2. Why is there little tax evasion in Singapore or any other country of your choice? Is it because Singaporeans fear state punishment or because they are satisfied with the performance of the state? Or is there any other explanation? Which explanation(s) do you find most persuasive? Why?
Tax evasion, the illegal negligence in taxpaying and misrepresentation of tax returns to reduce one’s tax liabilities, is at a low level in Singapore. With Singapore’s strong tax enforcement, Singaporeans fear state punishment, deterring them from evading taxes. However Singaporeans’ fear of state punishment is insufficient to explain Singapore having little tax evasion. In an empirical study by Alm and Jackson (1992), higher levels of state punishment were found to have relatively insignificant effects on tax compliance. There is instead another explanation for Singapore’s low tax evasion, and that is Singaporeans’ satisfaction with the state’s performance. When the state performs well, Singaporeans become more optimistic about taxpaying and voluntarily comply, leading to higher levels of compliance.
However I propose that there is something more dubious going on. State performance is but a means of making Singaporeans forget that they are being coerced into paying taxes. In other words, Singaporeans are being coerced subtlely by the state. Besides state performance, subtle coercion is also executed via the tax administration’s innovations, as well as social ostracisation. In this paper, I argue that while state punishment forms the foundation for Singapore’s tax enforcement, subtle coercion forms the pillars. Arguably without the foundation, the pillars would fall, yet it is the pillars that have been most cost-effective and widespread in achieving tax compliance, making subtle coercion the more persuasive explanation for Singapore’s low tax evasion.
Singaporeans have been compelled and manipulated by the state into involuntary payment of taxes, often unconscious of the underlying coercion. So long as they continue paying taxes, they do not even notice the coercion. Such coercion is called subtle coercion. Taxpaying has in effect been so assimilated into the lives of the people that the coercion seems completely normal and acceptable.
The state has firstly kept Singaporeans optimistic over taxpaying so that they volunteer to pay taxes instead of think about the underlying coercion. The state is viewed as being in a mutually beneficial relationship with its citizens. Singaporeans pay taxes which the state in turn uses to provide public goods and services. When Singaporeans are satisfied with the state’s performance, they become ‘loyal’ taxpayers, returning in their payment of taxes to continue in their reception of goods and services. The state meanwhile updates taxpayers with reports on government activities and budget spending (Government of Singapore, 2011), presenting the government in these reports as a government that works to improve the lives of Singaporeans. The state essentially markets and delivers its performance to Singaporeans to invoke greater acceptance of its tax policy, so that Singaporeans voluntarily comply.
Singaporeans are also led to trust that they are not being cheated of their money in their payment for state performance. Minimal levels of corruption in the government as a result of strong anti-corruption laws (Government of Singapore, 2006) imbibe confidence in Singaporeans that their taxes are being used to provide goods and services and not being embezzled. The state’s performance in essence becomes more legit and trusted. Singaporeans grow willing to pay for the state’s performance, leading to voluntary tax compliance. By keeping Singaporeans satisfied and accepting of its performance, the state has in effect turned Singaporeans into ‘loyal’ taxpayers who will continue to voluntarily ‘patronise’ the government’s tax policy, leading to a higher tax compliance.
In her book Of Rule and...
References: Alm, James and Betty R Jackson. “Estimating the Determinants of Taxpayer Compliance with Experimental Data.” National Tax Journal, no. 45 (1992): 107-114.
Foucault, Michel. Discipline and Punish: The Birth of the Prison (NY: Vintage Books, 1975).
Government of Singapore. “Strong Anti-Corruption Law/Administrative Measure.” Last modified May 26, 2006. http://app.cpib.gov.sg/cpib_new/user/default.aspx?pgID=165.
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Inland Revenue Authority of Singapore. “PP vs Gesco Marketing (Singapore) Pte Ltd.” Last modified March 3, 2011. http://www.iras.gov.sg/irasHome/news.aspx?id=6640.
Inland Revenue Authority of Singapore
Inland Revenue Authority of Singapore. “If you are selected for audits.” Last modified April 6, 2011. http://www.iras.gov.sg/irasHome/page04.aspx?id=11814.
Inland Revenue Authority of Singapore
KPMG. “Singapore Tax Survey 2011.” Accessed April 7, 2012. http://www.kpmg.com/SG/en/IssuesAndInsights/ArticlesPublications/Documents/SingaporeTaxSurvey2011.pdf.
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