- The canon of equity says tax should be levied on citizens on the basis of equality and ability.
- The sacrifice of all citizens must be equal and the distribution of tax burden should conform to the pattern of income distribution regarded as optimal by the consensus of opinion in a modern society.
- The canon of certainty suggests that the tax, which an individual has to pay, should be certain and not arbitrary.
- The taxpayer should know how much tax he has to pay, to whom and by what time the tax is to be paid.
In his book, The Wealth of Nations, 18th Century Scottish economist and philosopher, Adam Smith (1723 – 1790) stated the four major canons (principles) of taxation upon which the free market economy model was later benchmarked. They were equity, certainty, convenience and economy. I will restrict myself to the first three.
The canon of equity says tax should be levied on citizens on the basis of equality and ability. The sacrifice of all citizens must be equal and the distribution of tax burden should conform to the pattern of income distribution regarded as optimal by the consensus of opinion in a modern society. The canon of certainty suggests that the tax, which an individual has to pay, should be certain and not arbitrary. The taxpayer should know how much tax he has to pay, to whom and by what time the tax is to be paid. This protects the taxpayer from exploitation by tax authorities. The canon of convenience says every tax should be levied in such a manner and at such a time that it affords maximum expediency to the taxpayer.
The rationale is that since the taxpayer foregoes his purchasing power and makes a sacrifice at the time of payment of tax, the government should also ensure that the taxpayer does it with ease. Uganda’s recent social media tax passes Adam Smith’s test only in part. It fails miserably in another and, in the circumstances; its design lends credence to the misgivings about it in the public domain.
First, it is noteworthy that mankind is ever cold to taxes. If the biblical story of Jesus Christ sending Simon Peter to pick his tax fare from the inside of a fish was to be given an earthly meaning, it would be inferred that money to pay tax is hard to find no matter who you are. It is no surprise thus that a section of our population is against the new taxes. However, government can’t find solace in this fact alone or rest in peace over it. It is got to dig deeper. I am not convinced either that Ugandans are less patriotic. Most probably they are wasteful.
But I think they understand that in the morality of taxation, the aggregate duty imposed on citizens to pay tax should weigh as much as the government propensity to account. Government has, therefore, to exercise caution and care not to misread the people’s mood. They could be riled further by politicians desperate for government change, but they have genuine concerns of fairness, accountability, and replication. Why, for example, would a person who has loaded money on his phone be taxed while retrieving it? Has he or she made any income or profit? Other people are rooting for reciprocity. If, according to Adam Smith, citizens are supposed to pay tax according to their abilities, then, I think, they must receive services according to their needs. If they are taxed, then they shouldn’t pay bribes to health workers, police, teachers, judicial officers, etc, in order to get services.
The managers of our economy know that a good tax regime creates certainty and respects the exigencies of a free market economy, including convenience. But, look at the current prescription that one should pay the tax through mobile money in order to access Facebook or WhatsApp! When these and other insensitivities find a consumer, who is already disgusted, the consequences may include tax resistance.
Moses Nuwagaba is the Deputy RDC Kaberamaido