TAXATION – A NECESSARY EVIL?

By: Rafiq Hajat – Executive Director – Institute for Policy Interaction

Wise men everywhere in the world agree that there are at least three immutable elements in every
human life and these are: birth, taxes and death. They also concur that taxes are necessary but they
differ on how to inculcate fairness and equity in a tax regime.
The history of taxation is a fascinating subject. It's a sordid tale of rebellion, corruption,
presumptive arrogance, and even civil destruction. This article dwells briefly on this history and
subsequently draws the reader’s attention to pervasive inequalities in the tax system currently being
applied in Malawi.
The oldest tax system that modern civilisation is aware of, was set up 6,000 years ago at a place
called Lagash. The information is gleaned from clay tablets that were unearthed in an
archaeological dig. Not only is Lagash the site of the first known tax system, it is also the site of the
first bureaucratic rebellion. Artefacts reveal how heavy taxes were originally implemented to
finance a war. To collect them, tax collectors, armed with the power of seizure, stretched from one
end of the land to the other. Eventually, the war ended, but the tax collectors, having grown
extremely fond of their positions and the power they derived from them, refused to relinquish their
taxing power but were finally coerced into submission by force.
EGYPT
The most intense tax system was probably practised by the ancient Egyptians where Administrators
known as scribes ran everything. An advance fee was a prerequisite to becoming a scribe, but after
doing so, a person was inordinately elevated. Unlike normal people, scribes were completely
exempt from taxation. They conducted audits, prosecuted delinquent taxpayers, and ran the courts.
Grain was taxed, and so were beer, fruit, honey, and fish as were gardens, farm produce like
chicken and pigeon eggs, and even home crafts. Audits involved searching home kitchens to see if
non-taxed oil was being used for cooking.
What is interesting about ancient Egypt is that many attribute its eventual collapse to corruption in
the bureaucracy - especially the tax bureau. It reached a stage where the Emperor could no longer
control it and his orders would go unheeded. The great historian Rostovtzeff says that the continual
and unabated tyranny of Egyptian tax collectors produced a nationwide decline in incentive.
Agricultural lands fell into disuse, businessmen moved away, workers fled and crime blossomed.
The great ancient nation of Egypt finally crumbled into dust, leaving behind monuments such as the
Pyramids and the Sphinx to attest to its glory - a poignant lesson for us to heed.
GREECE
In times of war, the Athenians imposed a tax referred to as “eisphora”. No one was exempt from
the tax, which was used to pay for special wartime expenditures, however the ancient Greeks are
one of the few societies that were able to rescind tax once the emergency was over. Thus the tax
was designated for a specific purpose and would be lifted when the said purpose was accomplished.
In addition to this, the spoils of war that emanated from the campaign would be converted into
funds that were actually used as a refund of the tax to all citizens on a pro rata basis - a truly
remarkable example of a fair tax!
Perhaps this model ought to be used in the design of our so called emergency taxes such as the
levies that seem to have become concretised and taken on a life of their own.
THE ROMAN EMPIRE
A major factor in the fall of Rome also had to do with corruption and runaway bureaucracy. At one
point, assaults on Roman tax agents became so frequent that soldiers had to accompany them to act
as bodyguards. The last great Roman Emperor, Marcus Aurelius, realised that Rome was in trouble
and he knew that bureaucratic arrogance and excessive taxation were the root cause of the problem.
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He sent advisors to the provinces in order to persuade local governments to spend less money and
collect fewer taxes and, rather than raising taxes when the national treasury was bare, he sold off his
vast personal fortune to pay for the cost of running the government. Despite this magnanimous
gesture, Rome was doomed - another resounding victory for untrammelled taxation!
On a point of interest, Saint Matthew was a publican (tax collector) from Capernaum during Caesar
Augustus’ reign. This only goes to show that even Tax Collectors can see the light and become
Saints! Perhaps the M.R.A. could take a lesson from this and change their mindset/attitudes that
have earned them such a negative image in the public perception.
GREAT BRITAIN
In 60 A.D. Boadicea, the queen of East Anglia, raised an army of 230,000 and led a revolt that can
be attributed to corrupt tax collectors in the British Isles. She and her army seized London and
allegedly killed all Roman soldiers within 100 miles. It is said that over 80,000 people were killed
during the revolt. The revolt was eventually crushed by Emperor Nero and resulted in the
appointment of new administrators for the British Isles.
Lady Godiva (A Naked tax)
Lady Godiva was an Anglo-Saxon woman who lived in England during the 11th century.
According to legend, Lady Godiva's husband Leofric, Earl of Mercia, promised to reduce the high
taxes he levied on the residents of Coventry when she agreed to ride naked through the streets of the
town. I trust that we will not have to resort to such extremes to achieve an equitable tax system.
The 100 Years War
The 100 years War between England and France began in 1337 and ended in 1453. One of the key
factors that renewed fighting in 1369, was the rebellion of the nobles of Aquitaine over the
oppressive tax policies of Edward, The Black Prince.
Tax Decapitation
The King of England, Charles I was ultimately charged with treason and beheaded because of a
disagreement in 1629 about the rights of taxation afforded the King and the rights of taxation
afforded the Parliament.
Prominent taxes imposed during this period were taxes on land and various excise taxes. To pay for
the army commanded by Oliver Cromwell, Parliament, in 1643, imposed excise taxes on essential
commodities (grain, meat, etc.). These regressive taxes increased the tax burden on the poor so
much, that the Smithfield riots occurred in 1647 – sparked off by rural labourers’ inability to buy
enough wheat to sustain a family of four.
A precursor to the modern income tax we know today was invented by the British in 1800 to
finance their war with Napoleon. The tax was repealed in 1816 and opponents of the tax, who
thought it should only be used to finance wars, wanted all records of the tax destroyed along with its
repeal. The records were publicly burned by the Chancellor of the Exchequer, but copies were
retained in the basement of the tax court.
The above paragraphs vividly illustrate some of the turbulent history behind current tax regimes
elsewhere in the world, but here in Malawi we have also seen public outrage on unfair taxes such as
the “Tickey” Tax for medical services that was levied during the sixties.
Today, the untenably narrow tax base (i.e. the tax payers) in Malawi groans under the excruciating
burden of a draconian tax regime that shows no sign of decreasing to an equitably tolerably level.
One must be cognisant of the fact that the rate of compliance is directly related to the rate of tax, i.e.
the higher the rate of taxation – the lower the level of compliance and vice versa. The case of
Mauritius provides a vivid example of this scenario, where the tax revenue was very low at a rate of
90% but immediately increased when taxes were reduced to 20%. The present situation in Malawi
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is leading to a culture of non compliance, with an increasingly narrow tax base who are then taxed
even more savagely to raise the required revenue – a classic “Catch 22” no win situation!
It may useful here to list some of the direct and indirect taxes that every law abiding person must
pay during the pursuit of a sustainable and relatively comfortable life. The list is split into two
categories – Direct Taxes and Indirect Taxes:
DIRECT TAXES
1. Pay As You Earn (P.A.Y.E) - graduated;
2. Income Tax 30%;
3. Capital gains Tax 30%;
4. Withholding Tax 10-20%;
5. Corporate Tax 30%; (on profits)
6. Land Transfer Tax; ?%
INDIRECT TAXES
1. Import Duties 10-30%;
2. Cess 10%;
3. Value Added Tax (VAT) 17.5%; (Despite all assurances that this tax would not be levied on
“pro-poor items,” the opposite has indeed occurred. For example, the Water Boards are
paying VAT for electricity in the production of water and these costs are inevitably built
into the cost of water that everyone drinks. Thus even the poorest of the poor are paying
VAT for the “water of life”!)
Some of these taxes are de facto double taxes. For example, VAT is levied on top of duties, thus we
are, in fact, paying a tax upon a tax on all our imports!
In addition to the above, there are also other taxes that play a huge role in determining our cost of
living. For example:
Fuel Levy - includes the following:
 Temporary Safety Levy - MK6.70
 PCC Levy - MK0.35
 Road Levy - MK7.70
 MBS Cess - MK0.35
 Energy Fund - MK0.50
 Safety Net Levy - MK2.57
 Price Stabilisation Fund - MK1.69
Total Levies MK19.86 (22.87% per litre when the price of petrol was
MK86.85 per litre.)
It is important to bear in mind that the cost of fuel will inevitably determine the price of
transportation which, in turn, affects the price of all commodities in Malawi – from chimanga and
fertiliser to clothing and soap. Thus these “levies” have a direct impact on all sectors of Malawian
society, but they hurt the poorest the hardest.
In the final analysis, one must question whether the taxes that we pay are justified. Are our taxes
translated into better services for the people? Look at the state of our hospitals and the paucity of

