Duty isn't enough to boost tax revenue
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.
A resident of a “squatter” quarter in Yangon’s Hlaing Tharyar township walks past a billboard of President U Htin Kyaw.