Civic Education: Arguments for/against the rationale for taxing the citizens of Gok State
How to tax people in Gok State without being affected by taxation but at the same time benefit from taxes they pay
By Daniel Juol Nhomngek, Kampala, Uganda
February 18, 2017 (SSB) — In the recent debate on taxation law in Gok State, there are a lot of arguments for and against the rationale for taxing the citizens of Gok. For those who were and are against the imposition of taxation, their main argument was and still as summed up in this question: why should the people who don’t have sources of income or those with zero income be taxed?
The argument above for the opponents against taxation is very strong and the law in an ordinary circumstance may uphold it because taxation is based on the ability of a tax payer to pay. Where the tax payer is not able to pay or he or she is unemployed then there is nothing to tax and taxes should not be imposed.
To digress a bit before I access the argument of those who argue in favour of paying taxes, I need to briefly explain the meaning of ability-to-pay. Ability-to-pay is an economic concept which provides that those who have more resources (wealth), or earn higher incomes should pay more taxes. Hence, in economy, the ability to pay taxes such as income tax or tax on luxury goods is viewed as means of income redistribution.
In other words, ability-to-pay tax is a progressive taxation principle that maintains that taxes should be imposed according a taxpayer’s ability to pay. This is a progressive taxation approach which places an increased tax burden on individuals, partnerships, companies, corporations, trusts and certain estates with higher incomes. In simple language ability to pay means that rich should pay more taxes than poor and those who do not have income should not be taxed at all.
What needs to be pointed out clearly is that in economy, ability-to-pay tax is a matter of facts as it depends on the facts prevailing on the ground and the duty of the authorities is to objectively and honestly determine the taxable capacity of all the potential tax payers.
Taxable capacity is that maximum amount which the community is in a position to bear towards the expenses of public authorities without feeling the pain of paying taxes. According to Findlay Shiraz taxable capacity means the optimum tax ability of a nation, the maximum amount of taxation that can be raised and spent on the economic welfare in that community. In general taxable capacity means the maximum amount which a nation can contribute towards the support of the government without inflicting damage on the power and will of the citizens to engage in economic activities to produce.
It is important the tax collect process should avoid inflicting damage and it is the same reason, the amount of tax burden which the citizens of a country are ready to bear is not rigidly fixed. The tax may increase or decrease with a change in the distribution of wealth, the size of population, method of taxation. In other words, we can say that the limit of taxable capacity is a relative and not an absolute quantity. In ordinary English language, taxes should not become burden to the extent of people running away from production.
In order to determine taxable capacity, the following factors should be considered (see; economicsconcepts.com/taxable_capacity.htm)—
The size of population: Taxable capacity is very much affected by the increase in national income and by the rate of growth in population. If the increase in national income is greater than the growth in population, the per capita income goes up. The taxable capacity of the individuals rises. If the rate of growth of population is higher than the national income, the taxable capacity decreases.
The distribution of national income: Taxable capacity is also influenced by the distribution of national income within a country. If there is unequal distribution of wealth in the country, the taxable capacity of the nation will be high, but if the income is equally distributed, then the taxable capacity will be low. For example, a person earning an income of $50,000 a month is able to pay more to the government than thirty persons earning $300 per month.
Character of taxation: If taxes are devised wisely, then they give less resentment from people and bring forth a large yield or return.
Purpose of taxation: Purpose of taxation has a direct bearing on taxable capacity of a nation. If citizens of the country are satisfied with purpose of taxation i.e., the increase in welfare of people, then they show greater willingness to pay taxes to government but if they find that revenue will be spent for unproductive purposes, they hesitate to pay taxes or even engage in negative activities like tax evasion which is a crime punishable by law. However, if the taxes are misappropriated by the authorities then they are justified to evade taxes because they have right to rebel against tax officials.
Nonetheless, if the state spends revenue on education, sanitation, fighting against famine, diseases or in general on improving social welfare then the people are able to pay taxes and consequently, taxable capacity of a nation or state expands to its utmost, which is not the case if revenue is spent for unproductive purpose like war, which implication of taxable capacity shrinking.
