Albania Abandons Its Flat Tax

On December 28, 2013, the Socialist majority in the Albanian Assembly, in power since September 2013, passed the 2014 budget on  a strict party-line vote.  The budget replaced the 10% flat tax on personal income with two higher rates.

The new personal income tax imposed two rates of 13% and 23%, after exempting the first 30,000 leks of income.  ($1 =102 leks)  The 13% rate applies to incomes between 30,000-130,000 leks, above which 23% is imposed.  The government claims that the higher rates only affect the top 3% of income earners, while those with wages under 130,000 leks will pay less than under the previous 10% flat tax.

Corporate profits tax was increased from 10% to 15%, with an exemption provided for small businesses.

Altogether the new taxes are projected to increase tax revenue by 18 billion leks ($176 million).

The tax increases were part and parcel of a deal with the International Monetary Fund that granted a 300 million euro loan to help stabilize Albania's public finances.  Albania is seeking membership in the European Union, which requires its meeting deficit reduction targets.

Albania is the third country in the past two years (Slovakia and the Czech Republic in 2012) to replace a flat tax with two rates

Greenland Has Adopted a 37% Flat Tax

Greenland , an autonomous country within the Kingdom of Denmark, applies a national flat-rate 37 % personal income tax on the worldwide income of its residents.  Its 18 municipalities also apply flat-rate taxes of their own, 5% in 7 and 8% in the other 11, bringing the overall flat rate to 42% and 45% respectively.  Individuals are granted a personal and basic allowance of DKK 58,000 before tax is assessed.  ($1 = DKK 5.52)  Per capita income is about US$37,000, thus the first $10,500 is exempted from tax.  Tax is assessed on both cash and income in kind.

Corporate tax on business profit is levied at a flat rate of 31.8% both on resident and non-resident companies.  Any subsequent distribution of dividends from previously retained earnings, which must be withheld by the enterprise, is taxed at the individual rate in the municipality in which it is registered, either at 42% or 45%.

St. Helena Adopts a 25% Flat Tax

The British Overseas Territory of St. Helena adopted a 25% flat tax on both corporate and personal income effective April 1, 2012.  The Income Tax Ordinance 6 of 2012 replaced that of 2009, which consisted of two rates of 17% and 27%.  (St. Helena issues its own currency, which is set at par with British pounds sterling.)

Allowances were adjusted to prevent those in the previous 17% bracket from paying more in taxes than under the new 25% rate.  The 2009 law provided a personal allowance of 3,500 pounds that was deductible against charged income.  The 2012 ordinance increased the allowance to 7,000 pounds.

Capital gains are taxed at 10%.

The purpose of the 2012 reform was to increase the attractiveness of St. Helena as a place to invest in the wake of an airport scheduled to open in early 2016.  Previously, all physical contact with the island was through a weekly ship service to and from southern African ports.  The autonomous government of St. Helena plans to further reduce tax rates (and import duties).

South Ossetia Has Adopted a 12% Flat Tax

South Ossetia is an autonomous region in the South Caucasus, carved out of Georgia following military hostilities that ended in 2008.  Five countries recognize South Ossetia, which declared its independence in 1990.    Georgia considers South Ossetia to be under Russian occupation.

The tax rate for residents of South Ossetia is set at 12%.  (A higher rate of 30% applies to persons who are not residents of South Ossetia and Russia.)  Dividends are taxed at a lower rate of 6%.

The tax base is gross income minus the statutory monthly minimum wage and an allowance for children and dependents.

Anguilla Has Adopted a 3% Flat Tax

Anguilla is a British Overseas Territory in the Caribbean.  A tiny island of about 15,000 inhabitants, it is responsible for its own finances.  The outbreak of the financial crisis in 2007 hit Anguilla hard.  Fewer tourists meant less government revenue.  Needing to close a budget deficit, in 2011 the Island's government enacted its first form of income tax, a 3% flat tax, which it termed an "Interim Stabilization Levy."  Anguilla has no other forms of direct taxation.

Greece is considering a 15% Flat Tax

Read here.

Flat Tax Roundup June 2013

No changes since December 2012.