Why is it so hard to get people to pay tax?

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By Kevin Motaroki

There is a quote often attributed to Benjamin Franklin, one of the founding fathers of the United States: “In this world, nothing can be said to be certain except death and taxes.” It is a notoriously heated subject.

Right now, on one hand, there is an increasing number of people calling on big corporations and the super wealthy around the world to pay their taxes. On the other end of the spectrum are the libertarians, soaked in the belief that tax is theft.

The Free State Project (FSP) is a geopolitical movement  which, according to Wikipedia, seeks to recruit at least 20,000 libertarians in New Hampshire, in the United States, to move to a single low-population state in order to make the state a stronghold for libertarian ideas. It was founded in 2001.

Carla Garrick, former president of the FSP, says their “core objective is to awaken people to adopt our philosophy – which is to exert the fullest practical effort toward the creation of a society in which the maximum role of government is the protection of life, liberty, and property.”

The success of the Project “would likely entail reductions in taxation and regulation, reforms at all levels of government to expand individual rights and free markets, and a restoration of constitutional federalism, demonstrating the benefits of liberty to the rest of the nation and the world.”

Carla offers that while the organisation does not really take a stand on taxes, individuals within it “strongly feel and advocate for less(er) taxation.

“Personally, I think less and less is more. I believe that government is force – you have to pay your taxes or we will punish you. I think there are better ways to do it… We need to move away from coercion to something much more voluntary.”

What about the fact that we  generally and to a large extent – benefit from the services government provides – roads, hospitals, police protection, etc? 

Carla thinks the argument can be made that if we are paying for services involuntarily and we don’t like the services rendered, then there is a disconnect and that makes the difference. If we take a local example, in Kenya, a lot of what is paid in taxes ends up in the pockets of individuals – misappropriated or straight-up stolen. Numerous surveys conducted by the so-called influencers online reveal that public hospitals often lack in basic supplies (medicine specifically) and personnel, even when such items are adequately budgeted for each financial year. Official government statistics show the country to be woefully incapable of meeting its own development targets, not because of lack of resources but because of misappropriation.

In 2014, for example, President Uhuru Kenyatta, a year after assuming office, promised an additional 10,000 kilometres of tarmac in three years (to come to fruition in 2017). By government’s own estimation, less than one third of this was attained. What is more, it could not say why this was, despite having regularly allocated money for the same.

Carla continues:

“In the US, the war on drugs is a sticking point to most, on specific fronts. The majority of people support the legalisation of marijuana for either medicinal use or for leisure. If I am in a situation where I am paying the police to raid my friends and neighbours and throw them in jail for something many of us feel should not be happening, then that is a failure and a good enough reason to be hesitant about paying taxes.”

At the beginning of the year, Treasury Cabinet Secretary Henry Rotich forecast that the country’s budget deficit would fall by some 5 percent. But the taxman’s below-par showing, as reported by the Planning Department four months later in May, “stands in the way of government’s plan to halve budget deficits and slow down debt accumulation.” Curiously, this burdensome revision of policy came at a time when institutional and official corruption was at an all-time high, with as much as Sh1 trillion reported stolen from the beginning of the new year.

New York-based credit rating and research firm, Fitch Ratings, usually invited by Kenyan authorities to assess risks in the economy, in its latest report in May cast doubt on the country’s ability to halve its fiscal deficit in five years.

Kenya targeted to reduce fiscal deficit from 7.2 percent of gross domestic product (GDP) in the year ended June 2018 to 6.3 percent in the current year ending June, 5.6 percent in the year starting July 2019 and further to 3.1 percent in the year ending June 2023. Fitch says that weak growth in revenue, largely tax receipts, presents the biggest challenge to Kenya’s fiscal consolidation plan.

Initiatives like the FSP hold that, in the long-term, what they propose will be a fair alternative, but it remains to be seen how someone poor will take part if they have to pay for everything at the point of use.

People have been trying to get out paying taxes for years, in creative and weird ways. For example, in 8th Century England, some people falsely set themselves up as monasteries to avoid paying taxes. The 21st Century, however, is witness to much more complex schemes.

Remember the leaked Panama Papers in 2015, where over 11 million documents showed how numerous influential and famous people, from rock stars to royalty, set up off-shore accounts for their money so they could avoid paying tax? The people enabling it to happen – conveniently defined as wealth managers – have and probably will remain unknown to most. They form a small but lucrative industry recently getting a lot of attention from governments, who say they want to stop tax avoidance.

