Flat-rate Income Tax Research Articles

Justification of Taxation with Flat-Rate Income Tax on Real Estate Renting for Tourist Purposes in the Republic of Croatia

Income from renting apartments, rooms, and beds to travelers and tourists and organizing camps in the Republic of Croatia is taxed at a flat rate. The question is whether the taxation of this type of activity is justified if it generates more income than from renting/leasing real estate under a lease or rental agreement when these activities are taxed with a higher amount of tax from renting real estate for tourism purposes. Therefore, it is necessary to analyze why the flat-rate taxation regime for the activity of renting apartments, rooms, and beds to travelers and tourists and the organization of camps is prescribed in the Republic of Croatia and whether it is justified.

THE TRUTH ABOUT FLAT-RATE INCOME TAX IN ROMANIA

This article is about the 'Myth' of the flat rate income tax in Romania. It is not meant to add another argument for the 'pros' or for the 'cons' (the flat rate income tax or progressive income tax debate). It is simply a reality check of the Income Tax system Romania adopted in early 2006, which started and maintained not only many academic, but also even stronger public policy debates ever since. This article shows that accepting a necessary basic distinction between the nominal and the effective tax rate ends any 'debate' on the subject. Why? Because Romania never had and still does not apply a flat rate income tax, but a progressive income tax rate. The study uses data from 2012 and 2018 and shows how eight effective tax rates and not a single income tax rate were applied in 2012 and five effective income tax rates exist today.2 These evidences were always available not just for the experts and public policy decision makers, but also for the public. They were and still are simply ignored on the background of a misleading ideological noise.

System (zbiór) podatków samorządowych – wstępne propozycje uporządkowania

In Poland, local government tax is a source of own revenue exclusively for communes (“gmina”), whereas larger administrative units such as counties (“powiat”) and voivodeships do not have access to this source of finance. Therefore, the law should be modified to enable full implementation of the standards stipulated by the Constitution of the Republic of Poland and the European Charter of Local Self-Government. Moderate reforms would lead to providing counties and voivodeships with their own sources of revenue, thus enabling their fiscal autonomy. Moreover, the process of restructuring the operational responsibility should come to an end and commune tax organs should be given competence to deal with such fiscal issues as inheritance and gift tax, civil law transaction tax and flat-rate income tax in the form of fixed amount tax. The local government tax system should become a significant and lasting foundation of financial autonomy for local government units.

Taxation, Government Spending & Economic Growth: In Brief

Taxation and government spending as a proportion of GDP have increased dramatically since World War I. Spending has increased from one-eighth of national income to somewhere between 40% and 45% of GDP today, the actual figure depending on how GDP is measured. Despite widespread hysteria, there has not been a significant reduction in the level of government spending since 2010. Real spending fell by just 0.5% a year between 2010 and 2015 and is planned to increase through to 2020. Overall, spending as a proportion of national income at factor cost is still planned to be historically high at a level of 41% by 2020.The composition of government spending matters for economic growth. Government capital spending can enhance growth, though it should also be judged by its opportunity cost. Government consumption spending tends to harm growth. Badly designed government transfers can undermine growth by worsening incentives. As a proportion of national income, government investment has fallen whilst welfare payments and other government spending have increased since the 1960s. The current UK tax system is a very badly designed system with high marginal rates, huge complexity, taxes that discourage wealth-creating economic activity and wide-ranging exemptions. However, a better tax system can be created. This would entail abolishing twenty current taxes, including corporation tax, national insurance, capital gains tax, inheritance tax, council tax, and a range of duties. The reformed system would comprise a flat-rate income tax at 15 per cent of income above a personal allowance of £10,000, with distributed corporate profits also taxed at this rate; VAT at 12.5 per cent; a new housing consumption tax at 12.5 per cent; a new location land value tax; and fuel duty at around half the current rate.