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medicines available for the sick and we have the glimmerings of our answer. Observe the patterns
of governmental over-expenditure on luxurious vehicles, overseas jaunts, bloated allowances and
perks, analyse the stark contrast between islands of opulence amidst a sea of unrelenting poverty
stricken misery and the light may finally dawn that something is sorely amiss in this beloved land.
When the MRA proudly proclaims that it has beaten its targets by an enormous margin, why do we
applaud instead of questioning the methodology used during the collection? If the said targets are
set by the National Budget, then should such an over-collection not indicate an excessive zeal in
collecting an exorbitant rate of taxation thereby alienating the tax paying population?
The main lesson of history, and it's an important one, is that bureaucrats and political
administrations left unchecked, will eventually trample the rights of everyone. By virtue of what
they are, such classes inevitably place a lower value on civil rights than their own self-interest and
they can subsequently contribute to the downfall of any nation. It would be wise to learn from
history and not repeat those hoary mistakes in Malawi by inflicting adversity upon the hapless
heads of long suffering Malawians who only wish to pursue a wholesome life with minimal
interference.
Taxation without representation is a crime by the State upon its people and will not go unpunished
indefinitely – History is our teacher – heed the lesson well lest we all rue our blasé cavalier
recklessness on some dismal future day!

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Sources
Adams, Charles, 1993, For Good and Evil: The Impact of Taxes on the Course of Civilization,
Madison Books.
Rehnquist, William H. 1992 Grand Inquests: The Historic Impeachments of Justice Samuel Chase
and President Andrew Johnson. William Morrow & Company, Inc. New York, NY.
Steuerle, C. Eugene The Tax Decade
Adams, Charles 1998 Those Dirty Rotten TAXES, The Free Press, New York NY
Kevin Avram - The history of taxation - inciting rebellion and civil discord