“The real goal should be reduced government spending, rather than balanced budgets achieved by ever rising tax rates to cover ever rising spending.” – Thomas Sowell
Tax is a word that can be seen and heard everywhere around the world these days. Ill-advised tax cuts have basically forced the resignation of previous President of Sri Lanka after serving about a half of his term and the resignation of the previous Prime Minister of England after serving only forty-four days in the office.
Perhaps, the word ‘tax’ can be a dirty word for people who have had to experience such disasters, but in general, it has been an essential part of community living. History shows that China has been collecting taxes over 3000 years ago and Julius Caesar had imposed a one percent sales tax in Rome. Religious institutions were also seeking material power through different forms of taxations.
Followers had to pay a portion of their crop or the production to the temple, church, or the mosque. In addition to that people were expected to contribute their time, skill and resources in the process constructions and maintenance of infrastructure and taking care of the physical wellbeing of the priests. Modern systems of taxation around the world follow the processes introduced during the expansion of imperial Europe where tribute in kind was less useful compared to monetary contributions.
While disagreements on the rights of taxation or the right to collect taxes have led to civil wars in some countries wars between countries were funded by tax money. Some of the gang wars and rivalries between ‘organised crime’ groups, even today, are based on winning the rights of collecting unofficial taxes they themselves have imposed on businesses and individuals in the territories under their control. Sri Lankans have experienced a thirty-year long battle against terrorism which was funded by tax money since LTTE has also collected taxes from the inhabitants in the areas that were under their control at the time.
Tax code
While the LTTE was collecting taxes from the people in the North, the JVP was doing the same in the South. Though organised groups such as the LTTE and JVP were known to have executed people who refused to pay those illegal taxes they have imposed, no modern Government would consider death penalty as an option of punishment for violations of their tax code.
All stakeholders of wars benefited from the services of medical professionals, engineers, accountants, ICT experts and other skilled people who had gone through the education system of the country that was funded by the tax money. Wounded soldiers and bystanders were treated in the hospitals that were funded by tax money. If the trails of tax money were followed carefully, especially during war times, one could easily find out who got rich while the soldiers from poor families died on the frontlines.
If one follows the money trail of the war between Russia and Ukraine one would see how the tax money from the US and other donour countries helping Ukraine coming back to weapon manufacturers and other service providers of those same countries increasing their profits and filling the pockets of politicians and other brokers of the deals from the donour countries as well as from Ukraine itself, through bribes and commissions.
There has never been a better time for Sri Lankans to think about and evaluate deeply what has happened and what will happen to their tax money. One of the main reasons why the country is where it is today is the lack of involvement by the taxpayer in the process of spending that money by the government.
Taxpayers
But these same taxpayers will ask for the receipt and the exact balance when they send someone with even a thousand rupees to buy something from the store.
Citizens have been living in their own comfort zones for the most part of their lives until one or more outcomes of the crises hit home. A rural farmer in Sri Lanka may not be aware of and therefore not usually worried about things such as: trade laws, taxes the businesses must pay, devaluation of rupee, excessive printing of local currency or the treasury being drained to the last cent until he finds out that there is no fertiliser or pesticide for his crop.
When he finds out that the difficulties, he is facing are due to some policies the Government has implemented then his first thoughts would be to blame the government. The person who runs the small shop in the village is only concerned about his business and his family’s welfare and doesn’t think that he should learn about economic and political issues of the country and how his business is affected by them.
We have created hundreds of thousands of world-class engineers, medical doctors, accountants, lawyers, scientists, artists, and all types of other professionals most of whom bought into the same social contract of success and therefore were not interested in learning or thinking about those social, political, and economic factors the rural farmers were ignoring too.
Each of these professional groups would talk about any such issues or Government policies, usually through their trade unions, only if those policies have a direct impact on their earnings or career opportunities.
Not many of them would be worried about the policies that may have destroyed the small farmer, or even the agricultural sector of the whole country for that matter, even if the food prices are higher, as long as they can afford to feed their families. Similarly, the rural farmer is not aware and/or even interested in any of the policies affecting the engineers or the accountants since they cannot see the connection between that and their daily life. What we are experiencing today in the country is an outcome of living under such a social contract, especially since 1948.
Wage earners
Some people who are not wage earners think that they do not have to worry about increased taxes since they do not pay any kind of direct tax. But they too are paying all types of indirect taxes. Increasing the Government revenue is an immediate need in the recovery process irrespective of the reasons for this crisis and who is in control of the Government. A tax increase is inevitable. Therefore, instead of protesting against increased taxes the citizens should demand hundred percent transparency to see where their tax money is going. It is the responsibility of each and every citizen to be vigilant and do all they can to stop politicians and/or corrupt officials from stealing tax money from Government coffers. Increased taxes will not do any good to the country unless we stop corruption and reduce waste. Though tax is not a dirty word, corruption is.
The writer has served in the higher education sector as an academic with over twenty years in the USA and fifteen years in Sri Lanka and he can be contacted at [email protected]