Can tax avoidance be discouraged and voluntary tax compliance encouraged by delivering reciprocal public goods for which the taxpayers are entitled to but the cash-strapped governments are largely unable to provide? The answer is yes as demonstrated by the experience of European social democracies.
While the country is stuck with a low tax-to-GDP ratio despite various reforms and administrative measures there is a growing view now that to collect more taxes the government needs to ensure that the revenue is prudently spent on public welfare and infrastructure upgrading for the wheels of the economy to run efficiently.
Development practitioner Shakeel Ahmed Shah rightly points out that if the government is broadening the tax base and levying more taxes, the taxpayers expect some visible improvement in services delivered. He says “it is hard to claim that citizen’s experience of interaction with government service providers has changed at all.” Mr Shah observes that the government tries to raise taxes without bringing reciprocal improvement in public services.