The world is flat

First associated with the likes of Milton Friedman and Steve Forbes, the flat tax is now being contemplated in Greece, where a 25 per cent flat-rate income tax would take effect in 2006, replacing a multiple-tier tax structure that has rates of 40 per cent and more. The Finance Minister insists that such a flat-tax reform is necessary to reduce a spiralling budget deficit, and that any lost revenue will be recouped "via an overall increase in income."

This brings to 11 the number of nations with a single-rate, postcard tax system. More dominoes are expected to fall in the next few years:

Bulgaria, Croatia and Hungary are also preparing to feed their thousands of pages of tax code into the shredder in favour of lower, flatter rates.

A flat-tax proposal was debated as part of Poland's recent election campaign.

And one of the countries that started it all, Estonia, plans to lower its rate one more time, to 20 per cent from 24 per cent, which was down from the initial flat rate of 26 per cent.

Lithuania hopes to go to 24 per cent from 33 per cent.

Moreover:

Russia now reports it gets more revenues from the rich from its 13 per cent flat tax than from its pre-existing Swiss cheese tax code with massive evasion and 50 per cent-plus tax rates.

Russia's revenues with the flat tax grew in real terms by 28 per cent in 2001, 21 per cent in 2002 and 31 per cent in 2003, according to the Hoover Institution.

Hopefully, President Bush's tax reform commission will later this month endorse a simple, broad-based, single-rate tax system, say observers.

Source: Editorial, The World Is Flat, Wall Street Journal, October 7, 2005.

For text: http://online.wsj.com/article/SB112864535887162338.html

For more on Taxes: http://www.ncpa.org/pi/taxes/

FMF Policy Bulletin 18 October 2005