Wednesday, July 1, 2020

Countries And Jurisdictions With A Flat Tax On July 2, 2020

Jurisdiction                         Tax Rate (%)

Abhkazia                                   10%
Andorra                                     10
Artsakh                                      21
Belarus                                      12
Belize                                        25
Bolivia                                       12
Bosnia & Herzegovinia                10
Bulgaria                                     10
Estonia                                       21
Georgia                                      20
Greenland                                  42
Guernsey                                    20
Hungary                                     15
Jersey                                        20
Kazakhstan                                 10
Kyrgyzstan                                  10  
Madagascar                                 10
Mongolia                                     10
North Macedonia                         10
Pridnestrovie                              10
Romania                                     10
Seychelles                                  15
South Ossetia                              12
Timor-Leste                                10
Turkmenistan                              10
Ukraine                                       18
Yemen                                        15

At the peak of the flat tax movement, 44 countries and jurisdictions had a flat tax.  The number  has declined to 27, with Russia the most recent to add a second top rate.  Politicians in both dictatorships and democracies find that imposing a second top rate on a small percentage of high-income earners is popular, especially when twinned with increased social benefits for lower- and middle-class taxpayers.  The same holds for a second lower rate.

Of the 27 jurisdictions listed above, 10 have populations under 100,000; 3 between 100,000-1 million; 3 between 1-10 million; 6 between 10-20 million; and 3 over 20 million (Ukraine is the largest at 42 million).

Four are disputed territories of other countries lacking international recognition (Abkhazia, Artsakh, Pridnestrovie [aka Transnistria], South Ossetia).  Two are British Overseas Territories (Jersey, Guernsey).  One is a Danish Autonomous Dependent Territory (Greenland).  Yemen has two claimants to the government, Houthis and forces loyal to Hadi based in Aden.

Tuesday, June 23, 2020

The Flat Tax In Retreat: Russia Adds A Second Top Rate Of 15% On Its Personal Income Tax.

In 2001 Russia implemented a 13% flat tax on personal income.  Russia was the first large country to adopt a flat tax,

In a speech to the nation on June 23, 2020, Russian President Vladimir Putin announced that the government would impose a second rate of 15% on persons earning more than 5 million rubles ($72,675) a year, effective January 1, 2021.  

The higher 15% rate is projected to raise an additional 60 billion rubles ($872 million), which will be used to offset some of the government's spending on the economic costs of the coronavirus.

To stimulate the growth of Information Technology companies, the new tax law would reduce the social security contributions on technology firms for its employees from 14% to 7.6% and cut the profits tax on IT firms from 20% to 3%.

Monday, October 21, 2019

Hoisted From The Archives, June 17, 2010: The Origins Of The Flat Tax

The Federal Reserve Bank of Minneapolis, in its June 2010 edition of Region magazine, published a lengthy interview with Robert E. Hall that covers a broad range of economic issues. One discusses tax policy. As most readers of this site know, Bob is my coauthor of four books (1983, 1985, 1995, 2007) and numerous articles on the flat tax.

Bob stated that “it wouldn’t be remotely practical to do it [tax reform] with a single positive tax rate now.” This is due, in his view, to the dramatic widening of the income distribution in the U.S. since 1981. “This means that the idea of the poor paying the same tax rate just seems less viable than it was when the income distribution was tighter.”

....”So I play around with systems that have, say, two brackets.”

The Tax Reform Act of 1986, signed into law by President Reagan, had two brackets of 15% and 28%. In 1991, President George H.W. Bush signed legislation that added a 31% bracket. In 1993, President Clinton followed with two higher brackets of 36% and 39.6%. Two brackets lasted just five years. Moreover, the administrative simplicity of the Hall-Rabushka flat tax quickly evaporates with the addition of a second or more rates.

I also need to restate the historical record of our joint work. Bob stated that “The origin of our initial flat tax effort was Rabushka coming to me in 1980 and saying, ‘I know what the people want. The people want a flat tax, but I don’t quite know what that is.’ And I said ‘I know what it is because I’ve been thinking about it since I was a graduate student.’”  (He restated this history at a Hoover Event on October 2, 2019.)

Bob’s account is wrong. I had been observing Hong Kong’s approximate flat tax since 1973 and had looked at other cases in the Channel Islands of Jersey and Guernsey. I was asked to serve on President Reagan’s Tax Policy Task Force, which met between his nomination in August 1980 and election in November 1980. Having been dissatisfied with our 400-plus page report, I published a brief article in the March 25, 1981, edition of the Wall Street Journal entitled “The Attractions of a Flat-Rate Tax System.” Until that point, I had no knowledge that Bob had ever thought about the subject. Bob came to me and suggested that we write a flat-tax plan to replace the then current U.S. federal personal and corporate income taxes, which we did over the summer of 1981. We went public with the plan in the December 10, 1981, edition of the Wall Street Journal, entitled “A Proposal to Simplify Our Tax System.”

One other quibble is with his comment that the flat tax has not gone very far in the rest of the world. The dozens of postings on this site indicate otherwise.

Bob has not yet formally disassociated himself from the H-R flat tax. However, he has been less outspoken in its support in recent years. As president of the American Economic Association in 2010, I worry that this may be the year he walks himself back from the flat tax, explicitly stating a preference for a multi- bracket federal income tax.

