First of all, I should put a disclaimer here. I am not a tax expert and am light-years away to becoming one. However, I can say that I am acquainted to this matter and therefore would like to share with you some of my opinions, hoping that I am not wasting air and electricity in the process of writing this. Finally, this is not an article to promote more taxes, but more in the tone of it's useful to pay them.
Tax is a subject that tickles my brain and piqued my interest. It is unbelievable how those 3-letters word are deeply connected in our daily lives and the ramification of its impact is simply phenomenal. Tax could be perceived as boring and a drag for some. I, too, have to muster the courage myself on a yearly basis to filling my declaration. However, for me, reading things about tax things procures the same delight as watching Masterchef Junior, believe it or not. It just becomes a bit of a hobby.
This being said, it's difficult to open your news app on your phone today without something smelling or looking like tax. It is definitely 'en vogue'. The popularity of news or articles supporting tax headlines is borderline competing with the Kardashian. I give it to you, they are a hot subject alright, but in my view tax is smokin' hot. For the sake of providing justifications to my statement, taxes are here to stay for more than 11 seasons, wherever you go, whatever you do, it will be right there waiting for you.
We read or listen to a lot of discussions revolving over fiscal policy, tax evasion/fraud, tax credit, tax hikes, etc. Parliamentarians consider tax as a hot potato, and presidential candidates use this subject as pivoting tool for their benefits (for the benefit of the people too?). It is indeed interesting, though we seldom discuss about taxes in a more social context instead of an economic-financial-legislative one.
Financial institutions all over the world (I hope) are bracing themselves for the 'Automatic Exchange of Information', or AEOI-era. A directive established by the Organisation for Economic Co-Operation and Development (OECD). The Foreign Account Tax Compliance Act (FATCA for short) parachuted by the US government was a predecessor of these 'Tax Transparency' guidelines. For those who aren't caught up in the middle of these regulations cyclones (which encompasses a lot of individuals and legal entities), one can only wonder: What the hell is this all about?
As you know, taxes beneath all its intricacy and cobwebs are designed to serve a social purpose, or as utopist-optimist-realist, should benefit the greater goods for the people. After all, without the tax payer's money, we wouldn't have roads, running water, electricity, to name a few of our basic needs. Some countries even struggle to provide these three 'natural' to its citizens despite of having an official national tax institutions existing and planted in their capitals. Mismanagement of cash and corruptions are to blame for. Even then in some, for lack of a better word, 'developed' countries, other human needs, such as accesses to medical facilities, education and food face some obstacles. Perhaps, it isn't the state's critical priorities. In sum, tax is vital to a country as blood is vital to the human body, thus through simple syllogistic manner, tax is important to us.
If you are lucky enough to have to pay taxes today, honor that. Why is it that I say lucky when it comes to paying taxes? Because, in my view, it means that you have an income or wealth that can be taxable. Obviously, some people might consider tax as an abomination given that it reduces their own cash-stash. I am not of those people, given that I believe that the 'tax-machine' if it functions well enough, it should benefit the contributors and the country all together. Great mass-public transportation, affordable housings, free-schools and the heck, why not also free-universities! Such successes exist today - wouldn't it be great if we could replicate this worldwide? Will it be possible to shift mentalities to a 'Tax is a way to give back to society'? Or as some people have suggested, as a way to re-distribute wealth to the poor?
Governments carry an even bigger burden in terms of responsibility when it comes to how to spend the tax payer's money. How can the people support a country going to war in the name of democracy if the citizens cannot live decently at home? Or have to go bankrupt in order to finance their children's academic hopes? As for the AEOI, transparency on the spending of the tax payer's money should also go hand in hand. Given the major roles it can play in shaping the world, why can't the citizen (or independent citizen representatives) be involved in the decision on the spending?
As for individuals, let's take a step back. The whole FATCA, AEOI/CRS, and other weird named instruments alike have stemmed from the same seed: Governments running on national debts, i.e. without any cash they continue spending. (If you think about it, a person doing the same, she will be in deep doo-doo). These shiny measures popped out in a fancy new wrapper following the financial meltdowns a couple of years back when things were dire. Bear in mind these 'kids' have grandparents-regulations/guidelines which have existed prior to 2007.
