Happy taxpayers play a crucial role in establishing a more effective and enduring tax system. Satisfied with the tax process, they are more likely to comply voluntarily, reducing the need for costly enforcement measures.
This sense of satisfaction can lead to greater trust in Government institutions as taxpayers see their contributions being used effectively for public services and infrastructure. Moreover, happy taxpayers are more likely to support tax reforms and initiatives, which can lead to more innovative and equitable tax policies.
Also, satisfied taxpayers strengthen the social contract between the Government and its citizens, promoting a stable and prosperous society.
In Sri Lanka, the tax system has long been a subject of debate, with taxpayers often expressing concerns about its fairness, transparency, and complexity. While taxes are a fundamental part of funding public services and infrastructure, the perception of the tax system among many Sri Lankans remains largely negative. This begs the question: Are Sri Lankan taxpayers happy? In most cases the answer is no, then various factors may lead to this dissatisfaction, and it is important for us to acknowledge and comprehend them.
The complexity of the tax code, rules, and regulations may be very intimidating to the average person, making it difficult to handle and comprehend. This could lead to misunderstandings and unintentional non-compliance.
The situation may further worsen if there is a lack of clear and accessible communication from the tax administration. Without adequate awareness and guidance on tax obligations, citizens can feel alienated and frustrated with the system, which fosters a sense of disconnection from the tax process.
This disconnection not only affects compliance but also undermines the overall relationship between taxpayers and the Government. Fostering a more cooperative and inclusive tax environment requires the system to be made more transparent, user-friendly, and supported by effective communication and educational initiatives.
In recent times the Inland Revenue Department and other Revenue Agencies have been organising various programs to educate the tax-paying community and create a working environment without corruption.
The perception that the tax burden is unevenly distributed across different income groups is a significant issue in fostering taxpayer dissatisfaction. Middle – and lower-income earners often experience the weight of taxation more directly, as they see a larger proportion of their income going towards taxes. This can lead to financial strain, making it difficult for them to meet their basic needs while also fulfilling their tax obligations.
However, a prevalent notion is that wealthy individuals and big businesses are not making a sufficient contribution to the Government coffer.
The public also feels that the system is fundamentally unfair because of cases of tax evasion and unfair loopholes that seem to favour the wealthy.
Inequality
The inequality undermines people’s faith in the efficiency and fairness of the tax system, in addition to fostering animosity. When people don’t feel as bound to contribute to the common good, they may comply less, and the social compact may be weakened.
The perception of fairness in tax laws and the uniform and transparent application of the law to all income levels are essential for resolving these issues. Trust in the system can only be preserved and repaired by making sure that everyone is contributing fairly.
Dissatisfaction among taxpayers is largely caused by worries about how tax revenue is being used. The willingness of taxpayers to participate in the tax system is greatly reduced when they witness examples of waste, corruption, or improper use of public funds.
This belief may cause people to be less willing to voluntarily comply, fearing that their money won’t be used prudently or for the benefit of society as a whole. The public’s trust in Government institutions may be undermined by the exposure of such problems, which makes it more difficult to mobilise support for fiscal policies that are vital.
The Government has to create strong accountability standards, openly disclose tax revenue distribution information, and implement strong transparency policies to address these problems while restoring public trust and encouraging tax contributions by making sure that finances are managed ethically and efficiently. The attempts will ultimately result in a tax structure that is more efficient and equal.
Visualising the different ways that a healthy tax system benefits the Government and taxpayers is crucial. When taxpayers believe the system is fair, transparent, and functional, they are more likely to comply voluntarily, reducing the need for costly enforcement measures.
Enhancing societal well-being, improved infrastructure, and public services will be made possible by the higher money resulting from this increased compliance.
A positive tax culture promotes civic engagement and a sense of shared responsibility for the advancement of the nation by building trust between the populace and the Government. In the end, a content tax system generates a positive feedback loop in which appeased taxpayers and an accommodating Government collaborate for shared gains.
Feasible objective
The establishment of a “Happy Tax System” in Sri Lanka is a feasible objective, but it calls for the cooperation of all parties involved, including legislators, tax administrators, taxpayers, and tax advisors. The groundwork for such a system is mostly laid by policymakers.
They have to prioritise fairness and transparency in tax policy so that the tax burden is distributed equitably across all income levels. Tax regulations must be crafted to prevent a disproportionate impact on lower- and middle-class earners in order to guarantee that wealthier individuals and corporations make equitable contributions. In addition, the tax code needs to be simplified to make it easier for everyone to comprehend and utilise, which will reduce misconceptions and inadvertent non-compliance.
Conversely, tax administrators need to prioritise operational effectiveness and transparent communication. Streamlining operations to make tax filing and payments as simple as possible is necessary to minimise the amount of time and effort required from taxpayers and to reduce bureaucratic red tape.
The taxpayer experience can be substantially improved by offering strong support systems, such as easily navigable online platforms and easily accessible help centres. Tax administrators ought to take a proactive approach to teaching the public about the value of taxes and how their contributions are applied to improve society. Doing so will help to establish confidence and promote a favourable attitude towards tax compliance.
Tax advisors can play a critical role in fostering a positive tax culture by assisting taxpayers in understanding complex legislation and ensuring compliance. Their knowledge may be able to minimise tax responsibilities for both individuals and corporations, easing anxiety and confusion.
Tax advisors improve the satisfaction and systemic confidence of taxpayers by offering tailored advice and assistance. In the end, their efforts result in a tax environment that is more efficient, transparent, and joyful.
A “Happy Tax System” for taxpayers depends on their recognition and acceptance of their financial responsibility for infrastructure and public services. Taxpayers are more inclined to voluntarily comply with laws and even support them when they believe the system is just, open, and well-run.
To better understand their tax rights and obligations, taxpayers need to actively engage with the system by making use of the resources that are available to them. A “Happy Tax System” cannot last in the long run unless voluntary compliance is fostered and tax payment is seen as an obligation rather than a hardship.
Transparency and education
Transparency and education must be given first priority if Sri Lanka is to develop a tax culture that supports the nation’s economic goals and improves the welfare of its citizens. The foundation of a “Happy Tax System” is the knowledge that taxes directly support essential public services such as infrastructure, healthcare, and education.
Taxation can be perceived by the public as a valuable contribution to society rather than a burdensome responsibility when they witness concrete advantages like new roads and schools.
The Government may enhance national pride and a sense of ownership by encouraging residents to view taxes as an investment in the future of the country through transparent and honest communication, thereby developing trust.
Without pointing fingers, it’s important for us to acknowledge our common roles as administrators, policymakers, taxpayers, and consultants. Together, we can simplify, optimise and enhance the overall pleasure of the tax system for all taxpayers. Turn the narrative; taxpayers don’t have to be a burden if we approach taxation with purpose and consistency. By making our own contributions, we can all help to simplify the tax process and improve tax compliance. The secret to a happier tax system is teamwork and dedication to making it function for everyone.
The writer is Deputy Commissioner General at the Inland Revenue Department
