Philanthropy & Self-Interest
Recently, there was a news report about the Shrimad Bhagawat Mahayagya held at Surkhet to raise fund for the proposed university there. According to the report, the total fund collection was Rs. 110 million against the target of Rs. 20 million. Some other reports said the collection was Rs. 280 million, including land donations. One individual is reported to have donated Rs. 5.1 million.
Compare that with the government’s target and actual collection of taxes. Though the tax collection this year has so far been higher than the target, it should not be forgotten that the target itself is very low. When compared to other countries, the tax collection of Nepal as a percentage of the GDP is ridiculously low. It was about 9.8 percent in fiscal year 2006-07 and 10 percent in 2007-08. In India this ratio in 2004-05 was 16 percent (collected by the central and state government). It must have gone up higher now. According to a recent report, the Indian central government alone is collecting about 13 percent of GDP as taxes. In Nepal, even with higher tax collection this year, the ratio may be well below the Indian level. This ratio is over 50 percent in Sweden and about 30 percent in USA. Interestingly, the Swedish don’t complain for such high taxes as they are convinced that the money given out to the government is spent well. In the USA they do complain a lot, but they are happy that the donation that they hand over to charitable institutions, such as health and educational institute, are made tax-free. In Nepal, there is cap beyond which one cannot claim tax deduction on the amount that is so donated.
This means, people are much more likely to donate their money for philanthropic causes rather than paying as taxes to the government. The reason is the self-interest. While the money given out as donation yields satisfaction to donor (name recorded as the donor), the money given out as tax yields nothing to the taxpayer. By definition, tax does not involve a quid pro quo. The Surkhet example shows that if the government wants more educational and health institutions opened, it can achieve that objective if the laws governing donations are revised properly. Collecting taxes by the government and spending it into setting up and operating schools, hospitals and universities will be less efficient for two reasons: First, it naturally creates space for corruption and second, even without corruption, there is a “deadweight loss” when the government collects the money and spends it.
The Surkhet example offers some additional learnings as well:
One, people want their place to be developed and they agree that an educational institute is the basis for it. If not anything else, a big educational institute, like a university, will enhance the prestige of the area as a whole.
Second, religion is a very potent force in Nepali society and if utilized properly it can work as a great motivating factor.
(By Arthaprakash Bidyarthi)
