Graduate Tax: is it really that absurd?

2013-02-07 09:34

I wake up today and the burning issue being discussed is this mooted Graduate Tax. People in social networks are up in arms at even the suggestion of this additional tax on Graduates. And so I come in asking, is it really as absurd as it’s made out to be?

And may I add, those already opposing this proposal have no idea how it will even work, or how much that extra tax will be. But hey, it always feels good to whine and complain. Is it fear of the unknown? Or is hatred for the ANC pushing everyone to automatically take the oppositional stance without even getting the details?

The govt is proposing a Graduate Tax, whereby tertiary education would be free for everyone, then an extra tax payable after graduation by Graduates. Good or Bad?

Well, I don’t have the details of how this will work, but I’ve already seen a lot of voices against it. I’ve decided to take a different stance, just for the sake of a debate.

Maybe let’s look at a Graduate Tax vs. the NSFAS loan system or a straight Student Loan from a bank. Which is better?

With the Loan System, poor kids have access to funding for their studies, and then have to pay the loan back when they start working. The loan is also interest bearing, so those ‘poor kids’ are stuck with that increasing debt for a fair share of their early working lives.Kids from well off families will just pay their own way; kids who get bursaries & sponsorships will also have their fees taken care of. Which is better?

The ‘poor kids’ who use Loan, will graduate with a debt burden on their shoulders which they will have to pay back. The other kids will start their working lives with no debt. And so the better-off kids continue getting better, while the worse-off kids are lagging behind because a portion of their income has to service this debt. The rich get richer, and the poor get poorer.

With the Graduate Tax system, everyone is on the ‘same’ level post-graduation. Everyone has the ‘same’ disposable income after all taxes. Everyone has the same opportunity in advancing themselves towards a better life. The tax is not ‘debt’ per se, except everyone has to pay it. Not interest bearing either.

But of course, the kids from well-off families will be very quick to oppose the Graduate Tax system because they feel they are indirectly paying for the kids who are from not-so-well-off backgrounds. And to them, that is absurd, criminal, outrageous.

It has been proposed in the UK and in Ireland, looks like it’s still hanging in the air. But of course, in South Africa we have different dynamics – so what works for them may not necessarily work for us, and vice versa.

I do not think the government would put the Tax at an additional 5% or anything that ridiculous. It could well be in the 0.5 - 1% range. And face it, most graduates cannot tell you how much tax they are paying anyway. What is you effective tax rate on your salary? You don’t know. My point exactly. So why would paying an extra 0.5%-1% mean you’re being robbed or pushed back into poverty?

If the minister of Finance, in his budget delivery, would announce that the tax rate is going up by 1% across all tax-brackets, we would keep quiet and just accept that it’s necessary. But with this specific tax, no, “it’s daylight robbery”, we say. What informs that view, I ask.

You already pay a lot of levies you’re probably not even aware of from your salary and you’re not complaining – but now you think 0.5% is absurd, simply because you shouldn’t be subsidising someone else’s education? Just because you can pay for your own fees, so why bother.

Ask someone who’s busy paying off their study loan (NSFAS or Bank loan). Some have even been blacklisted for failing to pay (even by NSFAS) – simply because they had other priorities. Let’s hear from them which system would have been better for them.

Hear me well, I’m not saying Graduate Tax is the ideal solution. I’m just saying let it be debated. Let’s properly look at the pros and cons, from everybody’s perspective.

Maybe the ANC government will at some point consider it appropriate to let us have their reasoning for adopting this policy and how it will work exactly.

I say le'ts wait for the details, then voice our real, informed opinions.

Thank You. And of course, you can follow me on Twitter @xolanik

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