The art of taxation and the taxman

by E.M.G. Edirisinghe

The Department of Inland Revenue has laid down a code of ethics for its officers. It has also been made a public document making it enforceable by the tax-paying public. The Department should be congratulated for this admirable move taken on behalf of both the tax payer and the tax-officer.

It was long overdue, specially in the light of the Department finding it difficult to meet the revenue targets. However, an atmosphere of cordiality and mutual respect and friendliness lies in the spirit of its observance which makes taxation an art. All arts soothe the heart and inspire the intellect.

In 1993, the Inland Revenue share of total government revenue exceeded 50%. However, it was reduced by more than half in 2004. The Inland Revenue therefore, while playing a significant role in swelling the credit side of the Government balance sheet, has to perform a stupendous task with greater devotion and finesse.

That places the tax-officers on a tender scenario where justice, courtesy and mutual respect should necessarily prevail at all times at all levels in the Department of Inland Revenue.

While taxes in general, finance projects and administration, they also divert and develop the national economy in the direction in which the Government wishes, it to move leading the country eventually to social and economic progress.

Revenue laws replete with intricacies of imposition and collection of tax, confer a heavy load of authority, and the necessary teeth to the Department to gather revenue. However, in practice it is not the force of law or the size of the mechanism, but the art of taxation that rakes in most of the revenue due to the State, readily, regularly and smoothly causing the least heartburn to the taxpayer.

The laws whether moral, religious, civil or criminal, claim allegiance and obedience from the subjects. But, all laws, including those divinely inspired are honoured, more or less in the breach.

All laws are framed and enforced in common, to maintain law and order in the land where people can live in peace and harmony. However, unlike the other laws, tax laws are basically different as they are drafted and designed to recoup a part of the advantage gained by the people for redistribution in the country for the benefit of all.

Therefore, the enforcement and administration of tax laws naturally differ both in letter and spirit of the law enclosed in the statutes.

From a tangled social environment in which is a basket of laws, it is expected to evolve a peaceful and friendly society at no material or moral cost to the people. On the other hand, revenue that tax laws yields is expected to improve the living conditions of the people. Tax is a legitimate demand to part with a part of one's hard earned or easy made money. Therefore, enforcement of tax laws necessarily becomes onerous, delicate and even unpleasant.

A taxman is a prosecutor, defender, valuer, lawyer, accountant witness, record-keeper, investigator and finally a judge too, all rolled into one. Thus this multifarious task cast on him claims a heavy toll on his alacrity and intelligence for efficient and humane discharge of duty. The enormous pressure on him to dismantle the official garb that cloaked him is very heavy.

The typical bureaucrat or the normal white-collar worker effectively guided by AR and FR will not help in the art of taxation. One's ability and resourcefulness to conform to general standards set for each of the several professions mentioned above could be very limited and too demanding needing the presence of a strong polite character to make oneself an ideal taxman.

A fundamental difference exists between the office atmosphere in the Department of Inland Revenue and in any other government department. While the latter is established, constituted and maintained to provide essential services to the people, the former is assigned with the task of collecting the necessary finance to render such services.

To make matters worse most of the taxes so collected have to be garnered by breathing life in to the Tax Act. In short, whereas the public at Revenue pays for nothing in return which brings him no immediate personal benefit, at every other public institution, any such payment yields some form of personal benefit, whether in kind or service.

Therefore, if the customer is 'king' at such places where public is provided with a service, he is 'god' at Inland Revenue. In this factual and moral situation the taxpayer who always remains anonymous, contributes willingly or unwillingly to the well-being of the people in general.

Just as the taxpayer calling at Inland Revenue is emotionally and fundamentally a different person, the taxman who receives him too, is fundamentally and temperamentally a different person. They have to collect taxes due in accordance with the law and by bending and blending the rigid subtle official act with grace and politeness without even marginally encroaching upon whatever legal and moral immunity enjoyed by the taxpayer.

Behind each tax file, there exists a vibrant vigilant human being who is on a vision and mission to make life materially comfortable and enjoyable to himself and his family. Therefore, the cloak of authority the taxman wears should not shield the human being in him, who should use all his moral and intellectual resources with a humane touch to gather the tax legally due to the State.

That part of one's income a taxpayer parts with is accrued to his earnings and savings by dint of intelligent investment. He honestly believes that his contribution from his earnings which goes to the national reservoir of revenue, flows down for the greatest good of the greatest number.

He will then be happy and contented that he was contributing to the well-being of the people and the country. Unlike in the instance of donations to charity, taxes do not go to a clearly defined destination where the giver is identified, plaqued and honoured here itself with the possibility of being rewarded further in the next world too.

However, tax too, is like charity, except that it is the religion that compels one to give for charity whereas it is the statute that forces one to pay taxes. Taxes even if paid in millions, willingly or compulsorily, no eulogies are sung.

However, it is pleasant to hear that the Department is planning to honour at least some taxpayers with star-class citizenship for special recognition. This is a good move because taxes unlike charity, do not ensure a niche in heaven for the taxpayer. Its unidentifiable nature itself makes payment of taxes a generous act whether paid voluntarily or grudgingly.

The State in the meantime, builds necessary infrastructure, provides security, maintains law and order and yields a peaceful environment for the citizens to engage gainfully in generating income.

In the circumstances, it is fair and reasonable that a portion of such income should go to build the State Treasury which itself is recycled back to the people through the channels essential to their life and livelihood.

Within the provisions in the statute governing imposition and collection of taxes, necessary legal and organizational protection is also provided to the taxpayer. The intension of the Government to provide for an ombudsman is an additional administrative measure taken for the good of the taxpayer with a view to cushioning the rigours of the law and the official. This is further strengthened by the promulgation of a code of ethics for the Revenue officials.

Within this frame exists an excellent legal environment in which the tax-officers and the tax payer meet each other on a ground of mutual trust, understanding and respect to agree on the quantum of tax to be offered to the coffers of the State.

The annual return of income furnished by a taxpayer unfurls a series of legal steps applicable to the tax-officer as well as the tax payer. This basic document is 'sacred' to the extent that it is a declaration sworn to be 'true and accurate' and its contents bind the tax officer under an oath of secrecy.

The tax-officer has to honour that declaration and shall not reject or negate it without valid legal, moral or factual reason. Thus the bridge of confidence built between the two parties on the basis of simultaneous operation of the statutory law and the ethical law determines the smooth efficient functioning of the Department of Inland Revenue.

(The writer is an Attorney-at-Law and a former Deputy Commissioner of Inland Revenue)