As the pipe-smoker arrived at the set time for the regular coffee-drinking and discussion session he waved his greeting and mentioned that he wished to share thoughts about tax and taxation and all that these words entailed.

There was complete agreement as the others mentioned that their spouses and children had asked several questions about the same subjects.

The pipe-smoker admitted that anyone could use Google to see what these subjects meant, but he believed that it sometimes made more sense if someone spelt it out and made things more understandable.

So, to start at the `beginning`, he said that modern governments attempt to do many things and give many benefits to their citizens and thus they need funds to satisfy these intentions. By way of digression, he added that all of the persons within the country are therefore required to pay tax of one kind or another. In this regard it was interesting to note that the frequently quoted expression ` taxation without representation`, is not the basis of delivery of services.

He mentioned that the first and foremost tax that is encountered is Value Added Tax (VAT) which is payable on just about each and every product that can be purchased at any shop. Much time has been spent to ensure that the current rate of 14% is not exceeded or escalated as was experienced in the previous attempt to get every citizen to pay this tax. This previous system was called purchase tax or sales tax and was supposed to be charged at the point of sale. However, as many products went through a number of stages from manufacture to eventual sale, the `tax` was added at each stage which led to ‘leakages’ and thus unwanted impacts, including theft. It was subsequently replace by the current VAT. Nobody asked why the addition of value was seen to be something that has to be taxed!

Personal income tax and tax on profits were considered to be `fair` because anyone who earns a high income, whether it was by way of a salary or commission, was considered to be getting (note: not ‘earning’) more money than s/he needs to eat, drink, work and live and should therefore be charged to share some of these funds by way of taxes. Much the same argument is used to imply that a company that produces a product is selling it at a price that ensures that a big fat profit is made and should thus also share some of this by way of taxes.

However, there seems to be a massive list of things that a government must deliver to its citizens. These services include schools, universities, hospitals, security within the country and also along its borders. Add to this list such matters as foreign relations, special tariffs for imported goods and machinery, roads and train services as well as postal and telephone services at levels that can compete with the best in the world and all working for the government must be paid at competent salaries while social benefit allowances must meet and satisfy their specific needs. At the same, time loans may have to be raised to finance dams, pipe lines, power stations and airports and then these loans have to be repaid along with the regular interest costs during the lifetime of the loans.

At this point there was a show of hands indicating that any further explanation would only serve to confuse them all as the real statement of `the revenues and expenditures need to be in balance` would only overwhelm them, but they would welcome further explanation at some future date.