Following the student protests that have rocked the country in recent years, Minister Gordhan announced several adjustments to university fees, and appointed a commission to assess the feasibility of free higher education and training.

The Minister noted that, in addition to the increases of R32 billon made in the higher education allocations in the 2016 Budget, and the 2016 Medium Term Budget Policy Statement, government has added a further R5 billion in the outer year of the Medium Term Expenditure Framework.

Given budget constraints, allocating more funds for post-school education would require either reprioritisation of funds away from other programmes or an increase in tax revenues. Several groups have put forward the idea of a “graduate tax” to be levied directly on all university graduates.

Whilst the idea has its merits, such a tax is unlikely to raise the revenues needed to fund universities. According to the Budget Review, in 2011, there were about 1.3 million individuals who had completed a degree, and about 80 000 individuals graduated in 2014. The National Treasury estimates that if each new graduate faced a 1% increase in their marginal tax rate, the tax would raise about R200 million in the first year. If the increase applied to all graduates, it could generate about R3 billion annually. To place this amount in context, the 26 public universities spent R59.8 billion to operate in 2015.

Written By Kelly Pretorius, Senior Associate, Tax, Bowmans