Here are three burdens placed on compliant taxpayers when back taxes are not collected:
- Increased Tax Burden: When a significant portion of taxes goes uncollected (the "tax gap"), governments may need to raise taxes on compliant individuals and businesses to make up for the shortfall in revenue. This can lead to higher tax rates or the introduction of new taxes, creating an unfair burden on those who are already diligently fulfilling their tax obligations.
- Reduced Public Services and Infrastructure: Tax revenue is essential for funding vital public services such as healthcare, education, infrastructure development, and social programs. A persistent tax gap, exacerbated by uncollected back taxes, means less money available for these crucial investments. As a result, the quality and availability of public services can decline, impacting everyone, especially those who rely on them most, according to Oxfam.
- Undermined Public Trust and Fairness: When tax evasion and avoidance are widespread, it can erode public trust in the tax system. People may feel that the system is unfair and that others are not paying their fair share, leading to a breakdown in the social contract between taxpayers and the government. This can create resentment among compliant taxpayers and even encourage further non-compliance, creating a vicious cycle of distrust and a less equitable society.
In essence, uncollected back taxes represent a considerable lost revenue stream for the government and a heavy burden on those taxpayers who are fulfilling their responsibilities. This can lead to a less fair, less equitable, and ultimately less prosperous society for all involved
