Genera Electric

Marco Rubio, the Tea Party-leaning freshman Senator from Florida, recently said something remarkably intelligent, if self-evident, which appears to elude most Washington policy makers. “We don’t need more taxes,” he said, “We need more taxpayers.”

This is axiomatic for anyone trying to reform tax systems and increase government revenue, which I have done in a number of countries in Africa and Asia. In most of these countries, as well as in places like Greece and Italy, most people (and companies) do not pay taxes, at least not officially. Tax administrations are both inefficient and corrupt; if you’re lucky you will never attract the attention of the taxman, and if you’re not, a bribe – possibly significant, but almost certainly less than your true tax liability – will do the trick. And when garbage piles up in the streets and public money vanishes into the pockets of corrupt politicians and bureaucrats, it is natural for citizens to decide government is not worth whatever taxes they are supposed to pay.  In most of these countries, it is foreign individuals and corporations, who lack the proper connections, who are not steeped in the arcane rules of the game, and who try to obey the law, who shoulder much of the tax burden. The cell phone company, the brewery, and the oil and mining companies – and their foreign employees – are easy and highly visible targets, and governments never tire of trying to change the rules, imposing new taxes or demanding a share of the company.

The United States, of course, is not Nigeria or Greece. As hard as it may be to follow the letter of the law when the tax code runs to 10,000 pages, most people and companies try their best, exploiting whatever advantages they and their accountants can find, but rarely committing any deliberate infractions, cash payments to the guys who help carry your furniture up to the second floor apartment notwithstanding. The IRS is too effective, and the penalties too great, for most of us to chance it. And, at least until now, most Americans have thought that paying taxes is one’s duty as a citizen. [click to continue…]

Share

{ 0 comments }