There are two main reasons why most people resent paying taxes: They either fail to see very much in return for the taxes or they just can't afford it. Year after year, we keep raising taxes and other things, such as utility rates, in an economy that has not been growing. In other words, the cost of living has caused many people to find it increasingly difficult to survive.
As a result, many find themselves outside of the formal system where some have even made a career out of beating it. Out of an estimated labour force of 1.2 million, less than one-third are said to be on the tax roll. There is little wonder that we have a great difficulty meeting our revenue targets, yet we seem to think that increasing taxes and employing more enforcement measures will yield better results. What we are in effect doing is ensuring that we miss the target by ignoring the law of diminishing returns, expanding the informal sector and encouraging corruption.
If we move to increase consumption tax to get more people into the net, we end up pressuring the same people on the tax roll some more, and some of them inadvertently find themselves in the informal sector, leaving you not far from 'square one'. The desirable situation is to reduce the informal sector.
I submit that the best way to accomplish this is gradually reduce all taxes to where more people can afford it, and bring them in on the amnesty now being offered to the self-employed, with respect to income tax. If they fail to take advantage of the amnesty, then enforcement will become necessary, as well as the strong possibility of increased taxes - the carrot and the stick. If say, 50 per cent of the informal sector responds positively to the amnesty, you again lower taxes to encourage more compliance, and their time to stimulate growth in the economy, which itself, would yield more taxes.
first amnesty
Some would say that moral suasion will not work. The results of the first amnesty does not support this view. The majority of Jamaicans are decent people who want to do the right thing, but if you make it next to impossible for them, then history will tell you what to expect. Just suppose this strategy should fail, what have you really lost? It is better to collect less from more people, than to try to collect more from fewer people.
I am, etc.,
VICTOR NUGENT
P.O. Box 206
St Ann's Bay