‘Onna Babo Billo Enawa”
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Sitting through a discussion on “Taxes and the Public” organized by the Sunday Times Business Club on Tuesday and listening to how confused Sri Lankans are and fearful of the taxman reminded me of that childhood favourite song ‘Onna Babo Billo Enawa’. Loosely translated, it means ‘Children, beware of the bogey-man”. The taxman or the Inland Revenue Department is so distant from society not because people don’t want to pay taxes but because the mere mention of the word ‘taxes’ puts the fear of God or the bogey-man into you.
And, when your entire tax structure is as confusing as it can ever get as seen in the 2016 budget – never before have taxes been so complex – then the taxman is like the monster bogey-man. Having said that, every citizen has a moral obligation to pay taxes, at least in some form for the services provided by an administration – central government or provincial authorities. These authorities are elected by the people and expected to govern efficiently and honestly. Leave aside an individual’s moral duty vis-à-vis taxes, are administrations run ‘efficiently and honestly’?
For example, are “Our tax rupees at work” signboards seen on the side of road-works, the real thing? Do you see workers feverishly at work or chatting, smoking a cigarette or drinking plain tea in classic state-sponsored ‘time-pass behaviour?
Lack of credibility in the tax system that it doesn’t ensure the smooth delivery of services is why people constantly look for ways and means to avoid taxes rather than pay up. If you want more reasons, then the case of the 70 provincial councilors and officials who were going on a ‘learning tour’ to Russia, spending the people’s tax money when elected to do a job they should already know, makes it a more compelling cause.
Taxes my foot! Here’s further evidence. A 5-star hotel cum mixed development coming up in the heart of the city has got a VAT exemption afforded to Strategic Development Projects before October 2015. The apartments coming up are only affordable to the crème de la crème of Sri Lankan society and expats. So they don’t pay taxes for a costly apartment while the poor man, among millions making use of healthcare services in the private sector because the government simply cannot deliver an efficient system, is taxed to consult a specialist.
This is Robin Hood in reverse: Citizen Perera pays for the rich and famous. How absurd can our tax system get than these choosy taxes in the name of ‘development’ and foreign direct investment! Yes provide tax concessions but surely within reason and not taxing the poor to pay for the rich! Concessions for privileged classes, on individual preferences or backdoor deals, are the name of the game. Here’s another one for the road: When the May 2016 VAT increase of 15 per cent was enforced it ran into opposition protests and eventually a stay order was issued by the Supreme Court. During the period of suspension, the old 11 per cent VAT was imposed.
Now the government is hoping to reintroduce 15 per cent, with the bill to be presented to Parliament for ratification. Whether it would be enforced with retrospective effect remains to be seen. But what happens to consumers who paid 15 per cent VAT on their goods? They won’t get any refund while it is easier for companies to do so. While 2016 could be dubbed the ‘Year of Confusion’ for the IRD, taxes have been a perennial issue over the years for the simple reason that governments are unable to remove the widely-perceived notion that the taxman is out to get you. What has been lacking for decades is a public relations campaign where the taxman is seen as a friend, not a villain or the ‘billa’ that children shout about in jest while at play.
Public broadcasting messages of a friendly taxman like your neighbourhood bread delivery boy should be conveyed through TV and other mediums to make the IRD more people-friendly. Sri Lankans, by nature, are a caring lot and if administrations are sincere and honest, tax rupees will flow into the coffers. Want better proof? A recent BT-RCB poll on taxing Sri Lankans showed that while a majority of Sri Lankans are loyal taxpayers they have doubts about whether the taxes are put to good use.
Some of the comments that were received were: “People are frustrated by the tax system”, “Multinational companies benefit by tax concessions” and “Politicians use up all the tax money and this is one of the reasons why businessmen evade taxes, because they have no faith in the system.”
One of the biggest problems today, as disclosed by an economist at Tuesday’s discussion, is that in principle taxes must be ‘certain’ not ‘uncertain’ as it is in Sri Lanka. “The issue is not the rate of taxation but the uncertainty,” he said. Consider this: In Sri Lanka GST and VAT have been changed 11 times in the past 18 years while in New Zealand, it has changed only twice over the past 30 years. After two hours of listening to “twists and turns” in Sri Lanka’s tax structure with numbers going over my head, I made my way home listening to a Beatles favourite titled ‘Taxman” which goes like this: “… I’m the taxman and you’re working for no one but me… Taxman!”