Turkey’s Opposition Party Advocates Flat Tax

Kemal Kilicdaroglu, a 61-year old former accountant, was unanimously elected on May 22, 2010, as leader of the Republican People’s Party (CHP), the main opposition party in Turkey’s parliament.

The CHP was launched by Mustafa Kemal Ataturk, modern Turkey’s revered founder.  In recent years, the party has fallen out of favor.  Kilicdaroglu is trying to revive the party’s fortunes.  Central to his vision is the flat tax, to simplify the tax system and lower the top tax rate to curtail the underground economy and tax evasion.  It is estimated that half of Turkey’s work force is not registered in the tax net.

Current personal income tax rates range between 15% to 38%.  Kilicdaroglu has not yet announced the choice of rate, but it is likely to be low, reflecting rates throughout Central and Eastern Europe’s flat-tax countries.

Flat Tax Stays on Track in Hungary

On October 18, 2010, Hungary’s governing Fidesz party submitted its tax reform package to the country’s parliament.

Following through on its pledge to implement a flat tax, the package includes a 16% flat tax on all forms of personal income to take effect on January 1, 2011. It would replace the current two-rates of 17% on income up to HUF (Hungarian forints) 5 million and 32% on income beyond that. (US$1=HUF 201)

A flat-rate corporate income tax of 10% would take effect from 2013. Those firms whose tax base falls beneath HUF 500 million would enjoy the 10% rate from January 1, 2011. Companies with a higher tax base currently pay 19% profits tax.

The projected revenue reductions are to be offset with a financial “crisis” tax on telecommunications, energy suppliers, and retail chains. Hungarian Prime Minister Viktor Orban believes that the flat rate tax on individuals and business is necessary to improve the country’s competitive position in Europe.