Saturday, February 23, 2019

The Flat Tax In Retreat

The flat tax movement peaked at 40 countries.  Beginning in 2009, the following countries added a second (or more) higher rate(s) on upper-income households, with two adding a second lower rate.

Tuvalu, 2009:   added second lower rate of 15% to previous 30% flat rate

Iceland, 2010:  replaced 36% flat rate with progressive rate schedule up to 46.28%

Ukraine, 2011:  added second higher rate of 17% to previous 13% flat rate

Czech Republic, 2013:  added second higher rate of 22% to previous 15% flat rate

Slovakia, 2013:  added second higher rate of 25% to previous 19% flat rate

Montenegro, 2013:  added second higher rate of 15% to previous 9% rate

Albania, 2014:  replaced 10% flat rate with two rates of 13% and 23%

Grenada, 2014:  added second lower rate of 15% to previous 30% flat rate

St. Helena, 2015:  replaced 25% flat rate with two rates of 26% and 31%

Jamaica, 2016:  added second higher rate of 30% to previous 25% flat rate

Guyana, 2017:  replaced 30% flat rate with two rates of 28% and 40%

Mauritius, 2017:  replaced flat rate of 15% with two rates of 10% and 20%

Trinidad and Tobago, 2017:  added second higher rate of 30% to previous 25% flat rate

Latvia, 2018:  Replaced its 23% flat rate with three rates of 20%, 23%, and 31.4%

North Macedonia, 2019:  added second higher rate of 18% to previous 10% flat rate

The second higher rates in the Czech Republic and Slovakia are temporary 7-year measures.  They may be extended, made permanent, or allowed to lapse.

All of these measures were enacted after the financial crisis of 2008-09, some to raise additional revenue, others promoted by newly-elected leftist political parties.

Updates will be posted if and when other countries add a second or more rates to their flat tax, or if new countries adopt a flat tax.

Saturday, January 20, 2018

Prosperit√† per L’Italia

Italy is a wonderful country.  It has spectacular monuments, museums, churches, castles, cuisine, wine, and beautiful women:  Sophia Loren, Gina Lollobrigida, Claudia Cardinale, Monica Vitti, and Virna Lisi to name a few.

Italy is among the best countries in the world to spend two weeks on holiday.  There is so much to see, do, eat, and drink.  But Italy is a dreadful place in which to live, work, and especially pay taxes.

All that could change on March 4, 2018.  Italian voters have a chance to restore prosperity for themselves and their country, and show the way forward for all of Europe.

A coalition of center-right parties (market-oriented, low-tax conservative parties in American parlance) agreed to an electoral pact on Thursday, January 18, 2018.  Silvio Berlusconi of Forza Italia, Matteo’s Salvini of Lega Nord, and Georgia Meloni of Nationalist Brothers of Italy listed ten measures in their joint platform.  Topping the list was a single-rate flat tax:  Salvini proposes 15%, Berlusconi about 20%, with Meloni concurring in the general concept.

Should the coalition form the next Italian government, the flat tax will be the first measure it submits to Parliament.  A text of the law already exists, with only the exact rate to be set.  It would be relatively easy to select, say, a rate of 18-19%, with an agreement to reduce the rate one percentage point each year to 15% if revenue materializes as projected.

Italy would likely experience the benefits shown by President Trump’s reduction in the U.S, corporate tax rate from 35% to 21%.  Money would pour into Italy all over Europe and offshore for investment.  Tax evasion would decline.  New jobs would be created.  Young Italians could move out of their parents’ apartments and buy their own place.  Those who moved abroad in to earn a better living would return home to grab new opportunities.

It’s that simple!

As one of the big three in the European Union along with France and Germany, other European countries would find it necessary to follow the Italian example and adopt similar low, flat taxes.  All of Europe would enjoy a sustained economic boom.

PS.  By way of disclosure, I carefully reviewed, and prefer, the Northern League’s 15% flat tax plan, which originated with its chief economic advisor, Armando Siri.  I also met with Berlusconi to discuss the flat tax.  I believe the narrow difference between the two plans can be easily resolved into a single flat-tax plan.

Sunday, December 24, 2017

15% Flat Tax: Tax Reform Italian Style

Want to see the one of the world's best tax reform plans?  It was developed by Armando Siri, current economic advisor to Italian Prime Ministerial candidate Matteo Salvini of the Northern League.  The Nothern League will be joining two other free-market, low tax parties in a coalition to contest Italy's next national election, likely in March 2018.

If elected, and if Salvini becomes Prime Minister, one of its first actions will be to introduced its 15% flat tax plan.  This would be the beginning of Italy's resurgence, and a model for other European countries.  Here's hoping.

(Disclosure:  I advised Armando Siri on the development of his 15% flat tax.)

Tuesday, December 13, 2016

The 15% Flat Tax Coninues To Percolate In Italy

Armando Siri explains his 15% Flat Tax in Italian.

Go to Armando Siri's web page on the Italian Flat Tax

To watch the video click on the video play button.

For the English book cover of his Flat Tax see below. An English language edition of the book is forthcoming.