Posted on 08/28/2005 9:24:07 PM PDT by goldstategop
Indeed, the Brussels-based Center for a New Europe notes that none of the countries that have adopted the flat tax are seriously contemplating any retreat from it. Flat-tax pioneer Estonia is even reducing its rate by two percentage points a year until it drops to 20% in 2007. Since the tax's inception in 1994, Estonia has had an average growth of 5.2% a year, and now also ranks fourth (out of 155 countries) in the Index of Economic Freedom, published by The Wall Street Journal and the Heritage Foundation.
After being mired in stagnation for years, in 2001 Russia implemented a flat tax of 13% for individuals, along with a 15% rate for most business income. The economy grew 7.3% last year, thanks in part to underground activity going legitimate, more than doubling revenues from income taxes. Even the New York Times, which opposes a flat tax in the U.S., has praised, President Vladimir Putin for "radically simplifying the code and slashing rates." On a trip to flat-tax Slovakia earlier this year, President Bush, extolled those who are using the flat tax "to attract capital and create economic vitality."
(Excerpt) Read more at opinionjournal.com ...
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
Tax Ping
And did you know that Iraq has no capital gains tax?
The Bulls of Baghdad (Glimpse into the Iraqi Stock Exchange)
http://www.freerepublic.com/focus/f-news/1472387/posts
"Iraq has no capital-gains tax, so if he chooses to take his profit, he gets to keep all of it"
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
The progressive income tax was part of the platform of Karl Marx's Communist Manifesto. And we call other people socialists.
I want to dance on the grave of the IRS and the tax lobby industry.
The New York Times praises Russia's flat tax. Its being considered in Germany, Poland and the U.K. There's a truly a global revolution in tax and fiscal policy in the making.
Unmentioned in all this is that they all also maintain 17%+ VATs in place as well, which is a source of significant problems for EU economic growth.
An interesting side light however is Russia appears to be headed towards another 1st in moving towards deep sixing its 18% VAT and going to a 10-15% national retail sales tax system in its place.
The Russia Journal DailyEconomy - VAT may be scrapped in 2007 – Kremlin adviser
VAT may be scrapped in 2007 – Kremlin adviser
March 01, 2005 Posted: 15:25 Moscow time (11:25 GMT)MOSCOW - VAT may be abolished two years from now and be replaced with a sales tax in Russia. The news came from Arkadiy Dvorkovich, chief of the presidential administration experts department, telling reporters that officials were studying the policy switch and its consequences.
“Obviously, this would be impossible in 2006, but it could be introduced beginning in 2007,” he said, adding that a sales tax of ten to fifteen percent should be introduced along with VAT’s disappearance.
“If a ten-percent sales tax is imposed, there will be no growth in prices,” Dvorkovich claimed. Plans were not yet finalized and calculations were being made.
But the conclusion that replacing VAT with a sales tax would not bring price inflation is likely to be challenged. While VAT can be refunded for companies - though with difficulty - sales tax would not be returned and its amount would likely find its way into prices. A ten percent sales tax could be expected to bring price rises of at least that amount.
In comments on VAT dropping from 18 percent to 13 percent, Dvorkovich said a decrease was necessary but that further calculations were needed to determine the exact rate. A flat rate would simplify collection. It would also eliminate losses from unjustified use of a discounted rate, currently a significant drain.
In earlier developments, finance minister Alexey Kudrin told the economic development and trade ministry that a decrease in the VAT rate to 13 percent in 2006 would cost the federal budget RUR362.1bn ($13.07bn), or 1.6 percent of GDP. The 13 percent proposal was submitted by Mikhail Kopeikin, deputy chief of the government’s staff, to Prime Minister Mikhail Fradkov at the end of January.
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John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
I thought the condition of my wallet indicated that I was already subject to a "flat" tax.
The Fair Tax is superior tax reform to the flat tax. The flat tax does not achieve the 90% reduction in the number of tax returns filed, as does the Fair Tax. The Fair Tax will achieve something in excess of $200 billion per year in compliance costs, which the flat tax will not do. Tha Fair Tax gets rid of payroll taxes, the death tax and all taxes on capital and investment. Why settle for such a half-way measure as a flat tax that will quickly become again what we alread have?
If the Slimes is fer it.. theirs something wrong with it.. Funding gov't at an even greater rate is NOT a good thing.. absolutely.. De-funding central gov't should be the plan.. The flat tax eventually DON'T do that..
Anti-State rights groups/people would love anything that funds the central gov't MORE.. When central gov't has PROVED that ITS the problem.. not solution.. to ANYTHING..
Sounds like their VAT has some insoluable problems. Let's see - a 17% VAT plus the 13 or 15% flat tax is ... how much???
Their "sales tax", though, may not be the same sort of thing that we have with the FairTax. We'll have to keep our eyes open for more detail on the Rusky sales tax to replace those others.
