The mental calisthenics of avoiding paying taxes

It’s tax season. Responsible citizens everywhere are getting headaches figuring out how to file their tax returns. It’s an onerous task, what with all the different regulations and exceptions in the different tax codes. That’s why they have professionals to assist the regular Joe figure it all out. There’s a whole industry out there related to taxes, and it’s not just for firms, but individuals too.

As we grow older we come to the realization that “nothing is certain but death and taxes”, but it’s only the latter that vexes us on a predictable annual schedule.

But maybe we should focus on how I opened this post. Responsible citizens are the ones braving the tedium of filing their tax returns and actually paying their taxes. Yes, not everyone is a responsible citizen. I’m sure we all know those who couldn’t be bothered, thinking that it’s a low priority offense and no one gets hurt in the process. Or maybe they think that it’s too much of a hassle. Or maybe they object to the principle of the matter. Or maybe there’s a political angle to it.

And that’s where things start to get ridiculous. Not paying taxes because you don’t support the current government? What nonsense! Would you propose to forgo all public services in the meantime? And how should we identify you if you did? Will you proudly showcase your political affiliation on your sleeve, so that you may be excluded from receiving public services that others support with their taxes?

Or did you think there are some things provided free of charge? Those doctors in the government hospitals aren’t doing their duty purely out of the goodness of their hearts. They still need to bring paychecks home. How do they get paid? Out of the government’s coffers, of course. And where do the funds come from? Why, 43% of the Federal Government’s budget is financed through income tax. (Look it up yourself. Try using the government websites, maintained using public funds by the way.)

Don’t go to government hospitals, you say? Or send your kids to public schools?

Fine then. Don’t expect the police to help you when you’re a victim of crime then. Or the fire department to put out the fire burning down your mansion. They’ll help your neighbour who pays taxes though, while you stand outside moaning. Maybe you can hire private contractors to put out the fire. After all, you don’t trust the current government to use your tax dollars (ringgit, whatever) responsibly. So you’re on your own. Just the way you like it.

How about the next argument? We’re taxed too heavily! It’s a burden! Too much of our money is going to the government, and being wasted on all those wasteful and unnecessary and wrong “study trips”!

I’ve got news for you too. Let’s look at KPMG’s survey. They’re a reputable enough consultancy firm, so you don’t have to judge based on my credentials. For 2008, the highest tax rate on personal income in Malaysia was 28%. That’s a marginal tax rate, by the way, so it’s not 28% of your total income. But 28% on the upper portion of your taxable income. The global average was 28.8%. But let’s look closer to home, shall we? Let’s focus on ASEAN countries. There’s data on 6 of them (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam). The average was 32%, with the lowest in Singapore (20% - no surprise there really), and the highest in Vietnam (40%). So we’re lower than the average.

Then there’s the level at which that highest marginal tax rate kicks in (there’s no such thing as a flat tax). For Malaysia it was RM250,000. Converting all the other ASEAN countries’ currencies to RM (at prevailing rates), we find that the average was RM272,716.07. The Singaporeans are lucky, cos you’d you have to be pretty damn rich (RM771,328) before you get hit by their highest tax rate. The Vietnamese, however, are doubly unlucky. If you make less than half a Malaysian (at RM100,302), you’re already hit by that highest rate, which was already the highest in the region.

Think we have it bad? Think again.

My take on all this hand-wringing? It’s just a lazy mentality. “I want it free!” Bah! Suck it up, I say. Do your duty. Pay your taxes.