Tuesday, January 18, 2011

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.
   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%.

Saturday, January 1, 2011

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%.