It is known that the world over, countries which fail to achieve their full potential are those which are least able to collect necessary taxes. Their governance system is so unruly that few comply with tax rules and pay up their fair share to the public exchequer. This is typical of countries which are torn by various sorts of strife and lawlessness making it nigh impossible for the tax agencies to enforce rules and collect all the fiscal dues rigorously.
In such places, the black economy thrives and corruption of all sorts proliferates. A country like Nigeria, one of the largest oil and gas producers in Africa, has one of the highest rates of poverty on the continent. Maldistribution of the country’s earnings from this major source holds back its huge development potential. In cases like this government fails to fully undertake its principal responsibility to redistribute – by means of an equitable tax system — national wealth fairly among the country’s citizens.
In other places, the domestic tax regime becomes so oppressive and complicated as to encourage tax evasion and avoidance. High tax rates coupled with complex tax reporting and assessment systems not only make it difficult for citizens to be fully tax compliant. They end up discouraging the undertaking of economic activities in the home jurisdiction. Complicated tax systems tend to be accompanied by corruptions of different sorts which could easily discourage the brightest and the best.
When they are tired of it all, capable individuals quit and go to other jurisdictions which apply clearer and more predictable rules of fiscal and other accountabilities. It has been observed that citizens of certain countries with inefficient and oppressive tax systems have thrived exceptionally well in business in countries they have emigrated to. This represents opportunity foregone for their home countries.
The director-General of the Mauritius Revenue Authority (MRA), Sudhamo Lal, stated at a press meet, last Friday, that as in previous years, the tax authority has kept vigilance on several fronts to fulfil its duties of collecting revenues for the government. If in previous years tax collections have been on the rise thanks to various facilitations and enforcement measures adopted – including e-filing of tax returns, amnesties, dealing with tax frauds, bringing new taxpayers into the fold, carrying out regular tax audits, chasing perpetrators of the drugs trade, etc. -, it has unfortunately been a difficult year for tax collection with the onset of the Covid-19 pandemic, resulting in a fall in tax revenues: from Rs 93.7 bn for financial year 2019/20 to Rs 89.3 bn in 2020/21. There were major shortfalls in tax receipts from value added tax, excise duties from petroleum products and motor vehicles and gambling. This is quite understandable in light of the impact of the pandemic on most sectors of economic activity since March last year.
What has distinguished the MRA, however – and this deserves recognition – is the significant evolution in the role of the institution from that of a tax collector to a payer of allowances, on behalf of Government, to registered employees, self-employed and informal sector workers, as pointed out by Mr Sudhamo Lal. ‘The implementation of the Wage Assistance Scheme (WAS) and the Self Employed Assistance Scheme (SEAS) during the Covid-19 has revolutionised the way the MRA has been working over the last 14 years. It has challenged our capacity to fast track the Work-from-Home concept, tested the aptitude of our IT professionals to operate and modify the IT system remotely and assessed the adaptability of MRA staff in a completely new environment.
‘By the end of this financial year, the MRA was able to effect payment of the WAS and the SEAS, directly or indirectly, to some 500,000 workers and self-employed individuals for an amount of slightly more than Rs 10 billion. All applications for WAS and SEAS were made electronically by the general public, which in itself is unprecedented, as the beneficiaries are mostly the lower income groups. Similarly, payments of these allowances were made directly into the bank account of the applicants – another exceptional achievement.’
All this shows that a well-coordinated revenue authority – which employs all the information it has access to, with the help of technology and especially commitment – can not only raise additional revenues for the public exchequer but also evolve to fulfil an altogether different role outside its mandate with efficiency and promptness.
That said, in light of the government’s increasing trend in spending, it is important that the MRA be able to track down all due but unpaid taxes. Unless the gap is bridged reasonably, the effect will be to increase government indebtedness. Moreover, a tax system which manages to collect from as wide a base of taxpayers as possible is fair towards those who dutifully pay up their tax dues to the last rupee. This should be encouraged and implemented in a fair manner towards all stakeholders.
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