Psychological factor: Psychological factor is a very important in determining taxable capacity of a nation or state. If people are satisfied that government is doing its utmost to raise standard of living of masses and in maintaining prestige of country, then they try to sacrifice to pay their money to the government in form of taxation.
Standard of living of people: If standard of living of people is high, they work more efficiently so that they may enjoy a still better standard of living. When they work enthusiastically, they receive higher wages from their employers. Taxable capacity tends to increase then at the same rate.
Effect of inflation: If country is affected by the inflation as we have today in South Sudan, purchasing power of people is reduced, taxable capacity of nation shrinks considerably. But if value of money is high and country is not faced with unemployment, then taxable capacity of people is quite high.
The above factors are important and the State like Gok State should consider them before imposing taxes on citizens. This is because the people are poor and they are only surviving on zero income and because of that reason those who argue against imposing taxes on every household in Gok State may be right.
However, those who are in favour of imposing taxes on Gok State population argue that it is important to impose taxes as taxes are the only means of government raising money to fund its activities or projects. Though they have not put forward many reasons apart to support this main argument, it appears that their arguments rotate around the following points of the general arguments for taxation (see; www.financeninvestments.com/economics/508.html)that—
Money earned from tax enable a government to build all the infrastructure projects needed to run the country or state. These include roads, railways, bridges, flyovers, subways, dams and lots more. Remember building is just not enough. Money is also needed to maintain these structures.
Maintaining public security department is also a big responsibility for the government. These include the police, the fire men and the army. Revenue earned through taxes helps sustain these departments.
The government is also responsible for maintaining general services like Municipal and Council services. Inflow of money from imposed taxes helps to maintain these essential services.
Likewise another major responsibility of governments is to provide quality health services. Along with medical services governments also need to provide citizens with medical insurances. All this entails enormous expenditure. The only way government can manage to meet the expenses is by collecting taxes or revenues from citizens. So, citizens need to pay taxes.
Looking at the two arguments above, it is the fact that both sides have very strong competing arguments. Whereas citizens do not have sources of income to pay taxes, which is strong point for those who argue against imposition of taxes, the government cannot carry out its activities without collecting taxes from the people, which is a strong point on the side of those who favour the imposition of taxes.
However, amidst the two arguments as stated above, one fact is clear. In Gok State, people are poor and no one is at a threshold for taxation as they do not have incomes but just surviving on the zero income or they do not have taxable income. Taxable income is the amount of income used to calculate an individual’s or a company’s income tax due.
Taxable income is generally described as gross income or adjusted gross income minus any deductions or exemptions allowed in that tax year. It includes wages, salaries, bonuses and tips, as well as investment income and unearned income. In simple language, taxable capacity means the income of a person that can be taxed by the tax authorities. Hence, when the income of individual is below the threshold of taxation then the tax cannot be imposed on a person of that income.
When I talk of threshold of taxation, I am talking of the target of taxation and that a person who earns certain amount of money monthly is not supposed to be taxed by the tax authorities. For instance, in South Sudan the Taxation Act of 2009 states that a person who earns 300 South Sudanese pounds (SSP) monthly is not supposed to be taxed. This means that a person to be taxed in South Sudan is the one who earns 3001 SSP onwards.
Thus, looking at the provision of the Taxation Act of South Sudan Above, it is clear that no one in Gok State is liable to be taxed. Then the question is: what will the government do if the citizens cannot pay taxes yet it is known worldwide that the main source for the government revenue is taxation? The answer to this question in my opinion is simple and straightforward.
The answer is that the government can tax people of Gok State without them being affected by the amount of taxes they pay but at the same time benefit from taxes they pay provided the government plans how to do it. In short the government of Gok State is supposed to plan how to raise the revenues both in short and long run. The government should therefore do the following—
First of all, the government should establish the role of and purpose for keeping cows and activities connected to the cattle keeping. In fact, if the Government to that, it can discover that the main source of it income is cattle as it is the main dominant economic activity.
Cattle keeping are the prominent economic activity and should be considered as main source of revenue. The government of Gok State should tax cows. For example, the law should be passed to limit cows paid in marriages, let say that the maximum paid in marriage should be limited to fifty (50) cows and if a person pays any cows over that fifty, he or she should be taxed.
