TAX NEWS - 2010

Georgia Tax: Under the New Tax Code, Higher Schools are Expected to Further Increase the Education Fee

The Georgian government has promulgated the President's initiative for modernizing the education system as a new priority challenge to the state. The country lacking for oil gas natural resources strives for increasing the professional capacity of its citizens to be competitive on global markets.

It is difficult to say whether the Georgian education market is commensurate to the challenges before the country.

According to GeoStat, the National Statistics Office of Georgia, for the last year the education system has recorded the major rise in prices. The growth in the education fee has marked 48.6 percent.

Under the new tax code, Georgia-based higher schools are expected to further  increase the education fee.

Kakha Bendukidze, founder of Free University of Tbilisi: "The rise in the education fee is inevitable if the government sets a value added tax to higher schools. The decision will restrict the public accessibility to higher education".

Kakha Baindurashvili, Georgian Finance Minister: "The new tax code calls for imposing a value added tax on only private higher schools, which earn considerable revenues. It is unclear what for they should not pay taxes. Private higher schools receive significant revenues and our decision has been motivated by this circumstance".

Referring to the principle of a commercial secret, Baindurashvili did not unveil the amount of revenues higher schools collect a year. Nevertheless, he recommended reporters to ask university principles how much they collect in revenues and how much they take with them.

The proposal for imposing a value added tax on the education sector has caused sharp discussions in the parliament of Georgia too.

Levan Vepkhvadze, MP from the opposition Christian-Democrat faction, said the imposition of a value added tax on universities should be considered a backward step, because the education system will become accessible to children of only MPs and ministers.

Amid these debates the main accent is shifted from the most important issue whether the education quality in Georgia-based higher schools is adequate to the education fee.

According to the rating of the Financial Times, the annual salary of the London Business School graduates makes up at least 146 565 USD. The figure counts for 163 637 USD in Harvard and 170 340 SUD in Stanford. As to the annual education fee, the London Business School course fee stands at 74 500 USD, while the figure stands at 76 500 USD in Harvard.

Apparently, Georgia cannot be competitive in similar ratings for a long time. At the same time, the hike in education fee will make parents think whether to send their children abroad and invest in their guaranteed future or to put money in the enormous profits of Georgia-based higher schools.