Flat Tax Roundup 2011

No major flat tax developments transpired in 2011, either in new countries getting on the bandwagon or existing flat-tax countries falling off.

Vietnam has joined the list of countries-- Malta (15%), Andorra (10%), Malaysia (15%)--that tax non-residents at a flat rate, set at 20%, while residents pay graduated rates up to 35%.

The big news is the revival of the flat tax in the campaign for the Republican presidential nomination.  Herman Cain (since withdrawn), Rick Perry, and Newt Gingrich have explicitly proposed a flat tax.  If either Perry or Gingrich win the nomination, the flat tax will be a major issue throughout the campaign.  Although Jon Huntsman signed a flat tax into law in Utah, he proposes three federal income tax rates.  Mitt Romney plans to lower rates in the future, but is not proposing an immediate major reform.  Michele Bachmann, Rick Santorum, and Ron Paul support reform and lower rates, but none of these seem likely to secure the nomination.

Malta Extends its Preferential 15% Flat Tax

To enhance Malta’s attractiveness for skilled persons engaged in certain high-tech economic fields, the government, in its 2012 budget, has extended its preferential 15% flat tax to international professionals developing digital games.  Maltese companies that commission digital games will qualify for a tax credit of about $20,000.

The government will also exempt royalties from copyright-protected books, film scripts, music, and art.

Return With Us to Those Exciting Days of Yesteryear

The Flat Tax Rides Again--Perry, Huntsman, Gingrich (optional), Cain, and Bachman.

Et tu Romney?

Three Cheers for Herman Cain

9-9-9

Madagascar Enhances its Flat Tax

To improve the investment climate in the African island nation of Madagascar, located off the southeast coast of the African continent, the government’s 2010 budget reduced the flat-rate personal income tax from 24% to 23%, with a personal allowance of MGA 250,000 (US$1 = Malagasy Ariary 1,942), about $125 per month, or $1,500 a year.  Corporation tax was incorporated into the income tax code at the same 23% rate.

Flat Taxes Blog Highly Ranked in British Isles

This blog is ranked #28 in Economy blogs in the United Kingdom and Irish blogospheres.  Thanks to all you British and Irish readers who find it of interest.

Andorra Implements Non-Residents 10% Flat Tax

Andorra historically had no income or capital gains taxes on residents and non-residents.  In 2007, to slow property inflation, the government levied a 15% capital gains tax.

In late December 2010, Andorra published the Taxation of Non-Residents Act, 2010.  It subjects non-resident companies and individuals to a 10% flat tax on local-source profits and income, minus permitted expenses and deductions.  It plans to reduce capital gains tax on property from 15% to 10% in the near future.

The government plans on introducing a value-added tax to replace the existing consumption tax.  Following the imposition of a 5% VAT, the government next intends to apply the 10% flat tax to resident companies and individuals.

Malta Implements Non-Resident 15% Flat Tax

The publication of Legal Notice 106 - Highly Qualified Persons Rules - implemented a 15% flat tax for non-residents, effective January 1, 2010 (assessed in 2011) in specific eligible offices of employment in Malta for an initial period of five years.

The regulation lists categories of eligible positions and qualifying employment conditions.  The 15% flat rate does not apply to resident Maltese.

To benefit from the 15% flat rate, a qualified employee must earn income of at least €75,000, which is to be adjusted annually in line with the Retail Price Index.  A particular attractive feature of the scheme is that excess income over €5,000,000 is free of tax.

The Flat Tax is Alive and Well

Today, April 18, 2011, is the federal income tax filing deadline for 2011.  Sad to say, there is no simple postcard-size flat tax in our immediate future.  A flat tax is not in the cards anytime soon in North America or old Europe.

Elsewhere the flat tax thrives.  The IMF uses every tool at its disposal to persuade countries to abandon the flat tax to close budget deficits or improve their definition of fairness.  These entreaties continue to be rejected.  Commentators who smell any weakening of commitment to the flat tax are quick to rush into print, wrongly in every case, to proclaim the beginning of the movement to dismantle the flat tax.

I hope to report this year new entrants into the flat tax club.  Stay tuned!

