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%.

Bing Crosby Sings Out For The Flat Tax

A new rendition of Bing Crosby’s famous song is available for this year’s holiday season.

I’m dreaming of a low flat tax

Just like the ones in Eastern Europe

Where the forms are simple

And the rates are low

And their economies flourish and grow.

I’m dreaming of a low flat tax

With every holiday card I write

May your days be merry and bright

And may all your taxes be flat and light.

Happy caroling.

Thanksgiving: Giving Thanks for the Flat Tax

Romania: On November 22, 2010, Romania’s Senate adopted a draft law by a 54 to 31 vote to reduce the flat tax from its current 16% rate to 10%.  Proposed by Economy Minister Ion Ariton, the bill was supported by opposition lawmakers.  The argument in support of the 10% rate was that it would both generate growth and increase revenue.

If the larger Chamber of Deputies approves the rate reduction, it will become law.

As expected, the IMF urged Romania not to lower its flat rate to 10%, insisting that a rate cut would reduce revenue.  Stay tuned!

Estonia: In a recent radio interview, Prime Minister Andrus Ansip defended the flat tax, rejecting a proposal by the opposition Center Party to switch to a graduated rate system.  Ansip pointed out that Estonia has the lowest public debt in the EU, which could be paid off using reserve funds.  In his view, the flat tax was instrumental in Estonia having the highest growth rate in the EU during the past decade.

Hungary: As previously blogged, Hungary joined the league of flat-tax members, enacting a 16% flat rate on personal income effective January 1, 2011.

For more information on these and other countries, check out Google Blog search and Google News on the flat tax.

Poland’s Finance Minister Talks Up Flat Tax

Polish Market Online reported on November 12, 2010, that Finance Minister Jacek Rostowski told Dziennik Gazeta Prawna newspaper that he would eventually like to introduce a flat tax. to replace the country's current two rates of 18% and 32%.  He gave no specific date.  The objective would be to strengthen growth. and would place Poland in the same low, flat-rate competitive league with neighboring flat tax countries

Hungary Enacts a Flat Tax

The Budapest Times issue of October 27, 2010, reported that Hungary’s Parliament approved the government’s proposal for a flat tax. Beginning January 1, 2011, personal income tax will be set at a flat rate of 16%. The 16% flat rate replaces the current two bracket system of 17% and 32%.

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.