In a bold fiscal move, the National Treasury is considering levying taxes on certain non-educational services offered by schools. This groundbreaking proposal, outlined in the Medium-Term Revenue Strategy (MTRS) for the Fiscal Years 2024/25 to 2026/27, aims to rectify the existing imbalance in tax exemptions within the education sector.
The rationale behind this proposal is the glaring inconsistency in tax exemptions across different schools. These disparities stem from variations in tuition fees and the array of services each institution offers. The Treasury emphasizes that the blanket exemption of Value Added Tax (VAT) on education, encompassing all school-related services, results in an inequitable system. The Njuguna Ndung’u-led ministry singled out activities like swimming, highlighting that they should be subject to taxation when provided outside the traditional educational curriculum. This tax initiative is one of many measures the government introduces to plug revenue gaps and bolster taxpayer compliance.
CS Ndung’u elaborated that the revenue generated through these educational and other newly proposed taxes, as outlined in the medium-term report, will significantly contribute to the government’s ambitious development agenda. Furthermore, the Treasury has indicated that it will explore the thresholds for these services, ensuring a fair and balanced approach to taxation. In a broader context, the Treasury is also considering the tax on insurance services at a uniform rate.
Beyond these changes, the Treasury has proposed another significant proposal: eliminating the threshold for applying the VAT input tax apportionment formula. This move could have far-reaching implications for businesses and taxpayers across various sectors.
The government’s initiative to tax non-educational services offered by schools marks a noteworthy shift in fiscal policy. It seeks to address disparities in the taxation of educational services and aims to contribute significantly to the nation’s development goals. As these proposals progress, the tax landscape in the education sector and beyond is poised for transformation.
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