A supply-side world

In recent weeks alone, some of the unlikeliest political leaders have endorsed tax rate cuts in the name of making their economies better, says the Wall Street Journal.

Old socialist-leaning countries like France and Germany and Spain are cutting rates because of the tax competition from Ireland and Eastern Europe:

There are now at least 11 nations formerly behind the Iron Curtain with flat rate taxes of 25 per cent or lower.

On January 1, a new flat tax of 10 per cent became law in Bulgaria, replacing its progressive rate structure and possibly the lowest such rate in the world.

The newly elected Polish parliament is also planning to cut taxes, though an earlier flat-tax proposal earned a veto threat from the president.

Further:

In the Middle East, Kuwait has decided to slash its corporate income tax on foreign companies to 15 per cent from 55 per cent.

Finance Minister Mostafa al-Shemali argued for the cut, noting that Kuwait attracted less than $300 million in foreign investment last year, compared to some $18 billion in lower-tax Saudi Arabia (which has a religious tax but no corporate or income tax on Saudi nationals).

As a result, it's getting lonelier all the time at the top for America. With a corporate tax rate of 35 per cent, the United States is one of the few developed nations left with a rate of more than 30 per cent. Foreign leaders have learned that, in a world of easy global capital flows, high tax rates chase away investment and entrepreneurs.

Source: Editorial, A Supply-Side World, Wall Street Journal, January 7, 2008.

For text: http://online.wsj.com/article/SB119966577645371099.html

For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

SA Note: Mauritius is leading the way in Africa – in July 2009 its tax rate will be 15%.

FMF Policy Bulletin/ 15 January 2008