MID-TERM EFFECTS OF THE FLAT RATE PERSONAL INCOME TAX IN HUNGARY

The objective of the paper is to examine whether the advantages and disadvantages mentioned in the literature of the flat rate income tax could be observed in Hungary. Personal income tax data provided by the Hungarian National Tax and Customs Administration was used to check the arguments. It was found that the flat tax indeed favours richer taxpayers, and because of the family tax credits, it heavily favours families with children. Tax revenues declined as tax rates were cut, while the GDP growth rate was close to stagnant. Both of these developments go against the expectations of the flat tax supporters, although it has to be mentioned that the changes were made in the midst of a European- and world-wide depression, which could have distorted the pure effects of the new tax code. Although in many countries the flat rate tax was a positive signal for investors boosting foreign direct investments, the Hungarian government introduced extra taxes on some of the transnational companies in order to balance the budget (and compensate for the lost personal income tax revenues), which meant that there was a decline in the mood of the investors. There is some indication that some illegal activities are shifted to the legal domain: the ratio of those tax reporters who earned an annual income of HUF 2 million or higher has gone from 62.5% to 66.6% in the period of 2010-12.

Flat but Fair: A Proposal for a Socially Conscious Flat Rate Tax in the Netherlands

This article advocates the introduction of a flat rate income tax in the Netherlands. Such a system would lead to a better-functioning labour market and fewer administrative costs for employers. Progressivity would be achieved through tax credits at the household level. By itself, a flat rate tax usually has adverse distributional effects. However, if we allow the income-dependent health care contribution also to be given a flat rate, the distributional effects would be substantially less significant. This article further gives some recommendations for lowering the flat tax rate by shifting away from income taxes, increasing value-added taxes (VATs), and broadening the tax base. It concludes by showing that a marginal tax rate plus social security contributions of 33.25% is possible. The focus of this proposal is the Netherlands, but several aspects of it may be relevant to other EU Member States.

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

We examine the effects of Russia’s 2001 flat rate income tax reform on consumption, income, and tax evasion. We use the gap between household expenditures and reported earnings as a proxy for tax evasion with data from a household panel for 1998–2004. We associate large and significant changes in tax evasion following the flat tax reform with changes in voluntary compliance. We develop a consumption‐based framework to assess the deadweight loss from income tax in the presence of tax evasion and show that the efficiency gains from the reform are at least 30 percent smaller than the gains implied by conventional approaches.

Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany

The success of the flat rate income tax in eastern Europe suggests that this concept could also be a model for countries of western Europe. The present paper uses a simulation model to analyze the effects of revenue neutral flat rate tax reforms on equity and efficiency for the case of Germany. We find that a flat rate tax with a low tax rate and a low basic allowance yields positive static welfare effects amounting to approximately 1.8% of income tax revenue but increases income inequality. The increase in income inequality can be avoided by combining a higher tax rate with a higher basic allowance. But in this case, the efficiency gains vanish. We conclude that due to their limited efficiency effects and their problematic distributional impact, flat tax reforms are unlikely to spill over to the grown-up democracies of western Europe.

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

Using micro-level data, we examine the effects of Russia's 2001 flat rate income tax reform on consumption, income, and tax evasion. We use the gap between household expenditures and reported earnings as a proxy for tax evasion with data from a household panel for 1998-2004. Utilizing difference-in-difference and regression-discontinuity-type approaches, we find that large and significant changes in tax evasion following the flat tax reform are associated with changes in voluntary compliance and cannot be explained by changes in tax enforcement policies. We also find the productivity response of taxpayers to the flat tax reform is small relative to the tax evasion response. Finally, we develop a feasible framework to assess the deadweight loss from personal income tax in the presence of tax evasion based on the consumption response to tax changes. We show that because of the strong tax evasion response the efficiency gain from the Russian flat tax reform is at least 30% smaller than the gain implied by conventional approaches.

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

Using micro-level data, we examine the effects of Russia’s 2001 flat rate income tax reform on consumption, income, and tax evasion. We use the gap between household expenditures and reported earnings as a proxy for tax evasion with data from a household panel for 1998-2004. Utilizing difference-in-difference and regression-discontinuity-type approaches, we find that large and significant changes in tax evasion following the flat tax reform are associated with changes in voluntary compliance and cannot be explained by changes in tax enforcement policies. We also find the productivity response of taxpayers to the flat tax reform is small relative to the tax evasion response. Finally, we develop a feasible framework to assess the deadweight loss from personal income tax in the presence of tax evasion based on the consumption response to tax changes. We show that because of the strong tax evasion response the efficiency gain from the Russian flat tax reform is at least 30% smaller than the gain implied by conventional approaches.

