Flat Tax Update
Successful in Estonia
Mart Laar became prime minister of Estonia in 1992 with inflation at 1,000 percent, the economy shrinking by 30 percent a year, unemployment at 30 percent, and his people dependent on Russia for 92 percent of their trade.
With the introduction of a flat tax, privatisation and free trade Estonia now has stable growth of between 6 and 7 percent. Inflation at 2.5 percent, a balanced budget, low unemployment, and a very high level of investment.
On the table in Germany
Angela Merkel, widely expected to oust Gerhard Schroeder from the Reichstag in next month's German elections is reported by Tax-News.com to have appointed a flat tax advocate to her election campaign team. Paul Kirchof, professor of finance at the University of Heidelberg and a member of the Deutsche Bank's supervisory board, advocates replacing Germany's extensive system of taxpayer subsidies and replacing it with a flat rate of income tax charged at 25%.
On the table in Greece
The Greek government, led by Kostas Karamanlis, is actively considering a 25% flat rate of income tax to replace existing rates of 15%, 30% and 40%.
Censored in the UK
The Treasury recently released a paper that seemingly dismissed the idea of a flat tax. It later emerged that the government had censored the positive findings of the report. A Freedom of Information request revealed the true Treasury findings and has sparked renewed discussion in the UK media, transcending normal ideological divides with the normally left-wing Guardian today joining the fray with an article by Stephen Pollard of the right-wing think-tank the Centre for Policy Studies. Pollard writes:
The tax system is also ripe for reform. A flat tax would benefit both entrepreneurship and the poor… The biggest gains (12% of their income) would be for those on an income just below average. And the poorest third all benefit proportionately more than the richest third.
Mart Laar became prime minister of Estonia in 1992 with inflation at 1,000 percent, the economy shrinking by 30 percent a year, unemployment at 30 percent, and his people dependent on Russia for 92 percent of their trade.
With the introduction of a flat tax, privatisation and free trade Estonia now has stable growth of between 6 and 7 percent. Inflation at 2.5 percent, a balanced budget, low unemployment, and a very high level of investment.
On the table in Germany
Angela Merkel, widely expected to oust Gerhard Schroeder from the Reichstag in next month's German elections is reported by Tax-News.com to have appointed a flat tax advocate to her election campaign team. Paul Kirchof, professor of finance at the University of Heidelberg and a member of the Deutsche Bank's supervisory board, advocates replacing Germany's extensive system of taxpayer subsidies and replacing it with a flat rate of income tax charged at 25%.
On the table in Greece
The Greek government, led by Kostas Karamanlis, is actively considering a 25% flat rate of income tax to replace existing rates of 15%, 30% and 40%.
Censored in the UK
The Treasury recently released a paper that seemingly dismissed the idea of a flat tax. It later emerged that the government had censored the positive findings of the report. A Freedom of Information request revealed the true Treasury findings and has sparked renewed discussion in the UK media, transcending normal ideological divides with the normally left-wing Guardian today joining the fray with an article by Stephen Pollard of the right-wing think-tank the Centre for Policy Studies. Pollard writes:
The tax system is also ripe for reform. A flat tax would benefit both entrepreneurship and the poor… The biggest gains (12% of their income) would be for those on an income just below average. And the poorest third all benefit proportionately more than the richest third.
Have you got any articles that detail the current system and a possible flat system side-by-side?
So with a flat tax things such as tax credits would be abolished?
So in the case of the Greeks the rice (40% - current rate) will be taxed less and the poor (15% - current rate) taxed more?
Posted by
Anonymous |
Wed Aug 24, 03:00:00 pm
This is the problem - it's pretty counterintuitive that taxing the rich less will end in them paying more, but with all the tax-deductible things on the current system that accountants are paid thousands to find, the new system would probably work like that.
The sad thing is, people with slightly higher than average incomes and who don't hire accountants to steal as much from the government as possible are the people who will lose out. And that's us, or if it isn't now, it will be by the time the new system comes in. So we'll be footing the bill for both the poor's tax break and the rich's accountant bill break.
Posted by
Matt |
Wed Aug 24, 03:23:00 pm
Think of all those unemployed accountants too. Soaring unemployment in that sector will cripple the economy... honest.
Posted by
Anonymous |
Wed Aug 24, 04:04:00 pm
You've scarcely heard it because it's written down, not spoken.
Posted by
Matt |
Thu Aug 25, 08:59:00 am
And the poorest third all benefit proportionately more than the richest third.
Aside from picking at grammar, I am inclined to agree with Chris. If the poorest third benefit a lot, the richest third benefit a little, then either the country suddenly loses a shitload of cash, or the middle third loses out a great deal.
If we are concerned about rich people dodging tax, which seemed to be the main issue last time we discussed this, let's introduce a system that targets them, not me. I know I'm being selfish about this, but I already feel like I'm paying more money back to the government to pay for a series of things I'd prefer they didn't do.
I would say that cunts is a somewhat subjective way to describe the rich. And I'm not sure how it would introduce more chain stores - to my mind, simplifying the tax system would put more people in a position to run their own businesses. But mostly I think the horrendously complicated system we have now is going to have to do. And one day, I shall hire an accountant, and I'll pay 3p a year in tax, in the ultimate expression of freedom for Western society.
Posted by
Matt |
Thu Aug 25, 09:10:00 am
"Simplification of the tax system wouldn;t necessarily encourage small businesses."
Yes it would. Here's an example. Companies currently have to calculate the tax on every employee separately (through their tax code). This is very complex and needs lots of IT and lots of people to keep on top of it. With a flat tax you pay a flat percentage of the payroll over each month. It could be done in ten minutes for any company of any size. That's a big gain.
Ranting is fun, but doesn't really help you get to grips with the issues.
Posted by
Bishop Hill |
Thu Aug 25, 09:45:00 pm
I can answer some of these points I think.
The ASI proposal for flat tax would, IIRC, do away with NI too. It is after all just another kind of income tax rather than any sort of insurance scheme.
Pension schemes are funded at a flat percentage of salary so these are simple too.
Student loans I don't know much about, but on the face of it are more complex.
Most employees don't have any fringe benefits.
I understand your point, that the devil is in the detail, but there are big efficiency gains to be made. In the factory I used to work in, the works payroll (for the hourly paid staff) would become as simple as I have suggested. The staff payroll (for the others) might retain more complexity, but would still be substantially simpler.
Posted by
Bishop Hill |
Tue Aug 30, 03:28:00 pm