Following the recent order from the Appellate Division to impose a 15% tax on private universities in Bangladesh, the affected universities have yet to receive the full verdict.
However, the situation has worsened as the National Board of Revenue (NBR) has taken action by freezing the bank accounts of eight universities.
This decision has sent ripples of concern among the hundreds of teachers and employees who rely on this sector, fearing delays in receiving their salaries and bonuses before Eid.
The Assistant Commissioner of Taxes (Circle-3) office has taken steps to suspend the bank accounts of these eight private universities, citing non-payment of the 15% income tax. Official letters have been sent to the universities, notifying them of this action.
These letters, dated March 4, inform the universities that a dues notice has been issued in accordance with Section 214 of the Income Tax Act 2023, with a deadline for payment set for March 15. Failure to comply with this deadline may result in further legal action, including the imposition of penalties, as per Section 275 of the Income Tax Act 2023.
The letter, signed by Assistant Commissioner of Taxes Zahirul Islam Bhuiya, also said if the tax has already been paid, relevant documents should be submitted to their office by March 15. Failure to provide such evidence may result in the university's objections regarding the outstanding claim being disregarded.
The affected universities in the first phase of this action include North South University (NSU), American International University Bangladesh (AIUB), World University, University of Asia Pacific (UAP), East West University (EWU), Southeast University (SEU), Daffodil International University (DIU), and Independent University, Bangladesh (IUB).
It is anticipated that the bank accounts of other universities will face similar suspensions in subsequent stages.
What the universities say
In response to the freezing of bank accounts by the NBR, Prof Atiqul Islam, vice chancellor of NSU, expressed frustration at the lack of communication and timing surrounding the action.
He said that, despite not receiving a copy of the full verdict from the court, the NBR proceeded to freeze the university's accounts. “If the full judgement is not received, how will it be settled?” the NSU VC questioned.
“While my lawyer says the judgement is being drafted, all eight bank accounts have been frozen. They could have retrieved the dues from just one account. Why would they freeze all of them? No letter was given that the account would be frozen,” he explained.
“I am very disappointed. Salary and bonuses cannot be given if the accounts are frozen,” Dr Atiqul Islam said.
The NSU VC pointed out the irony by saying that there is no tax on funds leaving the country for students studying abroad, yet students in Bangladesh are taxed.
“They expect us to pay taxes and generate profits, essentially turning education into a business venture. While they may demand it now due to their investments, I do not want to treat education as a commercial enterprise," Dr Atiqul added.
In this regard, UAP VC Prof Qumrul Ahsan yesterday said: "We will hold a meeting in this regard. If the accounts are frozen, we will not be able to pay the salaries before Eid. We need an immediate, temporary solution. Tomorrow (today), we have a meeting scheduled with the tax commissioner to address this issue. Let's see what actions they take."
Meanwhile, UIU VC Prof Chowdhury Mofizur Rahman expressed his dismay, saying: “We are shocked that the account was frozen just before Eid. Our university does not have an income surplus; we operate on a day-to-day basis. With the account frozen, I am unable to pay salaries and bonuses to our teachers and employees.”
In the same context, DIU Pro-VC Dr Mahbub Ul Haque Majumdar said the sudden freezing of accounts seems arbitrary.
He said: “There should be room for reconsideration of the court's decision, but proper procedures must be followed. Ample time should be given for compliance. I have not been formally notified about the account freeze. How will salaries for teachers and employees be managed during Eid?"
What NBR says
Wishing to remain anonymous, a senior official of the NBR said: "Since the court has given the verdict and the university authorities have not appealed, the income tax official has the jurisdiction to take this action. We would not have been able to do it if the Appellate Division had adjourned. Since we have a judgement, tax can be demanded.”
When asked how universities would pay salaries before Eid, the official said: "They will now sit and settle with the concerned assistant commissioner.”
He said this action was not taken against any university on a whim. Claiming that many notices were given earlier, a letter was also sent in this regard. He said freezing the bank accounts was the last step.
What UGC says
When asked about NBR's action on private universities, University Grants Commission (UGC) Chairman (additional duties) Prof Dr Muhammad Alamgir said: "I am not aware of the matter. I just heard from you. Such a situation is not desirable for any university.”
What APUB says
Meanwhile, the Association of Private Universities of Bangladesh (APUB) has requested that the authorities unfreeze the bank accounts of private universities before Eid.
The plea was made in a letter signed by Sheikh Kabir Hossain, president of the association, yesterday.
The letter said that the general funds of private universities depend solely on tuition fees from students, without any form of government grant. After covering all university expenses, if any surplus funds (if available) are accumulated through savings, they are used for maintaining university standards, research programs, campus construction, expansion, hostel construction, transportation management, and other long-term projects.
According to Section 44(7) of the Private University Act 2010, it is mentioned that the money from the general fund of the university cannot be spent for any purpose other than the necessary expenditure of the university.
In this case, the entrepreneur-founders cannot receive any money from the general fund of the non-profit private university recognized by the law, and paying income tax or spending it in other ways is also a direct violation of the Act.
Earlier, the APUB appealed to President Mohammed Shahabuddin for guidance and counsel to resolve the issue.
What happened earlier?
The NBR issued a gazette notification on June 28, 2007, imposing the 15% income tax on private universities, to be effective July 1 of that year.
In another gazette notification, the NBR imposed the same 15% income tax on private universities, medical, engineering colleges, and ICT institutes.
After that, different universities filed 46 petitions challenging the government's decision.
Upon the final hearing on the petitions, the High Court on September 5, 2016, found the notifications illegal, thus ordering the NBR to refund the money realized in line with the government circulars.
Subsequently, the state pleaded to be allowed to file a leave to appeal with the apex court, which was finally granted on February 9, 2021.
The Appellate Division also stayed the High Court's order to refund money to the private universities.
On April 6, 2023, the Appellate Division of the Supreme Court upheld a High Court order asking the NBR not to collect income tax from private universities in the country.
