Ill-will and ill-effect of tax evasion

E.M.G. Edirisinghe

There are only two certainties in life, death and taxation. As everyone gets trapped in death, so are they in tax net. However, for some people, tax evasion is a great achievement and for some others it is a lucrative employment or a good pastime. They openly boast about it while treating those who pay as ‘fools’. Some specialise in tax evasion like Aristotle Onnasis who not only mastered its art, but also passed it over to the others without a fee.

Tax is either direct or indirect. Resistence to tax is mainly in the area of direct taxes.

Indirect tax is passed on to the consumer and the seller is legally required to remit it to the Department of Inland Revenue. They act as collectors and custodians, and they should not be keepers with developing desire for wealth.

Income tax is a direct tax which the tax-payer is legally bound to pay. Thus everyone who is liable to tax should pay a certain percentage of his taxable income to the State. The Government in turn is compelled to maintain law and order without which no trade, business, profession or vocation is possible.

Social activity and stability too, is the responsibility of the State.

One works hard to earn an income within a conducive atmosphere which is encouraging to earning and living. It is the duty of the Government to provide the environment for which the taxpayers make their contribution by way of paying taxes unhesitantly and ungrudgingly.

Income

What is the principle source of income of a nation? Taxation. Without taxes in the form of income tax, BTT, VAT, Wealth Tax, Sales taxes, duty, levies etc. as a national, social, political or moral entity, no country could exist. If there is no State, a peaceful life for the people within a healthy atmosphere is not possible.

Defence, health, education, security and development of infrastructure rests mainly on the revenue collected through various forms of levies, taxes and duties.

So the taxpayers should be convinced that whatever they pay to the State goes to strengthen the national economy and State machinery, and also to improve the living standard of the people.

Burden of maintaining the State should be borne by everyone in the country to a lesser or to a greater degree depending on the income one earns.

One grievance or a complaint the taxpaying public has is that what they pay in the form of tax is ‘wasted’ on unnecessary projects, events, funds etc. However, a degree of waste is invariably attached to any form of expenditure.

How many people waste their valuable earnings on never-ending gambling, drinking, smoking, drugs and tamashas. How much of water, electricity and fuel is wasted by the consumers?

Wastage is a wastage whether it is by an individual or by an official; the eventual loser will be the country and the people in general. The workers who are paid for the work they do, if they idle, engage in jabber or take long hours for meals and tea and often leave office early or come to office late, isn’t it a waste of public funds paid by the taxpayer? Isn’t it a crime to do so?

Taxes

Payment of taxes to the State is similar to making an offering to gods in cash or kind. Gods are expected to look after the interests of devotees and protect them from harm for the regular payment of donation or show of devotion. Part of what one earns they say should go to God whom they believe would save them from worldly hazards.

Similarly part of what one earns paid to the State goes to provide physical protection to him and to his source of income. So Ceaser should get his share while God should get His share.

Why do people are resistant or reluctant to pay taxes? People part with nothing without legal, moral or spiritual coercion. Government compels one to pay taxes, otherwise they will be subjected to penal provisions. As God pardons His believers on compassionate grounds, the Government too, writes off taxes under certain circumstances such as bankruptcy or death.

Contribution

Some of those who devise, plan or opt for tax evation believe that what they have earned and reaped is a divine reward or a fruit reaped due to past acts of merit and therefore, the Government has nothing to do with their earnings. Also, some others think that what they have earned was solely due to their effort and dedication and one should not part with it or a part of it for others to enjoy for which they have no right.

Some people feel that even if they pay millions by way of taxes, they are not recognised for their contribution which goes to fatten the State coffers. If they pay that amount to some other institution either by way of a donation or an immovable asset, they are not only recognised with a plaque but even are carried in a procession flooded with words of praise and thanks.

On the other hand, the big taxpayers feel that their contribution goes unnoticed and there is no difference between one who pays Rs. 1,000 and those who pay one million rupees as taxes. They love to see a distinction drawn and recognition bestowed for reaping the best out of what the Government offered.

There are others who think that politicians waste public funds and refuse to be party to promote wasteful expenditure and extravagant living.

There is another category of employees attached to Government corporations, who claim for themselves a refund of tax paid by the employer on their behalf over and above the salaries paid to them. They show ‘losses’ in agriculture, businesses etc. and claim a refund of the taxes paid by the employer and surreptitiously draw an additional salary causing loss to their own institution.

There is no limit to unquenched thirst for ‘unearned’ money. Many people love to declare that their income is less than Rs. 300,000 to claim that they do not fall within the category of taxpayers.

Correct

If the people pay the correct tax regularly, honestly and on time the country would be more prosperous and the generality of the people would be economically and socially better off with the needy getting the required assistance and incentives.

Whatever the Government in power, health of the nation survives on social discipline and social welfare which is mainly dependent on the revenue the people yields and the portion they pay to the State.

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