Fiscal policy for incentivising education

| Updated: May 15, 2022 22:21:26

Fiscal policy for incentivising education

The total allocation for the education sector in the current fiscal year (FY22) was Tk 719.53 billion, which was only 8.68 per cent higher than the revised budget for FY21. However, education budget as a share of total budget decreased from 14 per cent in FY10 to 11.92 per cent in FY22. Education budget as a share of Gross Domestic Product (GDP) has remained stagnant during recent fiscal years. The revised education budget as a share of GDP decreased to 2.08 per cent in FY22 from 2.14 per cent in the revised budget for FY21. Education budget utilisation has been decreasing over the years, especially for development expenditure.

Therefore, it is necessary to not only increase the budget allocation and budget utilisation of the education sector, but also implement a number of fiscal measures to promote improved education and in turn maximise welfare for society. In the following exposition, fiscal measures for English medium schools, imported books, and female education stipend are proposed.

REMOVAL OF EXISTING TAXES ON EDUCATION: The right to education is a basic human right and education should be made accessible and affordable for all individuals in a country. While the government has exempted Bengali medium schools, and later private universities, from paying Value Added Tax (VAT) on tuition fees, the VAT on English medium schools continue to be at 5 per cent. It is often opined that English medium education is a luxury good and that students who study in English medium schools belong to affluent families and do not stay in the country in the long run. Obtaining education, irrespective of the source, is a basic right and should not be misconstrued as a luxury good. In their early days, English medium schools might have been suited for the privileged. However, in recent years, the dynamic has changed profusely. The number of English medium schools have proliferated over the years in Bangladesh. Many middle-income families are admitting their children to English medium schools to allow them to study in the international curriculum and gain a competitive edge in the labour market. Parents, presumably, prefer English medium education in order to provide their children with benefits that would not otherwise be available to them. English medium schools are privatised and are not recognised to have a low tuition fee. Hence the VAT on tuition fees of English medium schools puts an extended burden on the parents of middle-income families. Therefore, Centre for Policy Dialogue (CPD)  recommends that the VAT on the tuition fees for all academic institutions, including English medium schools, should be exempted in FY23, and the exemption should remain in place for an indefinite period.

Additionally, since English medium schools, follow the international curriculum, the books assigned as a part of their syllabus are all imported books written by international authors. At present the total tax incidence (TTI) on foreign printed books is at 73.96 per cent. The TTI includes 25 per cent as Customs Duty (CD), 10 per cent as Supplementary Duty (SD), 5 per cent as Advance Income Tax (AIT), 15 per cent as VAT, and 3 per cent as Regulatory Duty (RD). Such high duties on foreign books intended to provide children with quality education defeats the purpose of achieving the Sustainable Development Goal (SDG) four which aspires to "ensure inclusive and equitable quality education and promote lifelong learning and opportunities for all". As the syllabus is revised, during every academic year parents have to buy new books for their children studying in English medium schools, while bearing such a high tax incidence. This puts further strain on families' incomes, particularly those from middle-income households. Therefore, CPD recommends that all taxes and duties on foreign imported books should be exempted in FY23 to ensure that education remains affordable for all.

FEMALE EDUCATION STIPEND: The economic empowerment of women is critical to long-term success for any society. The government, private sector and the non-government organisations have all played their part in the economic empowerment of women in Bangladesh. In 1982, the government of Bangladesh initiated some social safety net programmes especially targeted towards women and girls, such as the female secondary education stipend. Results from a pilot project showed that girls' secondary enrolments increased from an average of 7.9 per cent to 14 per cent in some project areas and dropout rates fell from 14.7 per cent to 3.5 per cent. In 1994, the highly successful programme was launched nationwide. Female students received a monthly sum of money ranging from Taka 25 in Class Six  to Tk 60 in Class 10, as well as payments for new books and exam fees, on condition of a minimum of 75 per cent attendance rate, at least a 45 per cent score in annual school exams, and staying unmarried until sitting for the Secondary School Certificate (SSC) or turning 18 years old.

The female secondary education stipend programme in Bangladesh was not only effective in increasing girls' enrolment in schools, but also succeeded in providing a host of benefits, such as increasing the ratio of female students in secondary schools, improving female literacy rate, lowering fertility rate, controlling population growth rate and increasing female labour force participation. As a result of the catalytic benefits of its successful female secondary education stipend programme, Bangladesh managed to advance ahead of Pakistan in terms of several key socio-economic indicators. In 2018, girls comprised on 54 per cent of pupils in secondary schools in Bangladesh, whereas in Pakistan, only 44 per cent of secondary school pupils were girls. In 2017, adult female literacy rate was 70 per cent in Bangladesh, but only 46 per cent in Pakistan.

Unfortunately, the allocation for three kinds of education stipends were reduced in FY22. The budget allocation for the Primary School Stipend was decreased from Tk 37.12 billion in the revised budget of FY21 to Tk 19.0 billion in FY22, the budget allocation for the Secondary and Higher Secondary Stipend was decreased from Tk 28.32 billion in FY21 to Tk 18.41 billion in FY22, and the Stipends for Undergraduate and Postgraduate Level Students was decreased from Tk 0.96 billion in FY21 to Tk 0.80 billion in FY22. We propose an increase in the allocation for all education stipends to be implemented in the budget for FY23 (see the table).

Our proposed stipend reform will benefit more than two crore students at all levels, and cost the government an additional Tk 106.35 billion.


Dr Fahmida Khatun is Executive Director, Centre for Policy Dialogue (CPD); Professor Mustafizur Rahman is Distinguished Fellow, CPD; Dr Khondaker Golam Moazzem is Research Director, CPD; and Mr Towfiqul Islam Khan is Senior Research Fellow, CPD. [email protected]; [email protected]


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