SINGAPORE: Tax is often seen as a civic duty and is frequently described as one of the two certainties in life, the other being death.
US President Donald Trump’s tax return has received more attention than ever from some US voters last week, even amid news of his coronavirus situation.
News that he paid US$750 in federal tax income in 2016 and 2017 but none in 10 of the previous 15 years have raised eyebrows and may be a key flashpoint for the upcoming elections, assuming Trump does continue to run.
MANY US VOTERS DO NOT CARE
On the one hand, there are US voters who will not be bothered about how much Mr Trump or other candidates in the race for the top job pay in taxes.
To them, what really matters is whether the president is a leader who can do his job well.
Factors likely to be viewed as more crucial include how the candidate can build a globally competitive and sustainable economy, protect citizens by ensuring law and order, and maintain a well-functioning society with a solid infrastructure that ensures quality living, in particular for the more vulnerable groups such as the unemployed, the young, the old, the sick and the handicapped.
The economy, healthcare, and coronavirus outbreak are among the top issues in this US election, according to a September Pew Research Center poll.
As long as these basic needs are well looked after, this group of voters care little about the the president’s background, let alone what how much taxes he pays.
In fact, among Trump’s supporters, the president’s record on tackling violent crime, immigration and gun policy matter more than how he’s faring on dealing with less bread-and-butter issues like economic inequality or race relations, according to the same survey.
Another Fox poll in May 2019 suggests only 20 per cent of voters agreed there was a strong chance new revelations about Trump’s business dealings could affect their views of him
BUT MOST AMERICANS DO
On the other hand, there is another group of voters who view the personality and integrity of the presidential candidate to be of paramount importance. The US president as head of state should have exemplary conduct and character.
He should lead by example and be seen as a role model. The president should also perform his civic duty by paying his fair share of taxes.
Any attempts to avoid taxes through dubious schemes, or even in employing proper tax planning techniques to minimise taxes, will not be viewed as morally acceptable when measured against the high expectations of this group.
This group may be a huge number that could swing the election, when two of three Americans polled in a Reuters/Ipsos public opinion poll in July said they want to see his income taxes, with half believing he is withholding them to hide incriminating evidence, significant financial losses or because they doesn’t pay them.
In fact, an April 2019 poll by Politico/Morning Consult show 51 per cent of respondents back efforts to obtain the president’s person and business returns, with only 36 per cent opposing them.
This is not to say that this group of voters pays scant attention to the ability of the president to govern well. More likely, they expect him to do both well.
PRUDENCE IS EXPECTED OUT OF THE GOVERNMENT OF THE DAY
The timing of these new revelations last week, in the lead-up to the first presidential debate and when many Americans have began voting, is interesting and does not seem coincidental.
The vast majority of Americans believe paying taxes is a civic duty, even 79 per cent of Trump supporters.
Part of this is linked to the principle of collective responsibility and prudence, as income taxes contribute to the lion’s share of 50 per cent of US federal revenue which fund social programmes and welfare services that benefit those left behind.
Borrowing can tackle shortfalls in revenue but this cannot continue each year without hurting the US’s fiscal position, with federal debt at US22.7 trillion in the last financial year.
And when news that an individual paid a miniscule amount in taxes – and less than the taxes a US worker earning an average gross income of US$20,000 does (of US$1,131) - people may feel as if a sense of fairness has been violated.
Much has already gone into structuring tax systems to ensure that it is progressive, fair and accountable, that even if Trump had followed the rule book, his tax returns could fuel the impression that the tax system is rigged and shine the spotlight on his administration’s tax policy and exemptions for the super rich.
Given the important role that tax plays in helping the government fund its various expenditure, it is no surprise heavy punishments are meted out for tax crimes, considered a serious US felony that come with hefty fines and jail terms because it involves cheating a nation of its consolidated fund.
GROWING FRUSTRATION AROUND THE WORLD REGARDING TAX EVASION AND AVOIDANCE
The growing attention paid to tax is further underscored by strong public reactions to tax evasion and avoidance.
When the British public first heard about Starbuck’s tax avoidance activities in 2012, the coffee giant was heavily criticised by British lawmakers. Some MPs called for a consumer boycott against Starbucks. There was wide display of public anger even though tax avoidance acts were less severe than tax evasion.
In China, celebrated Chinese actress Fan Bing Bing was fined heavily in 2018 for tax fraud involving the use of "yin-yang contracts" to declare lower income to the tax authorities. The scandal effectively killed her entertainment career. She has yet to bounce back from the setback.
Interestingly, when owners of a popular durian store Ah Seng Durian in Ghim Moh were convicted in Singapore in May 2019 for tax offences for under-declaring trading income and not registering for goods and services tax, there was wide support for them after they acknowledged guilt and expressed remorse in a Facebook post.
Observers were quick to overlook their misdeeds and were more interested in when the next batch of durians will arrive.
There is currently no evidence of any tax evasion by the current president.
But these latest disclosures that Donald Trump had paid negligible taxes for past years will undoubtedly sway the decisions of a good number of swing voters who have yet to decide on the next US president.
But there’s four more weeks left to go and anything can still happen.
Simon Poh is Associate Professor (Practice) of the Department of Accounting at NUS Business School where he specialises in tax matters