How to achieve voluntary compliance in taxation |06 August 2009

There cannot be a self-compliance system without introducing a taxation voluntary compliance programme. A self-compliance system on its own will never work.

The organisation and the existing programme of the tax agency should change to coincide with the objective of “voluntary” compliance.

Therefore, I have the following comments and suggestions:
Firstly, it is not so easy to make people exercise voluntary compliance in its broad sense, especially in a country like Seychelles where people have never been educated on such a tax system.

The habit of evading taxes, which existed previously, will diminish gradually when the country starts educating its people on tax compliance. Although improvements can be made in tax administration by adopting modern methods of educating people, little can be done to bring them up to the high standards of “voluntary” compliance if the government as a whole does not realise its importance.

However, despite that, the tax agency should not sit back doing nothing but instead find ways to make people obey the tax laws and abide by their practices. The tax agency must adopt a principle that suits Seychelles alone (and not any other country) and that can be applied to its own situation.

Disobeying tax laws is a state of mind and it cannot be changed unless the government recognises this fact and sets up a comprehensive programme to make the change.

It is important for the government to make the best approach on some of the factors that can ease taxpayers’ “state of mind”, for example:

● A prevailing belief that everyone doing business (also soon salary earners) is paying his or her fair share of taxes;
● The tax agency is fair in issuing assessments;
● A general respect for the agency’s ability and willingness to carry out its laws impartially;
● A realisation by the taxpayers that they get something for their tax monies – ie the basics of community life.
However, tax administration should concentrate on an effort to convince the taxpayers that the tax service is an effective organisation, and that it is available at all times to cooperate with them.

In other words, it should try to diminish the “confrontation” between the tax functionaries and the taxpayers.
The taxpayers should be made to believe that there is reasonable fairness in the system and that they pay their shares according to the law.

In order to achieve this, the tax administration needs some basic changes to bring better organisation and coordination, higher training of sufficient personnel and the development of  functions needed to improve systems, programmes and techniques and to use the necessary machinery more effectively.

The service should have as a basic objective the achievement of a reputation for technical competence, efficiency and effectiveness in making rapid, accurate and fair decisions. The staff who deal with the public should be high-calibre, responsible people, well trained, well paid and of good moral conduct.

In this way they will be recognised by the public as being a non-political group, from whom they can get help when needed and who cannot be fooled.

Staff must also be trained to understand taxpayers as members of the community who need help in complying with the tax laws. The taxpayers in return will respond to this help and respect the personnel working in the tax service.

One main factor in developing a climate of tax compliance is helping the taxpayers. People should be made publicly aware of any tax development, changes or amendments in the law that could be controversial.

Where public relations are concerned, information on problems should be given to the news and broadcasting media on a continuing basis.

Every tax form should be made available at all times when needed and should contain supplements that can help taxpayers interpret the information provided on them. In this way, the administration will develop a conviction among taxpayers that the service is making it as easy as possible for them to comply with the laws.

J.Y. HipWaye,
tax agent, consultant & preparer