Imagine a piece published in the New York Times that tries to tackle the epidemic of tax evasion in Bangladesh.
Imagine that in the first few paragraphs, the piece rushes to describe the sights and smells that stand behind and in front of that seemingly intractable epidemic :
“Much of Bangladesh’s capital city looks like a rich Los Angeles suburb. Shiny sport utility vehicles purr down gated driveways. Elegant multistory homes are tended by servants. Laundry is never hung out to dry.”
“But behind the opulence lurks a troubling fact. Very few of these households pay income tax. That is mostly because the politicians who make the rules are also the country’s richest citizens, and are skilled at finding ways to exempt themselves.”
“That would be a problem in any country. But in Bangladesh, the lack of a workable tax system feeds something more menacing: a festering inequality in Bangladesh society, where the wealth of its most powerful members is seldom redistributed or put to use for public good. That is creating conditions that have helped spread an insurgency that is tormenting the country and complicating American policy in the region.”
These three paragraphs were lifted straight from a piece published in today’s New York Times. The country at issue? Pakistan, corrupt, strangling its own revenue stream, killing off funding of its own public resources. But, consider that by switching out the name of the particular country in question and changing one word that qualifies the type of upward redistribution that is endemic in the country, the story could easily have stood for the punctured and leaking public revenue stream that is holding up a weary, sagging economy.
Recent research has tended to bear out the observation of a leaky sink that has contributed to a deluge in revenue loss. More interestingly a major source of that leaky sink seems to have stemmed–knowingly or unknowingly– from central government sponsorship of tax reporting. A 2008 paper by AKM Motiur Rahman and Sabera Yasmin demonstrated that the high rates of tax evasion in Bangladesh turns on the Self Assessed System (SAS) a program designed to yield higher public revenue through self-reporting.
Rahman and Yasmin write:
“Tax evasion or dodging (provide erroneous information in reporting the amount of income) in tax-returns [has become] one of the significant factors, which cause a significant amount of revenue losses in economy of Bangladesh. Since wealthy people, in general, live in urban area where a [small] level of dodging can result [in] a huge amount of revenue loss, they mostly use SAS in filing their tax-returns.” Rich Bangladeshis who live in urban areas are self-reporting their income and are quite likely reporting incorrect information to the government, which is mainly made up of–and run by–the people reporting erroneous income data.
And, so it goes, the privately run public sector, turning and turning in the widening gyre.