Obviously, it is hard to change the thinking of some people given that for most of their lives, taxes didn't bug them - compliance and control were just there, just in case they won the audit-tombola conducted by internal revenue services and such. Recently, someone told me that he didn't even know his country's income tax rate... very alarming.
Being socially responsible equals paying your taxes. But it is true that in several nations, the economic situation is beyond catastrophic to the point that if you have just a small pillow of wealth, the fiscal policies applied there are rapacious - pushing the contributors to elect fiscal residency abroad where there is a more clement fiscal climate. In this situation, governments need to reflect because one does not flee home without a cause.
All and all, these tax transparency instruments were put in place to counter tax evasion which make debt-wounded countries bleed more debts. Many measures of dissuasion are running along such as the discreet withholding taxes on dividends and interests for example.
But as you know if there is a law, there is always a loophole. Nothing stands against aggressive fiscal planning for instance. Financial reporting constructions built in order for the people or the entity to pay as little to none worth of taxes. For companies, they tend to overlook that Corporate Social Responsibility can also be expressed by paying its just taxes. Avoiding that could not be sustainable.
As for the individual, how many of us have purchased goods abroad during a trip, de-taxed them at the airport on the return way, then 'forgot' to declare the purchased goods for the value-added tax back home? This is equivalent to importing. And you know how expensive some imported items are around you.
If people are so reticent to paying their taxes, it is maybe they have a sense of injustice in regards to the obligation itself, or perhaps it is just human greed speaking leading to numerous cheats.
There are feasible solutions - Nordic countries have materialized the good use of taxes so that it benefits well its citizens: with its long parental leave, working public transport, free education and day care center, access to medical assistance, etc. If we are talking about scale in regards to population, yes these are small countries that if combined into one wouldn't make up for to the population of the United States of America. It's easier to control, easier to execute, etc. But this argument does not hold, as there are 50 States each with its own little
governing body. Roughly dispatched: it's roughly 6 million of people per state (for an estimated total population of the USA of 300 million) - almost the total population of Norway.
Establishing a sense of nobility and goodness to dissuade individuals and companies from avoiding taxes to the point of becoming fraudulent could be a path towards a more socially fairer world.
In the end, life is a cycle. If a person is earns a decent living today, what guarantees does he have that in the future, near or far, he would not be laid off. On another hand, not one single human being is 100% immune to a potential accident, at work or off work. In these times, wouldn't it be comforting to be able to rely on strong and equal social system that does not abandon its people who have given contribution?
If taxation and tax money are managed well, I firmly believe that we are able to, perhaps not to eradicate because it is too ambitious, but minimize certain social ailments. Somebody receiving social benefits shouldn't always be perceived as slackers or leeches. Sometimes, shit does happen and you wouldn't want to trade places them. As said, we are incapable to knowing the invisible battle that our peers are fighting. On the other hand, lazy bums shouldn't be allowed or given the opportunity to exploit the fragile system. This brings the sense of injustice that I have mentioned earlier that pushes people to avoid being taxed - or grunts heavy-heartedly at the idea of having to pay up.
A new fiscal-storm is brewing in the horizon. A large number of people and institutions are still trying to cope with the previous one, which could have been avoided if people weren't too greedy.
It is difficult to coerce people in to complying with these new sets of regulations. They reluctantly agree to the terms as they could be held in contempt for perjury and face prison time or a massive penalty if not. To counter this negative atmosphere, would it be possible for governments to ascertain the population that paying taxes does translate to giving back to society itself? To insure their people that governments are responsible enough to not burn through the national checkbooks to fill pockets of the appointed officials, or splurge in lengthy motorcades and jumbo private jets? In some countries, to illustrate an extreme case, the President uses the public transportation to come to the office, and this also applies for some CEOs. Because a comfortable, reliable and safe transportation system was put in place thanks to, you've guessed it, good management of tax payer's money and the tax payers do see the good result. In the end, it's all about the balance in a game called give and take.