income tax.

Private universities and colleges have been meeting the increasing demand for higher education services because of the limited number of seats at state-run universities.

They are still widely seen as a second choice for most students because, with the exception of one or two, they are considered inferior to state-run universities.

Their tuition fees are also higher than those charged by state colleges, which receive government subsidies.

One leading private university in Jakarta, for example, charges between Rp 4 million ($1,700) and Rp 8 million ($3,500) for admission to its school of economics. It charges another Rp 4 million in annual tuition fees.

In contrast, the University of Indonesia charges a Rp 400,000 admission fee and another Rp 400,000 in annual tuition fees.

Bunyamin explained that a university normally reaches its break event point if it has at least 6,000 students.

"Universities with less than 6,000 students usually seek support from other sources such as donors, foreign aid, or bank credits," he said.

There are currently 1,159 private universities and colleges in Indonesia, most of them with less than 6000 students, he said.

In Jakarta, only a small percentage of the 189 private universities and colleges are breaking even, he said. "The condition outside Jakarta is even worse, with many running with only 1,000 students or so".

Bunyamin said the forum which he chairs is still studying the full effect of the tax.

He said he hoped the government would reconsider bearing in mind the role that private universities and colleges play in providing education in the country.

He denied that these foundations are raking in profits from running the universities, saying that any profits go toward the building of new facilities and to hire lecturers.

The tax, if imposed, would block efforts to improve education in Indonesia, he added. (03)