Ministry of Revenue has warned private companies to properly collect cost sharing revenue.
Due to weak performance on the collection of higher education cost sharing tuition on time, the Ministry of Revenue has cautioned private companies to appropriately pay employees cost sharing tuition.
“The annual performance of revenue collected from cost sharing tuition has shown weak performance, which stems from students who are working at private institutions not paying their tuitions properly. Reasons for this unduly payment was either noted as lack of awareness, and or carelessness of the student,” stated the ministry.
Ethiopia developed the cost sharing plan to serve as an alternative source of supplementing revenue in a bid to open more opportunities and make students responsible citizens and customers.
However, as officials form the ministry have expressed the cost sharing revenue is declining which has affected the government’s activity, Cost-sharing scheme in Ethiopia was implemented in 2003 with the objectives of generating non-governmental revenue, expanding access, and improving equity and quality in higher education. Students under the scheme are expected to pay 15 percent of their tuition fee while the remaining 85 percent is sponsored by the government.
Students upon graduating under the scheme will start making payment within six months after graduation if earning income or within a minimum of one year after graduation in the form of graduate tax which is at least 10 percent of the monthly income. In the agreement, students are expected to pay all of their cost within a maximum of 15 years. Also if the student does not fully provide cost sharing documents, companies are expected to cut of 33 percent of their monthly income to the scheme.
As the ministry explains, unless the students start paying their employees cost sharing, the companies and also accountants will be punish or held accountable. “Accountants will be punished up to 2000 birr where as companies could face a penalty which might lead up to closure of the company,” the ministry emphasized.
Due to the decline of repayment rates last year, the ministry of higher education was planning to increase the cost sharing tuition fee from 15 percent to 30 percent in the current academic year, however due to the current situation in the country; the ministry did not follow through with the proposed increase.
The revenue from cost sharing is less attractive as the country spends a huge amount of its budget on education. However, the scheme is believed to be a more attractive, simple and manageable alternative in the Ethiopian higher education landscape. It is also an attempt to ensure equitable access to students of any background, as there is no need to stipulate income of parents to determine the repayment amount.
Government financing of education has been generous. It is similar to the amount spent on transport and other infrastructure. Public spending on education in Ethiopia has increased by 70 percent in real terms between 2003/04 and 2011/12. In this period, education accounted for roughly 20 percent of total government spending.
Calculating appropriate tuition fees and costs, giving every citizen tax identification number (TIN) and decentralization and strengthening the tax collection and information system have proved to be important for the successful implementation of cost sharing in Ethiopia.
Lack of awareness by private organization employers to deduct 10 percent from the gross salary and pay it back to the tax collecting ministry after a six month grace period and lack of central data system to trace where someone is working, and the low amount of job opportunities are some of the challenges the ministry has faced when it comes to collecting the educational revenue.