Malaysia Promotes Preferential 15% Flat Tax

On April 12, 2011, Prime Minister Datuk Seri Najib Tun Razak announced that Malaysia would encourage Malaysian professionals working abroad to return home by making them eligible for a 15% flat-rate income tax for five years, competitive with Hong Kong and below the maximum 26% rate under current law.

Once in place, the government will likely face pressure to extend the 15% flat rate to Malaysian professionals working at home, and then to all Malaysians.

  

(Here’s hoping!)

Why the U.S. Needs a Flat Tax

You want another good reason for a simple, postcard-size flat tax in the United States.  Take a look at the growth of tax law.

                                (HT:  Dontmesswithtaxes.com)

Flat Tax Book Available in German, French, and Spanish

For those of you who would like to read The Flat Tax book in German, French, or Spanish, you can download a copy free of charge from the E-book page of the web site of the European Center of Austrian Economics Foundation, located in Liechtenstein.

I recommend that you browse the other pages of the ECAEF web site where you may find items of interest.  I will be speaking at a conference in Vaduz on May 20, 2011, on "The Economics of Regulations."

Newly Independent Southern Sudan Joins the Flat Tax Club of Nations

During January 9-15, 2011, qualified voters of the Southern Sudan Referendum overwhelmingly voted for independence.

Sudan became independent on January 1, 1956.  During 1956-2002, two lengthy civil wars were fought, largely between the Arabic Muslim north and the Christian African tribal south.  More than 2.5 million people were killed and another 5 million displaced.  A final peace agreement was reached on January 9, 2005.  A new constitution for Sudan was ratified in July 2005.  It provided for a referendum to be held in January 2011 that allows the Southern Sudan to secede if it wishes. 

English: Map showing political regions of Sudan as of July 2006.

   Darfur

   Nuba Mountains and Blue Nile

   North Sudan

   South Sudan

   Eastern Front, area of operations July 2006

   Abyei, as defined by the Permanent Court of Arbitration

(Credit:  Lokal_Profil, Wikipedia)

During 2005-2011, the Interim Constitution of the Southern Sudan was the supreme law for the South.  GOSS is the acronym for the Government of Southern Sudan.

In accordance with the provisions of Article 59(2)(b) and Article 85(1) of the Interim Constitution, the Southern Sudan Legislative Assembly enacted the Personal Income Tax Act, 2007.  The law established a tax-exempt threshold of SDG 300 (three hundred Sudanese Pounds) per month.  (US$1.00 = SDG 2.50) Above that all taxable income is charged at a flat rate of 10%.
     

The Southern Sudan has had a flat 10% personal income tax since 2007.  With passage of the referendum, Sudan joins the ranks of independent countries with a flat tax.

The Sudanese government in Khartoum has a slightly graduated tax system of three rates: 5%, 10%, and 15% (see Appendix IV, page 42).  The personal income tax exempts the first SDG 9,050 from taxation.  Thereafter, successive rates of 5% and 10% are levied on the next SDG 120 and SDG 240 respectively, after which a fixed rate of 15% is applied.  The combined SDG 360 of the two lower rates amounts to about 4% of the value of the tax-free threshold of SDG 9,050.  The number of salaried persons falling into those two intermediate brackets is likely to be a trivial fraction of total salaried personnel.  In that regard, Sudan has a Hong Kong-style flat tax of 15%.

Armenia Moves Within a Hair of a Flat Tax

On June 24, 2010, Armenia’s National Assembly reformed its tax code.  Effective January 1, 2011, all exemptions and deductions are removed from the personal income tax.  All income up to 120,000 drams (US$1.00=AMD 363.4) is taxed at 24.4%, with income above AMD 120,000 at 26%.  Armenian commentators describe the reform as a practically one-rate (flat-rate) tax. The new “almost flat” tax replaces the previous regime of granting a deduction of AMD 30,000, 10% on taxable income up to AMD 80,000 and 20% above AMD 80,000.  (The flat-rate profits tax increased from 20% to 26%.)

The rise in the personal income tax rate is offset as follows:

Elimination of the 3% social tax on employees.

Elimination of the sliding scale social tax on employers reaching 20% above AMD 100,000 per month.

Reduction in Value-added tax from 20% to 18%.