Tax Evasion
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
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
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. Government of Singapore 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. Levi, Margaret