Happy Tax Inspectors’ Day
July 1st is Tax Inspectors’ Day! It might seem odd that there is a special “professional holiday” dedicated to Tax Inspectors, after all, it’s an unpopular job. There are lots of jibes and jokes directed against employees of the Inland Revenue service – the taxman. Those involved in the collection of taxes are often portrayed as being evil, and greedy, collecting more than they were meant to or entitled to.
This is a view reinforced in the Biblical stories, such as the Pharisee and the Publican and that of Zacchaeus, the diminutive tax collector who climbs a sycamore tree in order to see Jesus. When Jesus seems to show sympathy with him , causing outrage amongst those in the crowd, Zacchaeus not only agrees to give away to the poor half of his accumulated wealth, but also promises to repay anyone whom he has cheated, four times the amount.
In those days, the post of tax collector was put out to auction; people paid for the position, effectively paying the taxes due for a particular region for a particular period, and were then able to use their authority and power to raise the required sums for the exchequer. As such anything collected in excess to the required levies were pure profit for the taxman. As such the “publicans” usually managed to raise enough money to recoup their initial investment as well as earn a healthy living. As far as the authorities were concerned the system was simple and effective, guaranteeing a certain level of income to pay for public services. However, the system was open to abuse and although there were several attempts to introduce reforms and it’s no wonder that it wasn’t a popular job, at least that the people who held the post were not popular.
Any schoolboy who has studied the period of Henry VII will know, he had some “tax collectors” who were equally despised, such as John Morton who was Chancellor of England in 1487. His approach to raising revenue was that if the someone lived in luxury, and had clearly spent a lot of money on himself, then he obviously had sufficient income to spare for the king. Alternatively, if he lived frugally, showing no sign of being wealthy, then he must have substantial savings and could therefore afford to give it to the king. These arguments were the two prongs what came to be known as “Morton’s Fork”.
One was of looking at business is that the task before businessman is to maximizing his profits. Basically, this can be achieved in two ways: maximize income and minimize expenses. The first involves attracting new business by attracting new business by advertising or introducing new products and service; retaining and expanding the existing customer base by giving value for money and granting customer care. The second can be the achieved through efficiencies and eliminating extraneous items.
One expense is, of course, taxes. Businessmen seek ways to minimize their exposure to tax liabilities. Some of the techniques used over the years are perfectly legal and are known as tax avoidance, whereas others, (such as not declaring all your income), are not and are known as tax evasion, which is a crime in most societies, and can be heavily punished.
One day when I was just eleven or twelve, I was waiting for a bus to take me home from school when I fell into conversation with a fellow pupil who lived not far away from me. He was a couple of years older than me and he started telling me about what he was learning in history. Whereas I was stuck learning about the Vikings or some such group invading our islands, he was studying the Chicago of the 1920’s.
He enthralled me with stories about how the different sections of the city had been divided up between the different gangs in a turf war. It wasn’t hard going, because, at the time the Untouchables television series was all the rage, dramatizing the exploits of Elliot Ness in his struggles against the world of organized crime, represented in particular by the bootlegger, Al Capone. For a gangster, Capone maintained quite a high public profile, and his charitable donations helped to foster an image for him as a “modern day Robin Hood”. That was to change however, as his involvement in the Valentine’s Day Massacre, in 1929, began to emerge. Although Capone is known for his bootleg and other gangster activities, he was finally brought to justice for more prosaic matters: Tax evasion. It was a couple of years later, in 1931, when an investigation by the Revenue Service revealed that he had not been declaring all his ill-gotten gains as income and paying the government the taxes due on them, that the authorities were finally able to arrest, try, convict and incarcerate him
He died whilst still in prison, some sixteen years later … incarcerated for tax evasion – not for his more notorious and nefarious activities.
I understand that Chicago now has tours taking in some of the locations connected with characters like Capone and John Dillinger. Funnily enough, however, when I got to the fourth form, I missed out on such fascinating topics. For some reason, we got stuck into the Tudors and Stuarts. I can’t help thinking that I might have preferred the days of Prohibition.
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Here in Kyrgyzstan, the tax authorities are one of the most important and prominent of the government offices.
In a way, that is right and proper. Taxes are important. They represent the means by which the government raises the money necessary in order to pay for the services it provides for the community, such as: law enforcement; defence and protection of the borders; basic health and social services; education; important infrastructure projects such as roads and large projects such as hydro electric dams.
If we want these services, then they have to be paid for, somehow. Taxes represent our contribution towards meeting these costs.
Unfortunately, however, nobody really likes paying taxes. There are several possible reasons for this.
It seems, for example, that as once someone receive some money – in the till or in their pockets – they think of it as theirs … and they forget that some of it belongs to the state … and will have to be paid to the exchequer at some point in the future when, if they haven’t made the proper provisions, they may have already spent it. That’s why PAYE, (Pay As You Earn), and deductions “at source” are employed for income tax and taxes on interest and dividends.
Usually when buy something, goods or services, we know what it is that we are getting for our money; it’s obvious. That’s not the case, however, when we pay our taxes. The goods and services which get for out taxes may not be directly or immediately obvious.
Then again, taxation law is quite complicated, and not everyone understands all the intricacies involved. I have a friend, for example, who says that he “loves” VAT, (Value Added Tax). It’s simple, he says, and people pay according to when and what they spend. That’s all well and good in principle, I reply, but it is so extremely complicated that it is difficult to regulate and administer. (You’ll gather from that, that I am not a great fan of VAT. There are, however, other taxes that I dislike even more – but perhaps that’s a theme for another postcard.)
Perhaps, however, one of the biggest impediments faced by the tax authorities here in Kyrgyzstan, is a “chelovekchiskiy” factor; a “human factor”. The attitude and approach of the tax inspector is often officious, overbearing and, sometimes even, aggressive. Many businessmen seem to complain that they are treated as if the tax authorities assume that they are “cheating”; they are guilty before they start. I have faced three occasions when the first words of the inspector implied that we had done something wrong – and would be punished. In one case, the inspector said this as he crossed the threshold.
It’s true that certain businessmen may have, like Al Capone, evaded their tax liability and thus committed a heinous crime … but it also possible that they have simply made a mistake in their declaration. It happens. Nobody’s perfect. (I saw a report the other day about a British tax inspector who had discovered an error – the company had paid too much tax and, to their great surprise and delight, got a very welcome refund.
Looking at a job description for a tax inspector for the HM Revenue and Customs service in the UK, I saw the following phrase: “… offer information and advice to individuals, businesses and organisations on a range of tax and related issues.” Given the approach of some officials in the tax office, I am not sure how many individuals and businesses here in Kyrgyzstan would approach them for advice.
There are numerous stories that circulate about tax officials asking for and expecting bribes. There are also stories about people having “paid” for their position in the tax office, just as the publican in Ancient Rome did, and needing to recoup their “outlay”. If tax evasion is a heinous crime – then, surely, so are such activities.
That’s not say, however, that all is rotten … there are tax inspectors who treat the taxpayer with respect and go about their role in a reasonable and responsible manner; who don’t assume an attitude of “guilty until proven innocent”.
They, at least, deserve their professional holiday … and also the respect of the taxpayer for performing an important and unpopular role in society.
Bishkek