For example, imagine that a person pays sixty cows in marriage, then, ten (10) cows paid above fifty should be taxed as determined by the authority. Hence, for an extra number of cows paid above fifty cows, the parents of the girls must pay tax on that number above fifty and on the bridegroom side, the cows that are returned as “arueth” literally means cows return to husband after marriage in Dinka Culture. The “arueth” for the extra number above fifty must be taxed by the authority.
The above policy of taxing extra cows in marriage is important for two reasons: (1) it will help fight against inflated marriage and by implication reduces the expensive marriages that have cropped up in Gok State. At the same time, the government will raise the money through this taxation without affecting the people of Gok State. In fact, the same policy can be adopted throughout South Sudan in the States where cattle are kept.
Another scenario in relation to cows is where taxes can be raised where a young person pays more than one cows to buy one bull or an Ox in the purchase of the bull or the ox. The one who buys, and the one receives, should be taxed heavily as a way of discouraging such negative culture. It is negative culture and bad cultural activity because it is does not add anything to the values of the people in term of income. Contrary, buying one bull or one ox with more cows yet it does not add anything to the value of the community is disincentive to economic development of the people. In doing that the government will be able to raise the money without affecting the income of the citizens of the State, which is important and also control such negative and none productive economic activity.
The government should also discourage those who just sit idly under trees for the whole day that they do not have jobs by imposing on them taxes whether they like it or not. This is because they are liability to the country. For instance, in Juba as well as in Gok State there are those who spend taking tea or playing games throughout the day without even reading books. These kind of people should be taxed to force them into doing something.
After they have engaged in work for their own benefit then the principle of taxation of ability-to-pay should apply at the point by determining the threshold of their income. Hence, the purpose of tax in this scenario should only be to force people to work.
As I have stated above that sitting idly without doing work that the government has not given jobs is wrong and cannot be an excuse in imposing taxes because the government is not the only source of employment for all the people in the country or state. Rather, the role of the government is to provide security and encourage investors to come and invest in the State and when they have come and invested, they create employment for the people and people become employed.
In addition, the role of the government is to encourage the traditional industries to ensure that the ordinary citizens are engaged in their own traditional activities and at the same time the government should come up with policy to modernize those activities in long run. Therefore, the government should provide security to encourage investment so that they people get employment in private sectors. Hence, using taxation as a means of forcing people to work is a source of income in short and in long run.
Another resource of revenue for the government is fine. The government should fine heavily those who fight on the streets or anywhere they are found fighting and if they have cows they must pay cows or sell them and pay in term of money but if they do not have cows then they should be imprisoned and taken to the government farm to work for the government to increase the production of the government and hence become the source of the income to the government.
In addition, those who allow their cows to destroy other people’s crops or property should be fined and I think this policy is already in place in Gok State and if it is there then it has to be implemented strictly and impartially.
The government should also impose reasonable taxes on those who are running big businesses while exempting small businesses like those who cook tea from taxation. But the government should not stop there it has to monitor them how they are progressing. The purpose for monitoring them is to ensure that they progress from those small businesses to bigger ones where they will be capable of paying taxes to the government. In doing that the government would have helped them grow and pay more taxes to the government in future.
Importantly, the government should plan how to use the prisoners to produce income for it and also train them to become productive citizens once out of the prison. In that regard, the Government should come up with the project of building a big prison in places like Roordit, Lou Mathiang Dhuol or Ngatinga where there is fertile soil. If the project of building prison as stated in this paragraph is presented to the UNMISS, Law and Order section, or any other Organizations like Oxfam in South Sudan to take charge of its construction, then, if either the UNMISS or Oxfam or other Organization accept to build it and then it may seek for funds to construct it for Gok State.
The construction of the prison of that kind may take two to three years. Once it is finished, the prisoners in Gok State and even from neighbouring states can be sent to it and while there, they can contribute to the agricultural production for the government as they will be used in cultivating and maintaining crops which the State can sell to Gok State citizens at cheaper prices.