"18% VAT and going to a 10-15% national retail sales tax"
Could you please explain the difference between VAT and sales tax.
Isn't it easier to evade taxes in the sales tax method than the VAT?
Could you please explain the difference between VAT and sales tax.
A VAT is a species of sales tax that is collected on all purchases, business and consumer throughout the chain of production. The EU implements a credit back to a business for the VAT it pays when it collects and remits the tax on the purchaser of its own products, and thus passes the tax from business level to business level to the final retail customer who receives no credits against taxes paid in his purchases.
The EU version was a modification on European business transaction and turnover taxes that existed through WWII. They added the credit provision to reduce the cascading that is so detrimental to trade, and to make provision for border adjustably of taxes among EU members so that one nation isn't hit with embedding of taxes by another's tax system creating severe trade problems as goods pass from nation to nation in the EU.
A retail sales tax is just as implemented in 45 of our 50 states. A tax levied on the consumer at final purchase for consumption, i.e. retail. Businesses do not pay a retail tax for its purchases thus none of the problems nor regulatory red tape that goes with a VAT is imposed on business, the tax is collected visibly from the consumer and remitted to the government at a single stage instead of throughout the economy.
Isn't it easier to evade taxes in the sales tax method than the VAT?
Not really, in regards services especially. All it takes is doing business in cash and acquiring inputs to a business from others in the cash underground or blackmarket. The cash underground economies of Europe, where the VAT is highest at 20%+, sees evasion rates as high a 40% above GDP. Most of it due to the extreme redtape and regulatory burdens that go along with the VAT causing small businesses to go into the black market where they can compete at all. Furthermore the VAT tends to encourage inefficient vertical mergers among large businesses to avoid the repetitive levels of taxation thereby defeating the supposed advantages of VATs in preventing tax evasion.
In a vertical monopoly the raw material suppliers, transport, manufactures and retailer are all one company, not subject to the multiple layers of a VAT essentially negating the supposed advantages a VAT provides in reducing incentive for evasion.
The other side effect of the VAT that is a negative is the credit/voucher system its self. Any invoice becomes essential a check against a nation's treasury and large black markets have evolved around the trading of fraudulent invoices causing major enforcement problems through out the system.
In my opinion, less is gained overall from a VAT than its defenders like to admit. With its effects on depressing economies taken into account as a consequence of the burdens of taxation that can be laid with it, it is more a liability than a plus to any nation that implements one.
thank you.
"VAT may be abolished two years from now and be replaced with a sales tax in Russia."
This article must be bogus. Dick Armey says that one of the problems with a sales tax is that it is always converted into a VAT.
Thank you for your very informative answer.
I never understood much of what you explained particularly about vertical monopolies and the detrimental red tape level effecting small businesses.
I had heard that in Italy the underground economy was at 40%. I know that Europe is tremendously overtaxed to support social programs with the consequent result that they have undermined their economies and created huge unemployment. I did not attribute this to the VAT method per se but the level/percent of taxation.
"In my opinion, less is gained overall from a VAT than its defenders like to admit. With its effects on depressing economies taken into account as a consequence of the burdens of taxation that can be laid with it, it is more a liability than a plus to any nation that implements one."
VATs can get pretty complicated and therefore would typically have higher compliance costs than a sales tax would, even though they tax the same base. The VAT takes more little bites out of the apple, whereas the the sales tax does it in one big gulp. Both are considered consumption taxes, so from that point, are similar.
Also, there is no VAT so far that replaces almost all other federal revenues (other than excises, which are about 5%) like the FairTax does. VATs are typically in addition to other types of taxes, not instead of. That doesn't mean that a VAT can't be designed as a replacement tax, just that that isn't the customary practice (or even the occasional practice, so far).
Another difference is that the FairTax has a rebate that keeps it from being regressive. I am not aware of any VAT proposal which incorprates that feature. That does not mean that it couldn't be done, just that it hasn't been done. Therefore, VATs have been regressive in practice.
The biggest problem with the flat tax is that it is still an income tax. That is what the flat tax supporters just don't get.
“What the income tax does is lead the people of this country down a path to where actual control of their resources, which in the end is the control over their will, is handed off to the government.
The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system.
In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation.
The Intent of the individual income tax is for political and social control not revenue collection. The Individual Income tax is maintained to establish and hold every person in the country perpetual legal jeopardy. That is a situation that must end with the repeal of the income tax from the statutes, and the prohibition of its use by Constitutional amendment that future generations will not face the same manner of manipulation and interference in their lives.
Maybe we ought to see that every person who gets a tax return receives a copy of the Communist Manifesto with it so he can see what's happening to him.”
- T. Coleman Andrews, Commissioner of IRS, May 25, 1956 in U.S. News & World Report.
Should the United States adopt the FairTax proposal?
Yes (4160)
89%
No (500)
10%
Total Votes: 4660
http://economics.about.com/library/polls/fairtaxpoll.htm
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