Certain words or phrases can only be read in a particular language, with a particular effect. “At taxpayers’ expense” is one such phrase that I read in high school, saw it repeated in our English-language newspapers, and to this day, I continue to find its many variants, emphasizing the vital station of a tax-compliant citizenry.
But for us, this respect for the taxpayers in English goes only so far. It almost sounds like a ritual adulation of a culture that we never really imbibed. The dominant Nepali referent we use often is kar-chhali, or tax-evasion, which reflects badly on our civic sense.
Nonetheless, the essence of the communicative problem in taxation lies in the tension between public obligation and state coercion, between what the citizens as well as our administrative system do, can do, or should do about tax issues.
Whatever I read about taxes in high-school came from a few odd newspapers or magazines and not textbooks. Today, when I hear that kids in Japan or in Singapore or Malaysia get to read lessons in taxation, and youths in those countries graduate from “tax colleges” or “tax academy”, I have begun to trace the roots of deficiencies in my economic literacy.
I am among those citizens who don’t have a clue about how much money my government takes from me annually as a part of the social contract called taxation, and what I get in return for the civic role I thus fulfill. And now I realize that my ignorance and the apathy emanating from it have much to do with the complicated tax processes and an equally uncommunicative tax system we have than my ignorance of economics.
Sure, some of us suck at all things math or numerals. I am at a loss with what is happening with the little money I invested in our volatile share market. I can’t bargain for a kilo of mangoes, a bunch of spinach, or a pair of jeans, and have to often rely on my wife, who has an uncanny acumen to haggle for the best deal in the market.
So when I hear that Nepal is a failing state and that our economy plays a major role for that rank, I try to reflect on how I could get the best return out of my buck, and actually, in the first place, what my buck has to do with the overall economy of my country.
But again, you may rely on your wife, if not for her knowledge than for her instincts; however, seldom does a low or medium-income person hire a tax consultant or finance advisor—those intermediaries who are shrewd in getting around things more than actually explaining the abstract laws, or communicating them in the way I truly “get” them. In fact, oftentimes, they do our laundry and we may not have the faintest of idea why the sleeves of this new jacket suddenly shrank by a few inches.
I have always held that effective communicators are those who pride in being stupid so that they can start the conversation at the lowest common denominator of persuasion. Effective communication reduces abstractions to the basics. It simplifies complexities. It eases the process of understanding not merely by communicating more of the same fundamentals, but also listening to what the target groups want to hear or think they need to hear.
I am reflecting on this in light of a recent project I worked on for the Inland Revenue Department (IRD). The task: how to communicate effectively with the taxpayers so they understand the tax system better and thereby comply with tax laws which, hopefully, will help increase our self-financing capacity as a nation.
The reference to “self-financing” is of course to our perceived over-dependence on foreign aid. If we look at the data today, foreign assistance is merely 3.6 percent of our GDP while tax revenues constitute 13.3 percent (World Bank, 2010) as compared to 6.5 percent in 1992. Around 35.8 percent of GDP comes from remittance. Definitely, since the tax reforms in the mid-1990s, the nation’s tax base has gradually broadened. However, our tax non-compliance rate remains almost 40 percent. Compare that with Japan’s less than 5 percent.
Now these figures may mean something to experts. But how do we translate the implications of these numbers for individuals, for the taxpayers or future taxpayers? There is no other way than to hear from these important citizens themselves, how they make sense of taxation, what meanings and expectations they attach to this notion of civic obligation.
Promisingly, there are now signs that our tax department has woken up for the task. Since the tax reforms in the mid-1990s, it has shown some flexibility in embracing communication and persuasion besides maintaining its traditional focus on coercion. This has opened up some room for formal or informal interactions, directly with the public.
In my meeting with taxpayers in Dharan, Birgunj, Bhaktapur, Kathmandu and other places, I had the feeling that our shared understanding of taxation is heavily shaped by our collective perception that the government is here to extract, often unfairly, from the public, in return for virtually nothing: Where does all our money go? What do we get in return for our taxes? The low tax morale is indicative of the gulf of mistrust existing between the two sides. Only a deeper appreciation of the notion of taxations and its benefits may help to repair the situation.
Joel Migdal, the American professor who has written extensively on taxes suggested that extraction, no doubt, is one key capability of a strong state. However, it must almost always accompany penetration (reaching distant villages and regions to shape public life), regulation (maintaining social order and changing habits), and appropriation of resources (using them in determined ways to achieve ends).
What struck me about Midgal’s model of “state-in-society” perspective is the fact that tax collectors along with government officials form “the trenches” (the forefront) of the four levels of the state. The other three include “diversified field offices” (bureaus, legislative bodies), “central offices” (the nerve center in the capital) and the “commanding heights” (topmost leadership).
So all along, there truly was a positive side to the grim notions like “nothing is certain but death and taxes” or “the taxman cometh”. In Midgal’s perspective, since society or citizens are part of the state, domination remains dispersed between state and social forces. It is characterized by mutual engagements of the state and society. In other words, as citizens become more assertive in their civic roles, “the taxpayer cometh” too!
Indeed, a service approach to taxation involves more than just opening up Tax Service Centers in towns and districts, which our tax administration is already doing. Only a truly reciprocal relation between the government and citizens, in compliance, which includes mobilization of resources and the practice of open communication, as well as in increased participation on state affairs, and government accountability, will lead to legitimate democratic rule.
The role of communication thus remains central to the mutual relations between the two sides. During the workshop in Birgunj, a businessman looked surprised and elated because, as he said, “In the thirty years of my work, I had never before been invited to a government tax office to express my feelings and thoughts on taxation.”
There is an immediate need to communicate how tax monies are spent. In long run, how about opening a tax college or academy in Nepal?
What our tax system needs now is a clear communication strategy to nurture these types of dialogues, as well as to spearhead multi-media and communication and education campaigns on a regular basis. The IRD is already undertaking some of these tasks. An official told me that one recent public service announcement (PSA) video on home rent helped to raise tax compliance in that area by 15 percent. Such anecdotal figures may only be suggestive, and ultimately they must be followed up by research and development efforts.
The immediate need is to transparently and thoroughly communicate how the tax monies are spent. For the long run, and for the millions of future taxpayers, how about a tax college or academy in Nepal?
The views expresses in this article are those of the writer and do not reflect those of IRD