“Wealth managers specialise in keeping the rich, rich.” This is how sociologist Brooke Harrington, surmises their role. For the last 12 years, she has studied who keeps the wealthy, wealthy, and how they do it.

Neither wealthy people nor their wealth managers open up about the nature of their business; it is a very closed world. 

Knowing this, Brooke knew that it was going to be near-impossible to get the insights she needed to study this select clientele, on so touchy a topic. In wealth management, a lot of the experts there attain the qualification years after they have been working in the business for several years. So she went to school and studied about trust and corporate law, finance and accounting, as well as the general mechanics of moving wealth to the tax havens of the world.

In the course of her study, Brooke approached and interviewed several wealth managers, who agreed to speak to her even though they understood their clients’ secretive lives, but on condition of anonymity. She didn’t expect, after revealing herself to be a sociologist conducting research, to make much headway, and it therefore came as a welcome surprise that they were willing to speak with her. She wanted, she says, to understand how wealth managers felt about helping the rich avoid tax.

“Avoiding tax, successfully, while remaining on just the right side of the law, is a skill, and this is what these managers are trained to do.”

Of the more than sixty people Brooker interviewed, she estimates that about 20 of them are hardcore libertarians. They, Brooke, says, honestly believe tax is theft and that they are heroic for defending the wealth creators against rapacious welfare state that has no moral right to “seize” any of their assets as tax.

50 percent of those she interviewed she classifies as being lukewarm. Their response to the question of why they do what they do is that they help families – at the expense, of course, of all other tax-paying families – “keep their wealth, and that is all, really, there is to it.” Sort of blinded from the morally problematic aspects of their job, these managers in the mushy middle are just about executing what they know as well as they know.

The final cluster is a little more interesting. Well aware of the negative impact on the world of what they do, they are actively trying to make amends for their actions, by educating their clients on poverty and inequality.

One particular one, a human rights activist employed by a leading wealth management firm in Panama City, has made it his mission to make his clients aware of the other side of the coin, and what a portion of their wealth could do.

“When I have them in front of me, I tell my clients, while we are in air-conditioned my office talking about the billions of dollars sitting in their off shore accounts, that a few miles down the road is a family which lives in a cardboard box under a bridge, and if they wonder what they can do for such people… Sometimes a client eyes me like I am crazy, but it is a chance I have to take because I want my son to respect me the way I respected my father. I try to use my encounters with some of the world’s wealthiest people for good.”

Potential whistle blowers

Because of the work of sociologists like Brooke, as demonstrated by the Panama and Paradise Papers, governments world over are increasingly becoming aware of and appreciating the fact that wealth managers are potential whistle blowers. For example, a good data leak from offshore is worth years of costly spy work by government agencies trying to figure out where tax outflows are going.

It is therefore a necessarily good thing that an appreciable number of these wealth managers are conscience-stricken about the impact of wealth management work on inequalities in the world, and are willing to leak data to expose what happens in their world, as long as they don’t compromise their jobs and security, and therefore livelihoods. 

“When the Panama Papers demonstrated that you could be a whistle blower and still probably keep your job, that was a game changer for policymakers,” offers Brooke.

It is not just the super-rich who try to get out of tax. There are quite a few countries in the world where tax evasion is prevalent and fashionable. Greece is one example.

“Culturally, we are outspoken about it, but we also have the bad reputation of not paying taxes,” says Kelly Sarri, a Greek filmmaker who lives in the US. Shocked by her home country’s reputation about tax avoidance, she felt that she needed to tell that story, so she went home and spoke to people about why they felt the need to avoid tax, which made into a bold documentary titled “Tax Evasion: A Greek National sport”.

Sarri, more than exposing the prevalence of evasion, tries to look at the systemic problems which not only encourage but often almost mandate this sort of behaviour in Greece. Her film exposes many of the underlying social and economic issues behind the practice to both a Greek and international audience. As many of those interviewed in the documentary state, Greece’s tax burden is extraordinarily high. Most people, if they paid taxes in full accordance with tax laws, would actually end up paying somewhere between 70 and 75 percent of their earnings!

