2014 Wrap Up: Albania Abandons Its Flat Tax

Effective January 1, 2014, Albania replaced its 10% flat tax on personal and business income with two rates of 13% and 23% on personal income and 15% on all forms of business income.  Details are here.

Left-wing politicians have been waging continuous war against those countries that have adopted a flat tax during the past quarter century. While Thomas Piketty has won a small battle in Albania, its people will be the losers in years to come. 

The Flat Tax Is Picking Up Steam in Italy

Your friendly proprietor recently returned from a trip to Italy (December 9-13, 2014) where he met with leading Italian politicians and participated in a standing room only conference on the benefits of a 15% flat tax on personal and business income for Italy.

Armando Siri, president and founder of the New Italian Party (PIN in Italian), first introduced the 15% flat tax to the Italian public.  He contacted me by email and asked me to review his flat tax proposal in early 2014.  I endorsed it as a pro-growth measure that would help jump-start the moribund Italian economy.  He invited me to join him at a conference in Milan on April 6, 2014, to launch the plan.  About 150 enthusiastic supporters of Siri, many PIN members, attended the event.

From that event, interest in PIN’s 15% flat tax steadily grew.  In December 2014, PIN’s 15% flat tax was endorsed by Matteo Salvini, secretary of the Northern League Party (LN in Italian).  They jointly held a major conference in Milan on December 13, 2014.  They invited me to participate in the program.  I presented a set of slides documenting the need for comprehensive tax reform in Italy and why PIN-LN’s 15% flat tax was good for Italy.  Click here for my full 26 minute presentation.

A standing room crowd of 500, numerous television stations, and reporters from Italy’s leading media attended.  It was a feeding frenzy.  LN streamed the event live on its web site. Three television clips can be found here, here, and here. 

Matteo Salvini is currently the most popular center-right politician in Italy, closely followed by President Silvio Berlusconi’s Forza Italia (click here) which he formerly led, but in which he still remains extremely influential.  The three parties (PIN, LN, FI) constitute the core of the center-right bloc.  Were it to win the next general election, or a snap election perhaps as early as May 2015 if a no-confidence vote  brings down the current center-left government of Matteo Renzi, Salvini would be in line to become Italy’s next prime minister and introduce a 15% flat tax.

Two days earlier in Rome, Armando Siri and I met with President Berlusconi and several of his closest advisers to discuss the flat tax. On December 5, 2014, Berlusconi had announced on You Tube his support for a 20% flat tax, a higher rate than the PIN-LN plan because Berlusconi’s plan has a narrower tax base due to a larger personal allowance (click here).  The two plans differ only in respect of the scope of the personal allowance and the flat rate.  I presented him with a signed copy of the Italian edition of “The Flat Tax” (published by the European Center for Austrian Economics Foundation in Liechtenstein through the good offices of Kurt R. Leube).  For the moment, Berlusconi stands behind his 20% flat tax for the political purpose of retaining a separate identity.  The two plans rest on common ground.  Should the center-right bloc win the next election, the differences between the two plans are easily reconcilable.

I prefer PIN-LN’s 15% plan to Berlusconi’s 20% plan because the lower 15% rate will have a greater impact on incentives to take risks and reduce underground economic activity and tax evasion.

The New Year could be exciting for flat-tax enthusiasts in Western Europe’s fourth-largest economy.