The New York Times of February 28, 2010, carried a lengthy story on Seif al-Islam el-Qaddafi, the son of and possible successor to Libya’s ruler Colonel Muammar el-Qadaffi. The young Qaddafi is Western educated, with a Ph.D. from the London School of Economics.
Seif wants to reform Libya’s economy, opening it to Western investment and transform it into the Dubai of North Africa. His ideas include massive investment in infrastructure, a free-trade zone for foreign investment, a new business and commercial legal code, and a 15 percent flat tax.
Seif’s views on the flat tax are attributable to two factors. In 1996, while attending a meeting of the Mont Pelerin Society in Vienna, I taught a one-credit, day-long course on tax policy at IMADEC (International Management Development Consulting) University. I concluded with an exposition of the flat tax, which had then been adopted in the three Baltic countries of Estonia, Latvia, and Lithuania. Among the students was Seif al-Islam el-Qaddafi, who asked several interesting questions about the flat tax.
A second factor is its spread to another two dozen countries with positive results for fiscal policy and economic development.
The flat tax is only one, but very important, ingredient in the matrix of economic policies that fosters investment and growth. If and when Libya adopts a 15 percent flat tax, it will be a sign that the country has chosen, as Deng Xiaoping put it for China in 1982, to open up to the West.