Thursday, January 10, 2008

Why people dont pay tax?

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The reasons that people don’t pay taxes are not simply opposite to why they pay:
  1. Righteousness: Some people have developed a moral framework for their opposition to taxation. They act without state sanction, challenging the legal framework that renders their acts as defiant and reprehensible. This is a very courageous act, some would say futile because it will not change the system, and it might land in them in prison. But in their minds, they know they are doing the right thing, and they don’t want to support an unethical system. Some of these people act defiantly under the auspices of a tolerating government. At some point government will decide to reign in defiant people, supported by the majority and mainstream media.
  2. No income: Given that most countries have consumption taxes, its getting more difficult to live in the real economy and not pay tax. The only tax evaders are likely thus to be street and forest scavengers. Even drug dealers pay consumption tax (on their consumption). Maybe some deal in drugs because it’s the only tax-free job.
  3. Practicality: Some people don’t apparently act on principles, but instead just evade tax because they can. This seems to be the case in Asia, where people just pay a nominal amount of tax. Eg. The Philippines. People are actually quite honest about their acts of defiance.
  4. Resentment: I think some people don’t bother to rationalise their opposition to taxation, they just know that on some level its wrong and ineffective, so they act with impunity.
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