Who Bears the Burden of Taxes on Labor Income in Russia?

In 2001 the Russian government introduced a bold reform of its tax system, which included the adoption of a flat-rate income tax. Until then, only a few countries, including the transition countries of Estonia, Latvia, and Lithuania, had adopted a flat-rate income tax. This reform has naturally attracted a great deal of attention, as many countries have been toying with the idea of a flat-rate income tax. In this paper we investigate the tax incidence of Russia's flatrate reform. Although there are studies on the incidence of the personal income tax in other countries, to the best of our knowledge no study has been conducted so far on the incidence of income taxes in a transition economy.

God's Income Tax: What Jewish Tithing Practices Can Teach Us About Tax Reform

Tax reform and religion were two of the hot button issues during the last election. While at first glance these issues seem unrelated, a number of scholars have argued that religious values should guide our decisions regarding tax reform. This article posits that the relationship between religion and taxes is even stronger than has previously been suggested. People have been tithing for thousands of years. When they determine the amount of the tithe based on their income, the practice amounts to a religious income tax, or, more precisely, God's income tax. This article explores the Jewish traditions of tithing, looking at both agricultural tithing, which is described in the Bible, and the practice of maaser kesafim, which involves tithing from all types of income, a practice that derives from the Bible but which developed more recently. Over the centuries, religious authorities have developed a sophisticated tax jurisprudence that holds lessons for us as we struggle with the questions of whether to reform our current income tax or replace it entirely with some form of consumption tax. In comparing Jewish tithing traditions and Federal income tax, this article (1) tests claims that Judeo-Christian values require a progressive tax system; (2) examines the ways in which culture and context affect income definition (and are likely to do so in the future); and (3) explores whether a flat-rate income tax or consumption tax will be less complex than our current tax system, as proponents for such systems claim.

Slovakia's 2004 Tax and Welfare Reforms

The paper reviews Slovakia`s comprehensive reforms to its taxation and welfare systems in 2004, including the introduction of a flat-rate income tax and single-rate value-added tax (VAT), and linkage of social benefits to participation in labor market programs. Though revenues following the reform are lower as a ratio to GDP, the paper argues that the reforms have helped encourage investment and improved efficiency by broadening the tax base, reducing the administrative burden, and improving work incentives. The paper also looks at some implications of the reforms for income distribution and social protection.

Slovakia's 2004 Tax and Welfare Reforms

The paper reviews Slovakia's comprehensive reforms to its taxation and welfare systems in 2004, including the introduction of a flat-rate income tax and single-rate value-added tax (VAT), and linkage of social benefits to participation in labor market programs. Though revenues following the reform are lower as a ratio to GDP, the paper argues that the reforms have helped encourage investment and improved efficiency by broadening the tax base, reducing the administrative burden, and improving work incentives. The paper also looks at some implications of the reforms for income distribution and social protection.

Both Rationed and Subsidised: Jersey's Command Economy in Housing

ABSTRACT The bailiwick of Jersey's special constitutional position has given it the opportunity to develop its own economic, cultural and policy strategies. Becoming an off-shore tax haven, with a flat rate income tax of 20 per cent, no VAT, no inheritance tax and no capital gains tax, has brought with it the need to strictly limit residency. A key instrument in this has been housing policy and draconian measures have been introduced by the States of Jersey to ration access to housing through a complex series of stacked housing rights directly linked to residency rights. At the same time, the high cost of housing on Jersey that has resulted from economic pressures has forced the States to subsidise housing to certain categories of those who fulfil the residency requirements. This paper describes Jersey's unique and little known housing system. It is suggested that Jersey's housing policy strategy can be fruitfully understood in a broader international comparative context and in relation to other tax-havens and 'micro-states'.

