Matthew Lester on #FeesMustFall: Don’t give it to the rich

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The 2015 student protests brought a victory for all, the waiving of any increases in fees. The shortfall is to be picked up by government and universities’ creative means of finding new revenue streams. Roll on 2016 and the protests aren’t as documented but the students are still demanding more.

Tax expert Matthew Lester, who is a lecturer at Rhodes University, has been following proceedings. In what is bound to be a heated discussion, Lester says if there’s a blanket approach to the problem, there’ll be no winners. In other words don’t give it to the rich. The next topic of discussion: what’s the definition of rich? – Stuart Lowman

By Matthew Lester*

#FeesMustFall scored some great victories during 2015. They successfully stumped both government and the universities all the way. And one can only say Well Done! The burning issue of student fees has been neglected for far to long.

But starting off 2016 we are all in a very dangerous position. The waiver of the 6% increase is not going to do it for the poorer student. And neither is a Presidential Commission of Enquiry that will take at least to the end of the current academic year to issue its first report.

So there is little doubt that the protests will continue. And this is where all have to tread very carefully.

#FeesMustFall is a brilliant hashtag. But the underlying demand of fees must fall for everyone is where the whole thing comes unstuck.

On the very night that the 2016 increase of 6% was waived I got a call from a parent of 3 students. ‘Thanks for the best tax deduction I have enjoyed in the new South Africa’ he jibed, ‘I reckon I just scored R12 000 that I would have been happy to pay! In celebration I’m off to buy a few crates of expensive whiskey!’


Read also: Matthew Lester: #FeesMustFall – Widen tax exemption to R500k

And there lies the rub.

Just yesterday Oxfam reported that the wealthiest 62 people now own as much wealth as half the world’s population. And the situation is worsening. This likes of Gates and Zuckerberg are wealthier than some countries!

Celebrity economist Thomas Piketty has achieved much in exposing the growth of inequality in the world today. The following graphic was included in his presentations in SA during 2015.

In the USA attendance at a public school is free, but they pay for college (university). So, as we regularly see of TV sitcoms parents are expected to build up a college fund. It is often a case of family pride and tradition.

But even with all this there is rampant inequality in college/university attendance. Nearly all of the children of the highest income deciles attend college/university. Yet only around 25% of the poorest decile get there. So inequality grows.

It is a great pity that we do not have Piketty’s graphic for SA. No doubt it would be a horrifying reflection of SA’s inequality.

Read also: Matthew Lester: #FeesMustFall – No-Go higher VAT, social unrest

But that does not change the fact that the top income deciles can afford SA university fees and should continue to pay, inflationary increases included. To let them off the hook is tantamount to granting them a most generous tax reduction that SA just cannot afford.

An illustration of the disastrous effects of general exemptions is found in SA’s VAT system that provides zero rating of basic foodstuff for all. On the face of it one would assume that this benefits the poor.

The important point is that zero rating of basic foodstuff helps the rich just as much as the poor. In short, the poor may be buying maize meal zero ratted while the rich are buying fillet steak using the same exemption. So, if the general zero rating exemption costs SA R20bn a year, as much as R10bn of the benefit is pocketed by the rich.

Read also: Matthew Lester: #FeesMustFall – Free education, tax deduction for the rich

When it comes to solving problems of inequality only specifically targeted interventions are effective.

If #FeesMustFall was totally successful and university fees were waived in full here is what would happen:

• The rich would enjoy the most fantastic bonus they have scored in the new SA.

• Taxes would have to be increased substantially across the board and not only for the rich. Families of those who are already struggling to pay university fees would get hammered.

• The students who benefit will have to pay higher taxes for the rest of their lives.

• The budgets of other government social development programmes would suffer. What about children, the elderly, national health etc?

There would be no winners.

Apparently #FeesMustFall has already freed up R10bn in additional funding. More will follow. If this is carefully spent on targeted intervention that’s a good start. And it will be sustainable.

If the #FeesMustFall campaign could shift it sights to concentrate on targeting the campaign on poorer students a lot can be achieved and very quickly. This would allow students to direct their attention at all the other aspects of transformation of universities that are in dire need of attention.

* Rhodes University Professor Matthew Lester was educated at St Johns College, Wits and Rhodes universities. He is a chartered accountant who has worked at Deloittes, SARS and BDO Spencer Steward. A member of the Davis Tax Committee investigating the structure of aspects of the RSA tax system, he is based in Grahamstown.

By Matthew Lester