Lawmakers & the new breed of tax evaders

Whenever lawmakers (both upper and lower house) conduct hearings, we wonder if it is, indeed, in aid of legislation or reelection. Well, as election is forthcoming, we can be easily swayed to lean on the latter. However, if we make an attempt to drill down a bit and look intently into what transpired last Tuesday, February18, at the House Tri-Committee’s second hearing, some might suspect that it was, in context, a retaliation.

For one, in such hearing lawmakers tackled social media content creators’ compliance with tax regulations as part of their review of tax measures. Though tax compliance is a big issue among social media content creators (a.k.a., influencers), the timing raised some eyebrows as some lawmakers are still griping on their (influencers) alleged false and, sometimes, malicious accusations.

Whether this is a form of retaliation (highlighting social media content as creators as tax evaders) in aid of legislation, we do not know.  The fact, however, remains that, as technology advances at a dizzying speed, the number of tax evaders multiply.

Indeed, technology accelerated tremendously in recent decades. Notably, rapid changes are experienced in technologies that are addressing climate change (renewable energy) and manufacturing inefficiencies (artificial intelligence and robotics). In the same pace, there are huge developments too in big data, the Internet of things, machine learning, 3D printing, biotechnology, nanotechnology, blockchain and satellite and drone technologies. Certainly, these changes are directly affecting the global economy, society and culture.

Of course, there are downsides too that we can’t ignore. For one, governments are way behind in crafting and implementing relevant policies to regulate, at the very least, the use of these technologies. As richer countries have better policymakers and are well-funded, the gap (adoption-wise) between the rich and poor countries widened. Inarguably, our government is one of those that is lagging behind.

There are a lot to talk about.  Due to limited space, however, let us dig into the aspect of taxation. Why? There is so much inequity between the obvious tax evading and the tax complying businesses. And as technology surges continually, the number of tax evaders will only multiply.

Gone are the days when our lists of tax evaders were just filled with names of smugglers of bootleg DVDs, fake designer-garments, etc. that are sold by the street entrepreneurs a.k.a. sidewalk vendors (who are tax evaders themselves).  The same entrepreneurs who are selling their wares in the sidewalks to justify their tax-free existence.

Also, platforms pervade and online sellers/resellers have multiplied. Certainly, most of them are earning more than the street entrepreneurs. Collectively, by now, the volume could run to hundreds of millions a year or even billions. Absolutely, their number will only increase. Yet, if left unchecked, most of them will remain tax free.

The same is true with those motorcycle-riding Indians who ply their lending businesses from one stall to another on a daily collection basis. Ironically, these tax-exempt individuals are using roads that are built and maintained by honest taxpayers’ money. Through the manner by which they carry out their businesses, interest charges are certainly higher than banks, pawnshops and lending investors. Yet, they never drop even a single cent to our government coffers. Obviously, they are everywhere and too many to be missed.

Yet, before we can even throw the tax code on them, a more sophisticated kind of lenders have now become so dominant and harder to catch. Yes, as access to financial facilities have become, literally, so handy, through one’s smartphone. So that, today, fintech companies are raking in billions a year. Well, some are legitimate and are sensible taxpayers. However, some are preying on our hapless citizens by offering easy loans online at exorbitant rates and shaming them (online) if they can’t pay. Call them loan sharks online, most of them aren’t paying taxes.

Finally, the Airbnb. The Airbnb listing owners are really raking in thousands a day for every unit that they have. Yet, most of them, or, probably, all of them, remain tax free. Worse, their number will certainly grow by the day. Unfairly competing (Airbnb listing owners), our hoteliers will again feel the pinch of their tax-free existence.

Frankly, these new breed of tax evaders are hiding behind the wall of powerful technologies.  Obviously, therefore, the only way our taxing authority can break this wall is through the use of technology too.