Pattern of Trade, Economies of Scale and Public Goods

Some existing studies (e.g., Anwar 1992) have considered the relationship between government spending on industries and the pattern of trade. However, very few studies have attempted to examine the link between government spending on households and the pattern of trade. In addition, almost all relevant studies are based on the assumption that constant returns to scale prevail in all industries. The larger paper for which findings are summarized in this note attempts to examine the relationship between government spending on households and the pattern of trade in the presence of economies of scale. Government spending on households has been incorporated into utility functions as a public good. The results of the paper are derived from a simple general equilibrium model of a representative closed economy. The private sector of the economy produces one final good by means of labour and an intermediate good. The intermediate good is produced by means of labour. The production of the intermediate good is subject to Marshallian external economies. The public sector of the economy produces a public good by means of labour which enters the utility function of the representative household. The cost of the public good is financed by means of a flat rate income tax. The model is used to examine the relationship between the supply of the public good and the autarky price of the intermediate good which is measured in terms of the final good. The direction of the relationship between the supply of the public good and relative prices in a closed economy is used to predict the pattern of trade and factor mobility in a twocountry world. The two countries are assumed to have identical tastes, technologies and labour supply. Labour is fully mobile within the national boundaries but there is no labour mobility across international boundaries. Within the framework of the model, it can be shown that the country that produces more public good imports the output of the decreasing cost industry and exports the output of the constant cost industry. An increase in the supply of the public good in a country reduces the availability of labour

Public economics in action: the basic income/flat tax proposal

This book surveys recent developments in public economics by taking as a case-study the proposals for a basic income/flat tax scheme. It discusses various approaches to taxation and presents a framework for a system that would affect both personal income and the social security system, replacing the one by a flat-rate income tax and the other by a guaranteed income. This idea has generated wide interest in a number of countries, and is being actively discussed by several political parties. This book explains how these changes would benefit a wide variety of social groups, leading to a greater redistribution of income. At the same time, it also raises the question of whether a single reform can meet the very different objectives of different supporters. The author reviews different areas of public economics in which there has been active research in recent years- namely the theory of optimum taxation, public choice theory, general equilibrium analysis of incidence, numerical tax- benefit modelling, and econometric studies of work incentives-and asks how these contribute to our understanding of this particular policy reform. He also indicates the promising directions for future research. The author does not argue for or against the basic income/flat tax proposal, but believes it should be on the agenda for any serious discussion of tax and social security reform for the twenty-first century.

THE OPTIMAL EXEMPTION

This paper uses simulations to find the optimal tax rate and exemption under a flat-rate income tax. Hall and Rabushka, Lindsey, and recently presidential candidate Jerry Brown have argued that the current income tax system should be replaced by a flat tax with a low rate and a modest exemption. This paper shows that assuming a low rate and exemption to be optimal generally is unwarranted. In addition this flat tax is compared to the linear income tax.

A general equilibrium model of housing consumption and investment

This article develops an applied general equilibrium model for analyzing the effects of tax policy on housing consumption and investment. The model incorporates housing tenure choice and consumption decisions in an explicit model of household portfolio choice that recognizes that the demand for owner-occupied housing depends on the after-tax returns from housing capital and other investments. Asset returns are stochastic so that asset holdings are determined by the desired risk-return relationships of households. Owner-occupied housing has a unique position because it has both a consumption role in providing housing services and an investment role. The model is then used to evaluate the effects of tax policy on the size and composition of the housing stock. Potential tax changes include a flat rate income tax and taxation of the imputed rent from owner-occupied housing.

Invariant Resource Supply and Tax Incidence in a Lifecycle Growth Model

The incidences of wage, income, interest, output, and expenditure taxes are examined in a dynamic general equilibrium growth model. It is shown that a flat-rate income tax and a general sales tax have the same incidence; if the production function is Cobb-Douglas (unit elasticity of substitution), both are borne entirely by labor income. Feldstein's finding that a proportional capital income tax is partly shifted onto labor income is shown to hold even when saving elasticities are zero. A proportional wage tax reduces after tax wage income by more than the tax, while increasing interest income, demonstrating that labor bears more than a 100% share of this tax's burden. These results are compared to the incidence results of static general equilibrium analysis. It is shown that the general equilibrium results hold in the long run only if the production elasticity of substitution is infinite.