The prison should be built in those places where there is fertile soil so those prisoners are able to plan and produce big harvests for government. Hence, the government will be able to get income from crops they produce through selling the produce to the public at cheaper prices thus also reducing hunger that always attack people in Gok area.
In addition, the prison will help criminals to get reformed and become productive citizens not only for Gok State but also for South Sudan as a whole. This is because while in prison education should be made compulsory so that those who are not serving death sentence will be trained in carpentry, masonry, other technical works and some young prisoners will be trained with the aim of ensuring that they join University while in prison or when they come out from prison.
In short, the prison will play a role of reforming the prisoners that will enable them to come out as reformed citizens of Gok State and South Sudan in general, hence, are able to pay taxes to the government in long run.
Another source of government revenue is the government officials themselves. The common concept not only in Gok State but South Sudan in general is that the government officials do not pay taxes. This is a wrong concept as it is not correct because according to the law the government officials are supposed to pay taxes. In fact they should pay more taxes than anyone else because they have higher income in South Sudan.
The wrong thinking that Government officials do not pay money might have originated from the fact that the people have failed to understand that the Government is independent from its employees. The government officials are employees of the government and must pay taxes unless they are exempted by the law due to the nature of works they do as seen in the case of judges. Hence, in taxing Government Officials, the government will raise revenue that will run its projects without affecting the citizens.
Another means of raising government revenue is encouraging tourism in Gok State as there many wild animals. The government should encourage tourism by empowering wildlife authority to protect forests and also animals. In doing that the government should be tough on poaching and any person found involved whether within the government or outside should be severely punished with fines and imprisonment at the same time.
What is required for tourism to operate are: (1) the presence of wild animals and (2) stable security. In that case there are wild animals in Gok State and the security is there. Therefore, there is a chance of developing strong tourism industry that will employ citizens of Gok State. After getting employment, Gok State will be able to get taxes from employment and tourists. Hence, the government is able to get taxes without harming the economic activities of Gok State citizens.
The Government should also impose heavy taxes on those who trade in timbers, charcoals and bamboos as means of discouraging deforestation and in the process of taxing them it is able to get money and also control deforestation.
The government should tax all soft and alcoholic drinks as a means of protecting health of Gok State citizens. This will protect citizens and at the same time raise money for the government.
The Government of Gok State should also formulate a policy that governs the NGOs which imposes the duty on all NGOs working in Gok State to employ Gok State citizens in all posts except top managerial posts and posts that need experts. In the case of they can only employ experts outside Gok Stat where they cannot be found in Gok State. However, before they go and recruit experts outside Gok State they must have advertized to call for application and it will be through application that is when they will know that there are no experts for that particular work in Gok State.
The policy however should make it clear that NGOs in recruiting staff in Gok State are free to recruit as they deem fit as long as they recruit citizens of Gok State to work with them. In other words, they should not be directed by the authorities as to who they should recruit and in which post.
When any NGOs employ Gok State citizens then the Government of Gok State gives all NGOs tax policy indicating the amount of taxes paid by Gok State citizens and how they should be paid. In that case the tax policy should direct the NGOs concern to deduct taxes at the source and remit that money to the Government tax or block account opened for that purpose.
Therefore, the government must open tax account and put under the control of the body responsible for the collection of taxes in Gok State as shall be discussed later in this work.
In adopting the above proposal and other taxes that do not affect Gok State citizens seriously, the Government is able to get revenue for itself and at the same time without affecting the citizens to the point of abandoning production.
However, it should be noted that taxes are important as they involve issues of tax justice. Tax justice means fairer systems for taxing. Tax is a global justice issue. In South Sudan and especially in our state revenues obtained from are always lost in millions of pounds and because of that the State must adopt the system that is accountable to citizens and which treats every member of Gok State equally. This means that any citizens of Gok that is caught misappropriating taxes must be forced to account for that money and also after accounting for it then he or she is forced to resign from the government.
Thus, before imposing taxes, the government needs to know the population of the people in general and that of the tax payers in particular. Knowing the number of the tax payers helps in dealing with issues of transparency and accountability as the government is able to estimate the amount taxes to be paid by the people.
