Policy makers and tax payers should help increase revenue

With reference to the CDN article of 17th November 2004. I would make some constructive suggestions. The crucial fact is that out of 4 million people, there are only 200,000 tax files of whom only a section pay taxes honestly and regularly.

This is the state of affairs after 50 years of independence as a nation state aiming to achieve excellence in all areas of national enterprise and highly rated progress and development so as to make a mark in the world or at least in Asia.

The appeal is mainly to policy makers and tax payers, but I would go beyond in a few strategies.

Firstly - Policy Makers

Kindly examine the situation in Singapore. In his first book on 'Memoirs' and second on 'Third World to First World" Lee Kuan Yew makes out one of his basic strategies. Viz: "The private sector should be encouraged every way and provided the necessary environment, free of bureaucracy so that they grow rapidly, increase profit and national wealth so handsomely as to provide rich resources for tax measures so essential for government services.

Secondly booming private sector provides full employment for youth with fair living wages and to have a good standard of living approximating to middle class quality of life.

Tax collection process: The tax declaration forms, etc. for individuals are highly complex, laborious and create a natural aversion and resistance or evasion of taxes. I have come across tax declaration in Australia & New Zealand which comprise about a A4 size form (single sheet). Such simplification and prompt assessment and recovery even small amounts would bring in a large number of small tax payers.

Image of tax authority

Popular image of tax authority is a 'Fleecer' exacting maximum on hardworking income earner. The popular saying is that "only death and the tax man are permanent".

The image of the Inland Revenue Department and officials should undergo a radical change through a sensitive public relations and human resource training exercises. The focus should be on achieving reasonable, dignified assessment on declarations made, treating them as a bonafide, except where there is reason to suspect obvious deception and suppression of income.

The Assessors should create an image of being fair reasonable and humane. Tax assessors should exercise discretion towards marginal income earners. NGO religious bodies etc. Conversely any over tax recovery should be refunded. In Australia, New Zealand Tax refunds are made within 2 months of closing date of tax returns.

This coincides with bargain sales and spending sprees.

Assessor needs to demonstrate highest Integrity. There is public perception of collusion between reluctant tax payers and some Assessors over tax assessment or a presumption tax imposed where no declaration are made. At this point to the need for social marketing of Inland Revenue Department as a tax payer-friendly organisation is suggested. This may sound ludicrous and crazy but worth consideration.

As the CMC puts out name boards on how rate payers' money is spent, the Inland Revenue Department should engage a professional social marketing firm or contact Common Wealth Secretariat, neighbouring countries of Malaysia, Singapore, Australia to strategies and implement a national marketing program to reduce evasion and encourage tax payments on following pillars;

1. Tax revenue on increasing scale is needed to meet basic needs of expanding population of whom 30% - 40% are youth, to provide infrastructure, development for expanding business and employment, for better income and quality of life both in urban and more in rural areas, more community services in education, health, housing, transport, sports, culture are needed to make life more enjoyable.

2. High public spending in the above areas attracts foreign investment, tourism, sports and cultural exchanges.

3. As I found in Japan years ago, even the humble street petty trader (boutique keeper) is proud to announce that he pays income tax to state or province, and also to Social Security. It should be considered a national patriotic duty of everyone to come forward to pay taxes honestly and honourably.

4. This campaign will support:

(a) The Gold Card system proposed for honest tax payers in current budget 2004/2005.

(b) It would contribute to promoting better public civic sense and morality that are needed to curb bribery, corruption, crime, vice etc.

(c) A declaration by political candidate that he/she is free of any tax liabilities should be respected by political parties and constituents and included as essential qualification candidature.

Corporate Social Responsibility (CSR)

There is growing trend in above direction by Employers' Federation, Chambers of Commerce etc. The Inland Revenue Department needs to promote C.G. and highlight that full compliance of is one of its hallmarks. A good Corporate Governance could be made a criteria for awards of excellence. Why not an award for tax obligations, Model Tax Records by IRD?

Further more private sector can embark on CSR only when they have performed their own social and civic responsibilities of rendering taxes to the state Employees EPF/ETF dues & labour requirements.

The Inland Revenue needs to develop a sensitising strategy in this area without frustrating the private sectors creative and positive moves in CSR & CG.

In the campaign on anti bribery & corruption measures, it has been cogently pointed out that hither the emphasis has been on colonial bureaucratic methods. The objective has been "locking stable after the horse has bolted" However the current strategy is to "raise a hue and cry" in persuit of the felons.

In any policy for control of social problems such as drugs, crime, there is first and foremost, effective law enforcement. But this is rationally supported by campaign of public collaboration for prevention. So also would be the campaign against corruption and tax evasion.

To elaborate, the Independent Commission Against Corruption (ICRC) in NSW Australia besides the legal process, expends 2/3 of its resources on variety of programs on community education and empowerment as well as preventive measures.

- J.V. Thambar