Give cash back as tax credits, says expert

July 2, 2004

University graduates in England and Australia pay far more in tax during their working lives than the cost of their education and therefore should not be charged for their studies, an English economist said in Canberra last week.

In a critique of the British Government's decision to introduce a deferred tuition payment system broadly similar to Australia's Higher Education Contribution Scheme (Hecs), Tim Curtin said the average graduate paid more than double the amount in lifetime taxes than non-degree holders. This was far above the cost of a degree, Mr Curtin said in a paper presented to a seminar at the Australian National University.

Graduates constituted only about 16 per cent of all income tax payers, yet they contributed more than 30 per cent of total income tax. Ideally, tuition charges should be scrapped and university education again made free, he said. Universities should be allowed to charge full-cost fees - with these and any costs such as the interest payable on loans made tax deductible.

But as no government was now likely to abolish fees, he said students and their parents (if they paid the tuition fees) should be able to claim a tax deduction on the costs.

One method would be to allow tuition fees paid to be treated as "tax credits". This would mean a graduate's annual tax liability would be reduced by the amount of documented university fees he or she had paid.

The one in five students whose parents did not earn enough to claim fee credits would receive grants or scholarships.

"The ethical justification for the combination of tax credits for those able to claim them and grants for the rest is that it re-invents free higher education for all students while at the same time it privatises the universities, by making them wholly dependent on cash income from fees for their teaching," Mr Curtin said.

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