When the government is able to estimate then its agent cannot misappropriate taxes as it can easily be discovered in the process. To do that successfully, the Government is supposed to carry survey to determine the Gok State population intended to know exactly how many people are in Gok State and also how many people in the population are potential tax payers. It is through survey the government will be able to establish the following—(1) the trends of economic activities and how many people are not engaged in economic activities and why? (2)What is affecting the productivity of the people and (3) the number of Gok State people educated? Hence, when such questions are answered then the amount of taxes to be collected in Gok State is known before it is collected.
However, some people may ask the question such as: how will the survey be carried out in the absence of resources or money? The answer to this question is simple and straightforward. It can be carried out whether there is money or not. The Government can do the following: (1) establishing a number of Executive chiefs who are in Gok State, which the government also knows; and (2), then establishes the number of people who are under the authority each executive chief?
After getting the number of the people under each executive chief then the government total up to get the overall population and after knowing the population, the government should take time to verify the figures and the population found after verification will be the true population of Gok State.
The main reason as already stated above is to know the potential tax payers. After establishing the potential tax payers then the government should enact Taxation Act and if it is already in existence like Gok State already has 2016 Taxation Act, then such Act should be amended to incorporate principles of taxation. The four cardinal principles of taxation laid down by ADAM SMITH are as follows (see; www.nytimes.com/1865/…/taxation-article-no-ii-general-principles-of-taxation.html?)—
The subjects or citizens ought to contribute to the support of the government as nearly as possible in proportion to their respective abilities — that is, in proportion to the revenues which they enjoy under its protection. Any deviation from this rule constitutes inequality.
The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time and manner of payment and the sums to be paid ought to be plain to the contributors and everybody else. Otherwise they are placed more or less in the power of the tax-gatherer, who may use it for oppressive purposes.
Every tax ought to be levied at the time and in the manner in which it is most likely to be convenient for the contributors to pay it. This is one great advantage in indirect taxation, as the purchaser of an article upon which it has been assessed, can buy or not, when or to what amount, be pleases.
Every tax ought to be so contrived as to take out and keep out of the pockets of the people as little as possible above what it brings into the public treasury. In other words, it should be collectable at a minimum of expense. The levying of a tax should not require a great number of officers, whose salaries will eat up the greater part of the produce. It should not direct labour to less profitable employments. It should not harass the payers by fines and forfeitures, and give a great temptation to taxpayers to engage in illegal activities or annoy them due to too frequent visits and odious examinations.
If the Gok State Act meets the above principles the taxes will not affect citizens of Gok State as they are able to know when, how, where and whom the tax should be paid to and why taxes are being paid.
One of the major problems facing taxation in South Sudan is lack of transparency in tax collection and because of that millions of pounds always disappear into individual tax collectors’ pockets. Hence, the tax law should be able to give penalties in case of misappropriating the public money.
The same Taxation Act should also establish the Authority responsible for the management of taxes. Such a body should be independent and only answerable to the Ministry of Finance in the State. Under the Authority, there must be tax appeals tribunal responsible for cases arising from taxes whose decision can be appealed to the High Court in Gok State.
In summary, if the adopt and implement all the activities explained above successfully, the State will achieve stability and the rule of law. In fact, if the government of Gok State adopts this article and implement whatever explained hereinabove the whole process may take six months or the whole year but it worth it because it gives the state direction in dealing with issues of taxation and also people are able to know what is going in general.
In addition, it will help the government reduce or avoid confusion in which few government officials take taxes for personal use because the system will be transparent. The lack of transparency in regard to taxation and in other activities makes people hate the whole government for nothing.
The government can therefore tax people of Gok State without affecting them and at the same time benefit from their taxes through investing in education, health, roads, water and other social goods that will improve the lives of Gok State citizens.
If the government utilizes the tax revenues collected as discussed above, then the citizens will be encouraged to even pay more taxes without complaining as Gok State Government would have built trust of Gok state citizens in its operation; hence justice, liberty and prosperity will have been achieved in Gok State.
NB//: the author is South Sudanese lawyer residing in Uganda and can be reached through: +256783579256 or juoldaniel@yahoo.com
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