AS A GENERAL rule, most people do not like paying taxes and will avoid doing so if they feel they can get away with it. This is why in all developed states, Inland Revenue and other tax collection services have sweeping powers while courts impose severe punishments on individuals found guilty of cheating the tax authorities.
Big fines and prison sentences are powerful deterrents to tax evasion, because if the authorities took a lax approach to tax collection, as they had done in Greece, very few people would pay their dues. Effective tax collection is also dependent on the standard of services offered by the state. People would be less inclined to engage in tax evasion if the state was offering a high standard of education and healthcare and other services free of charge, the case in Scandinavian countries.
In countries, like Cyprus in which the state does not offer a good standard of service to its citizens and squanders the taxpayer’s money on populist measures and on paying public employees obscene wages and pensions, many people, understandably resent paying taxes, because they cannot see any benefit. This is not to say there are no greedy individuals who would avoid paying taxes no matter how good the services offered by the state were, but the current state of affairs does not put any moral pressure of people to pay their taxes.
For instance, union bosses have been demanding for the last two years that the government clamp down on tax evasion by the self-employed rather than dock the wages of public sector workers. But could we blame a plumber or an electrician if he chooses not to declare his full income, choosing instead to invest part of it in a private pension plan. The alternative is to pay the amount to the state Social Insurance Fund, and subsidise the generous pensions paid to public employees, who contributed less to the Fund but would be paid a pension at least twice as high as the plumber’s. And by declaring a higher income, they might not be eligible to free, state healthcare which public employees are guaranteed regardless of their earnings.
Businesspeople are in a similar position. They have to pay tax on every cent they receive from the company for justified expenses, whereas senior state officials and deputies are entitled to a ‘representation allowance’ (€18,000 for the former and even higher for the latter) which is tax-free but still goes towards the calculation of the state pension. Even the use of a company car is taxed as a benefit in kind, but it is not in the case of state officials; as for deputies they have the privilege of not having to pay any taxes when they buy a car.
We have not heard any union bosses complaining about this legalised tax evasion, but they wasted no time expressing their objections when they heard that finance minister Kikis Kazamias was considering taxing the big retirement bonuses paid to public sector employees. The tax privileges of the workers of the broader public sector are a ‘workers’ conquest’, insist union bosses while demanding a clampdown on tax evasion. But is not being exempt from paying taxes on benefits such as low interest loans, the use of government cars, free healthcare, cheap holiday homes not tax evasion, even if it is sanctioned by the state? Private sector workers pay tax on these benefits.
If the government is serious about clamping down on tax evasion, as its union comrades have been demanding, the first step should be to end the tax discrimination and create a level playing field. All citizens must be treated equally by the tax authorities and be subject to the same taxation rules and regulations. What sort of democracy and rule of law do we have when the state taxes all the benefits of one set of citizens and none of the benefits (not even big cash allowances) of another set? This is social injustice.
Once we are all treated equally, there may be fewer resentful citizens willing to cheat the tax authorities. There should also be a clampdown on tax evasion that should be exercised much more effectively than has been the case so far, but the priority must be the equal treatment of all citizens by the tax authorities. Now, that the State is desperate for cash is the perfect time to introduce a fair, non-discriminatory taxation system.
