Why do some people refuse to pay income tax?
Perhaps the word ”˜some’ understates the gravity of the matter. The Ministry of Finance just recently shared that out of approximately two million Malaysians within taxable income bracket, only just over about half of them paid their due last year. This has prompted the Internal Revenue Board to hunt down those who have not paid their income tax yet.
It is likely that a majority of them do not actually explicitly refuse to pay their taxes. It could be a simple oversight, for instance. Indeed, there are multiple possible reasons contributing to non-payment but I am only interested in those who actually explicitly refuse to pay income tax. It is so because this question is crucial in understanding how much trust citizens have for the State, the direct benefactor of such taxes.
Before we explore the original question together further, it is imperative to understand the reasons for taxation.
From classical liberal perspective, there is no doubt that the biggest reason of all is to support the State for rendering services which in effect protect citizens and those within the jurisdiction of the State. That protection at minimum means protection of individual rights.
If the State fails to do so, the obligation to pay taxes evaporates. In fact, failure on behalf of the State to protect these rights eliminates a reason for such a State. This later calls for the creation of a new State capable of discharging its duties better, lest the dissolution of the previous incompetent or tyrannical State leads to an unstable state of anarchy.
This is part of a social contact between citizens and the State as embraced by classical liberals, henceforth libertarians.
Within Malaysian context, the State or the Barisan Nasional-led federal government in many cases has failed to protect various individual rights. Worse, the State itself has in the past threatened and actually infringed on the rights of its citizens.
To be fair, the current administration has so far refrained from doing so and seems to have given some commitment to continue the trend of restraint. How long will that restraint persists is anybody’s guess. We are after all still too early in the days of Najib administration to be confident of anything.
Notwithstanding the question of fairness, the Najib administration is still a BN-led government and the BN-led government has developed a very bad reputation among various groups in Malaysia.
That bad reputation affects classical liberals’ willingness to contribute to the State’s coffer in no little way. Why should libertarians contribute to the State which has the reputation of infringing on private citizens’ rights? To contribute is idiotic and libertarians are not so idiotic.
The unwillingness of libertarians to pay taxes is enhanced further on the economic front. This tax money will in one way or another financed State’s enterprises which will inevitably compete against private enterprises. Why should business owners support their competitors? I will not pursue this point further in hope that I do not digress from the main point and that I do not complicate the flow of thought here unnecessarily. I believe a focus on civil liberty will be sufficient to demonstrate my point clearly.
Admittedly, there are not so many libertarians in Malaysia and therefore, a libertarian explanation does not come even near in explaining comprehensively why so many people refuse to pay their income tax.
The more all encompassing answer probably relates to trust citizens — or more specifically individual taxpayers — maintain for the BN-led government. When seen from this angle, the libertarian answer forms as a subset to a larger explanation.
The trust is associated with the manner which BN-led government manages the tax money. Here, again, the reputation of the BN-led government does not shine and sucks in unsavory adjectives.
Corruption is seen as rampart. Observe the Auditor-General reports highlighting multiple suspicious dealings which include a screwdriver with an astronomical price tag. Has any action been taken to allay such suspicion? Have any culprits been taken to task?
The answer is a resounding no.
More recently, three prominent UMNO members were convicted of corruption by their own political party. Surprisingly, they were allowed to contest for party positions. One of them even went on to win an important party post. Another continues to hold a Chief Minister post.
If the party that leads the state government is seen as corrupted, there is no reason to expect the state government is clean. The same logic goes for the federal government. Does this encourage trust?
The answer is yet again a resounding no.
And then there is the abuse of power, characterized by the slogan ”Satu lagi projek Kerajaan Barisan Nasional”. There is a tendency among BN politicians to obfuscate the difference between the State or the government and political party. This tendency can be seen during by-elections when the BN unabashedly spends millions of ringgit of public money as part of its campaigns, be it in form of direct cash handouts or newly paved road.
BN has no qualms in using state machineries for its benefits. They without guilt consider government machineries as their own private property.
During the last UMNO General Assembly, a delegate made parallel the Malaysian Anti-Corruption Commission to a dog turning around to bite its master’s hand. That is a highly inappropriate statement and yet, it is hard to imagine if UMNO members attending the assembly saw any problem with that statement.
The best example of obfuscation yet is the nature of Radio Televisyen Malaysia. Despite being a public institution, it is woefully a mouthpiece of BN. To understand further how badly the function of RTM has been abused by BN, a comparison with the National Public Radio in the United States of America and the British Broadcasting Corporation in the United Kingdom is necessary.
Both the NPR and the BBC are public institutions like RTM. Unlike RTM however, both the NPR and the BBC serve public interest, not the interest of the ruling political party. This can be proven by its independence and largely neutral reporting as far as local politics are concerned.
RTM lamentably is just one institution which has been abused by BN. There are others like KEMAS, the police and the civil service. Many times whenever I listen to members of these institutions speak, I wonder if I were listening to the government or to BN.
So, given the corruption, the abuse of power and disrespect for individual rights, why should taxes be paid? These money are paid to fund wrongdoings.
When a group of people believe that the government does not belong to them and instead belong to someone else which they do not identify with, the group of people will hold that they do not have a stake in the government or the State. When they do not believe that they have a stake in the State, then they will have no moral obligation to support the State, i.e. pay taxes.
Even if this group paid their taxes, it is only akin to paying protection money to some parasitic thugs.
The antidote for this is simple: convince a majority of taxpayers that they do have a stake in the State. This can be done by making public institutions independent and free of political bias. Make these institutions accountable to them and not to political parties. Such setup is working in the US and the UK and there is no reason for it not to work in Malaysia.
Trust me, income tax collection will go up leap and bound if people feel they do have a stake in the State. More so if they actually feel proud about their State.
First published in The Malaysian Insider on April 20 2009.
nb — a lot of people at The Malaysian Insider failed to differentiate between positive (descriptive) and normative (prescriptive) statements. This article is a positive article, not a normative article.
Many thought that I was advocating for all to not to pay income tax (normative). On the contrary, I am only offering a reason why nearly a million people do not pay their income tax (positive).
A person try to imply that I am against the idea of taxation. No, I said not such thing. This article is not an opposition to the idea of taxation in general. Again, it is only an effort at suggesting several reasons why many individuals do not pay their income tax. It is not an advocate of shirking from responsibility of every citizens.
Remember the positive-normative dichotomy. If you failed to comprehend the positive-normative dichotomy, then you might misunderstand the message.