Duty isn't enough to boost tax rev­enue

The Myanmar Times - - Front Page - GER­ARD MCCARTHY newsroom@mm­times.com

IN the past few weeks, colour­ful sign­boards have been erected around Yan­gon re­mind­ing peo­ple of their obli­ga­tion to pay tax. An an­thro­po­mor­phised car­toon map of Myan­mar – eyes wide – proudly gives a “thumbs up” to the mes­sage that “ev­ery cit­i­zen has the duty to pay taxes to be levied ac­cord­ing to the law”.

Af­ter decades of ar­bi­trary and ex­trac­tive lo­cal tax­a­tion and a regime fi­nanced largely through nat­u­ral re­source plun­der, the Na­tional League for Democ­racy gov­ern­ment clearly knows two things: It needs to boost tax rev­enue to ex­pand ser­vices and wel­fare, and taxes need to be more fairly and con­sis­tently levied.

Th­ese are ad­mirable ob­jec­tives. Yet the bill­board ad­ver­tise­ment misses the two key rea­sons why many peo­ple grum­ble about pay­ing tax: They have no idea where it goes, and feel they get very lit­tle in re­turn.

Th­ese are two of the lessons from re­cent field­work and a 1000-house­hold sur­vey con­ducted in cen­tral-east Myan­mar, ex­plor­ing so­cial pro­tec­tion, tax­a­tion and ac­count­abil­ity. The pro­ject, sup­ported by the In­ter­na­tional Growth Cen­tre Myan­mar, found that the ma­jor­ity of peo­ple ac­tu­ally have no is­sue iden­ti­fy­ing tax as a “duty”. The prob­lem is that this “duty” car­ries neg­a­tive con­no­ta­tions of ex­trac­tion with­out any re­turn.

As one re­spon­dent told us, “Why would I want to pay tax? It prob­a­bly just goes into the pock­ets of the gen­er­als.”

In spite of the public sec­tor re­forms and the slow com­mence­ment of so­cial wel­fare schemes in re­cent years, the neg­a­tive per­cep­tion of tax has proven hard to shake. Our study found that it is en­trenched for one key rea­son: The state con­tin­ues to play a mi­nor role in the ev­ery­day life of Myan­mar peo­ple, who rely on and con­trib­ute to a menagerie of other ac­tors and in­sti­tu­tions for sup­port in times of need.

Across most ar­eas of so­cial pro­tec­tion – flood­ing, food se­cu­rity, dis­abil­ity, funer­als – non-state ac­tors such as fam­ily, neigh­bours, wel­fare groups, re­li­gious groups and NGOs are by far the most sig­nif­i­cant providers of sup­port.

In ar­eas such as ma­ter­nal health and ed­u­ca­tion, gov­ern­ment as­sis­tance was the most sig­nif­i­cant provider of sup­port and source of sub­si­dies – es­pe­cially for costs associated with school­ing. State health fa­cil­i­ties were also very im­por­tant for ru­ral and re­mote re­spon­dents, es­pe­cially in the mixedad­min­is­tered con­flict ar­eas sur­veyed where there are few pri­vate clin­ics.

In wealth­ier and more pop­u­lated ar­eas where pri­vate and char­i­ta­ble clin­ics were more avail­able, how­ever, more than one-third of re­spon­dents opted for pri­vate treat­ment. For many, it was eas­ier to bor­row K3000 from fam­ily to by­pass the pa­per­work in­volved with public treat­ment and go di­rectly to a pri­vate doctor.

It is thus un­sur­pris­ing that when asked whether it was more im­por­tant to re­ceive as­sis­tance from gov­ern­ment, neigh­bours/fam­ily, or both, al­most half of re­spon­dents said that both were equally im­por­tant and less than 10 per­cent said only the gov­ern­ment.

Our find­ings also sug­gest that char­ity may be an­other way to de­scribe re­dis­tri­bu­tion. Pay­ment to non-state providers of care and public goods are at least twice as big as tax pay­ments, with con­tri­bu­tions to non-state providers ac­count­ing for over 8pc of house­hold ex­pen­di­ture, com­pared with less than 4pc for state taxes.

Given the mag­ni­tude of con­tri­bu­tions to non-state groups, we would ex­pect some donor fa­tigue in the face of con­stant fundrais­ing de­mands. De­spite this heavy fi­nan­cial bur­den, 85pc of re­spon­dents said they were con­fi­dent that their do­na­tions to wel­fare, re­li­gious and other non-state groups reached where it was needed most. This con­trasts with just 41pc who said the same about tax.

To en­sure trust, gov­ern­ment rep­re­sen­ta­tives would do well to em­u­late some of the prin­ci­ples of ac­count­abil­ity learned by non-state ac­tors.

The first is di­rect­ness: The donor wants to see a tan­gi­ble out­put or ben­e­fit associated with their con­tri­bu­tion. Rev­enue cam­paigns should show the im­pact that gov­ern­ment spend­ing (and thus tax) can have on the sick, the el­derly or the next gen­er­a­tion.

The sec­ond prin­ci­ple is trans­parency. In much of Myan­mar, mak­ing a do­na­tion to a wel­fare group is im­pos­si­ble with­out hav­ing your con­tri­bu­tion recorded in a note­book and a re­ceipt metic­u­lously writ­ten out. It should be the same with taxes, with the op­por­tu­nity taken to re­mind tax­pay­ers where gov­ern­ment rev­enue ac­tu­ally goes. Form­ing civil­ian over­sight bod­ies that in­clude rep­re­sen­ta­tives from trusted wel­fare, re­li­gious or other groups could be one means of in­still­ing con­fi­dence and en­sur­ing ac­count­abil­ity in tax rev­enue at a lo­cal or state/re­gion level.

Gov­ern­ment agents must also be re­al­is­tic about what they can do and col­lab­o­rate with non-state groups to im­prove ser­vice de­liv­ery in ar­eas where they have a weak pres­ence. One op­tion could be to al­lo­cate ser­vice de­liv­ery and over­sight re­spon­si­bil­i­ties in so­cial pro­tec­tion or tax­a­tion to a range of state and non-state ac­tors.

Mu­tu­ally ben­e­fi­cial ap­proaches to rev­enue-rais­ing could also be found, es­pe­cially for funds which are clearly di­rected to lo­cal projects.

Boost­ing tax rev­enue is es­sen­tial to im­prove so­cial pro­tec­tion out­comes. But em­pha­sis­ing duty with­out show­ing the real ben­e­fi­cia­ries from tax or en­list­ing non-state ac­tors into ac­count­abil­ity roles is un­likely to pro­mote more re­spon­sive state-so­ci­ety re­la­tions.

Ger­ard McCarthy is a doc­toral fel­low in the Coral Bell School of Asia Pa­cific Af­fairs at the Aus­tralian Na­tional Uni­ver­sity. This ar­ti­cle is a col­lab­o­ra­tion be­tween The Myan­mar Times and New Man­dala.

Photo: Aung Myin Ye Zaw

A res­i­dent of a “squat­ter” quar­ter in Yan­gon’s Hlaing Thar­yar town­ship walks past a bill­board of Pres­i­dent U Htin Kyaw.

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