COME budget time and many wonder why they should be paying taxes. While the tax payers would certainly like to see greater horizontal equity in taxation structure so that a narrow tax base is not burdened further in the interest of a higher tax-to-GDP ratio, this certainly does not mean that tax obligations should not be fulfilled.

As greater equity and country-specific targets are demanded in tax policy, the tax obligations must be fulfilled for more reasons than one. It would be interesting to first examine the reasons why people think they should not be paying taxes.

The first myth that needs to be shattered is the common reason usually given against tax payment. That is, “tax money is either wasted or it ends up in the personal coffers of some.” This is a weak argument as over 67 per cent of federal expenditures are allocated for defence and debt-servicing, both of which are utilized for the purpose they are earmarked. Otherwise, either the country’s frontiers would be insecure or the country would default or both.

That people derive a psychic intangible benefit of security due to national defence and a tangible benefit from the fulfilment of external financial obligations is an indicator of how the tax revenues are being used. The above is, therefore, no reason for not wanting to pay one’s taxes. Rather, one should be paying one’s share of taxes for buying the above kind of security.

The next argument then is that the share of defence expenditure is high. While this is a matter that may remain subject to discussion and debate amongst the economists, international relation experts, and defence strategists; the fact of the matter is that this is no reason for shirking one’s tax obligations either. For, there is a certain defence expenditure that has to be borne for as long as the debate is not settled or for as long as the country’s economy does not grow big enough to make defence look like a small share of total expenditures. For, developed countries that spend a great deal on entitlements also run huge defence expenditures.

The only difference is that their economies too are big and in fact big enough to conceal defence as a smaller share of total expenditures. So, there is a bare minimum that countries have to spend on defence and this bare minimum may look big or small in relation to the size of the economy. One cannot, therefore, take it upon oneself to shirk tax payment just because they do not like the size of the defence expenditure even though many who use this as a reason against tax payment will not be able to tell what an optimal size of the defence budget ought to be.

So, the least the tax payers can do is to contribute their share to not just tax revenues but to the eventual efficiency and size of the economy likely to grow bigger if government has revenues enough to provide infrastructure and create a climate conducive enough for growth and development. Otherwise, the government will incur deficits. With reduced government savings or borrowing, private investment is discouraged and economic growth constrained.

And, with low government revenues, the government is not able to create institutional capacity for efficient and quality public service. Government organizations remain inefficient and even corrupt. People then find one more reason for not paying taxes. That is, they feel less than inclined to pay for a government that does not discharge its obligations as well as people would like to see. When people advance this as an argument against tax payment, they are unable to appreciate the role they could have played in improving public service by giving their share of revenues to the government. So, if a policeman is corrupt, it is, inter alia, because he is hardly paid for the service he is expected to render.

Government does not have the financial resources to begin turning some of these organizations around as it is the lower order needs that need to be satisfied first and foremost without which the employee would remain dissatisfied and would not be able to perform as is the case with police or public sector teachers or even the tax collectors themselves.

While it may look like a chicken or egg situation to some, it is paucity of financial resources that keep some of these institutions weak to begin with. Each one in these organizations then sets out to generate their own financial resources informally which is viewed as and is corrupt. But, we refuse to see our own disposition towards non-payment of taxes as corrupt even though it contributes very significantly to the malaise of corruption we are caught in.

So, can we hold inefficient public service as a reason for not wanting to pay taxes when our own inability to contribute our tax share contributes immensely, amongst other factors, to the inefficiency of the public service we think is reason enough for not wanting to pay taxes?

This argument against tax payment is clearly flawed as our lack of propensity to pay taxes contributes to the reason for which we shirk from tax payments and the vicious circle rolls on as we are behind that one crucial reason for which we ourselves evade tax payments. Another example is that of water tax that people like not to pay.

While water supply is inefficient, irregular, and in inadequate quantities; but, people do get water to fulfil their needs. In some extreme situations, tankers have to be purchased. Otherwise, people do get some supply of water which helps them get by for which they are not willing to pay at all because of the inconvenience caused or the lack of utility they derive from it. For as long as they get water in whatever quantities, they must pay for it because they do get to consume it.

But, this is a good for which people decide themselves whether they will pay or not. Can people consume a private good anywhere on earth without paying for it? The answer is simply no. But, water is viewed as something that can be consumed without payment. The upshot is an even more problematic situation for which even the tax payers suffer as they have to share the brunt of non-payment of others.

The general belief, therefore, is that a public service or utility may not necessarily be paid for if the service is unsatisfactory even if the people get to consume it and are able to fulfil their basic needs. This outlook feeds back into the quality of the service that is not likely to improve again, inter alia, due to paucity of financial resources.

While private goods must first be paid for even before they are consumed, public service is not deemed worth paying for even after consumption. Many attribute this to a weak collection system and many argue that people are averse to tax payment even in the developed countries.

In the USA, for instance, collection is so strong that one, irrespective of social or financial status, is likely to end up in the federal penitentiary if one fails to file the income tax return by the due date. And, while some over there may be averse to tax payments, by and large arguments cannot be made against taxes as others will reject them outright. So, in addition to legal pressures, there are social and peer pressures against an anti-tax disposition. And, tax obligations are as excessive as having to pay taxes at two levels, that is, federal and state as opposed to in our country where income tax is paid only at the federal level.

And, even though income tax is to be paid only at one level, our agricultural sector considers itself privileged enough to remain perpetually exempt from income tax. This makes the taxation structure grossly inequitous horizontally complicating the tax culture and providing yet another reason for non-payment to many who do not want to pay taxes.

In the past, agricultural sector considered itself to be implicitly taxed as its output prices were tightly controlled with a lid on them. This is no longer the case. Now, the argument from this side is that they have to pay so many other taxes, so, they should remain income tax exempt. A response could be that even businesses or individuals are taxed in more ways than one.

In addition to income tax, individuals have to pay sales tax, property tax, water tax, road tax, and other levies built in the utility bills and in fuel prices. If individuals are not income tax exempt, why should the agricultural sector be? It is favouritism in the taxation structure that needs to be done away with to begin to put an end to the multifarious reasons that people keep giving against payment of taxes.