Business owners and employees alike explain that the majority of businesses would simply be unsustainable if they paid their full share of taxes. Job seekers say if they were to request salary amounts compatible with living costs and full payroll taxes, they would not be hired, as their requests would simply not be competitive. This has led to a thriving black market in Greece, with people performing legal jobs for which they are paid “under the table.”

In other words, “Tax Evasion” looks at the problem of tax dodging not so much as a matter of choice, but as a necessity of survival in the Greek economy. But the film also found out that Greeks are so proud of their tax avoidance skills that it is akin to a national sport, hence the title.

Samuel Mwaura, Tax Partner at Grant Thornton, relating the film’s basis to the Kenyan situation, echoes the reasons it gives for tax avoidance. According to Mwaura, it is not so much that people do not want to pay taxes, as much as it is about their opposition to how public money is spent.

“People are not willing to pay taxes because they cannot directly see the returns on the money they are already paying. It is difficult to convince people to continue paying – or pay additional taxes – when the money they contribute to public coffers is not only been misused but also stolen with roaring impunity,” says Mwaura.

There could be more sophisticated methods of tax evasion in more advanced economies – where the sums involved can also justify such investment – but the means locally are more on the ‘tried and tested’ – cooked books, under-reported revenues and manipulated records, which translates, collectively, to colossal amounts of money.

Mentality, more than anything else, is the biggest motivator for tax evasion. In the Kenyan online space, influencers and activists, on the back of wanton, unpunished stealing by state officials, have often called on the need for a campaign to stop paying taxes until (a) government can demonstrate convincingly it is committed to tackling corruption and (b) all lost money is recovered. It may be a far-fetched idea but the import is clear.

Says Sarri, “Most non-wealthy evaders just don’t trust their government. The idea is that since government does not offer desirous, commensurate services or its officials will steal their money outright, not paying is a measure of resistance.”

Mwaura concurs:

“It is my belief citizens are willing to pay their fair share of taxes if they drove on smooth roads, didn’t have to buy basic drugs in public hospitals, and were assured of sufficient basic amenities. For perspective, how willing to pay tax can one be expected to be if they have to remit high fees for education for their children at the same time? When people are angry, they tend to resist and this resistance is what is, in some quarters, called economic sabotage.” 

Governments have often tried to get as many of their citizens as they can to pay taxes, in recent times turning to psychology and behavioural economics. Experts in these fields have discovered certain simple and cheap interventions that create huge impacts. Stewart Kettle is Senior Advisor at the Behavioural Insights Team:

“Tax policy in most countries is based on the premise of people being rational, where the threat of not paying is greater than not paying; the traditional model was structured in such a way as to increase that threat, or the probability of being caught; in reality, however, there are a lot more influences that determine whether or not one will pay,” he explains.

Behavioural economists like Stewart work with governments around the world helping them make little adjustments to their tax policies that take human behaviour into account. 

He recalls recent work in Guatemala, a country with the lowest rate of tax collection compared to the size of its economy in the world. Although it is classed as an upper middle income country, it is fraught with economic inequalities, with about half of its population lives in poverty.

“The general perception by citizens is ‘nobody else pays tax at all, so why should anyone?’” explains Stewart.

Stewart and his team studied and set about changing the wording on official tax demand notes from the Guatemalan Tax Authority from bureaucratic and threatening to clear and simple on why one is being written to, and added lines with insights from behavioural sciences – why it is being sent and why it is important to heed its contents, for example. The new letters had a softer message, gently asking people to pay, including encouraging wording that explained that the majority of those who were due to pay had already done so, and that recipient was part of the minority that hadn’t.

“Highlighting social norms, such as that most people were compliant helped people see that as the norm and therefore more receptive.

The results, he says, were remarkable. Thousands of people began to pay, putting millions of hitherto unavailable dollars into public coffers. The government of Guatemala is now continually testing newer variants of softly-messaged letters to its citizens, with very encouraging results.

We asked Mwaura what he reckons governments can do encourage their citizens to pay taxes.

“More than anything else, corruption is the biggest cause for tax apathy. Considering that governments chiefly finance public debt through taxation, it behoves it to create accountability in the system; if taxpayers see appreciable return on investment (ROI) on their taxes, they won’t need further prompting to become compliant. Policies fashioned along behavioural economy target the moral element, and they ought to be as binding on government as they are on taxpayers,” concludes Mwaura. (

This report is adapted from an entry in the BBC World Service series ‘The Why Factor’

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