Paying the price
The decision to alter the tax status of private schools has led to fears that parents will face a 20 per cent increase in fees for the next school year, reports Reem Leila
Speculation that private schools will raise their fees has been rife since the government announced, as part of the package intended to finance the 30 per cent pay increase of public sector employees ordered by President Hosni Mubarak, that they will not only lose their tax exempt status but henceforth be subject to a 20 per cent tax on profits. The changes have angered the Association of Private Schools (APS) and led to panic among parents who fear that fees for their children could increase from between 12 and 20 per cent for the school year 2008/09.
Minister of Education Yusri El-Gamal insists that private schools should not use the decision to cancel tax exemptions as an excuse for putting fees up and that any increases will be subject to approval of the General Directorate of Private Education (GDPE). Schools seeking to increase their charges must, says El-Gamal, apply to the GDPE stating the reasons why they are doing so.
"The ministry will not allow any infringement on the social aspect of the bonus decision issued by the government," says deputy minister of education Reda Abu Serei, or allow schools to unnecessarily burden families.
The APS has said it intends to contest the end of tax breaks in the courts, claiming that to remove exemptions from private schools and educational institutions is unconstitutional. The new tax structure approved by the People's Assembly (PA) and which subjects schools to 20 per cent annual income tax will, says Farouk El-Amri, secretary-general of APS, be disastrous for both parents and schools.
"We already had a seven per cent pay increase in January and now a 30 per cent increase. How are we expected to find the additional money for the 20 per cent income tax when the school year is almost over," he asks.
By paying income tax private schools will come under the authority of the Chamber of Commerce rather than the Ministry of Education.
"They are now businesses and the Ministry of Education will simply act in a supervisory capacity," says El-Amri. The APS is hoping to schedule a meeting with El-Gamal in the next few days to discuss the situation.
"We will then assess what the response of the APS should be."
Parents are being requested to notify the ministry of any unannounced increases in school fees. The Ministry of Education, says Abu Serei, remains committed to promoting private enterprise in education, pointing out that private institutions in Egypt represent 8.5 per cent of the total number of schools.
Head of the People's Assembly's Education Committee Sherif Omar says the committee has already received complaints from parents and school owners over the decision to cancel tax exemptions. The Education Committee is due to meet next week with all concerned parties in an attempt to resolve outstanding issues and hopes, says Omar, to pave the way for an agreement between parents and the APS that will neither compromise the implementation of the government's budgetary measures nor increase the financial burden placed on the families of children attending private schools.
The number of private schools in Egypt has been growing steadily, says El-Amri, as parents increasingly demand certificates other than the thanaweya amma. Private schools in Egypt fall into three broad categories: international schools, schools affiliated to churches and language schools and in the past only international schools have been subject to taxation.
"The new law does not affect our status and so we will not be affected," says Alaa El-Dessouqi, head of finance at Al-Hayat International Academy.
For other schools, though, the timing of the bill -- just as examinations begin -- has compounded their problems.
"We have had no time to plan how we will deal with the new situation," says Sherine Shabana of the accounting department at New Manor House School. Other private and church schools refused to comment, saying final year exams remained their top priority for the time being.