Single tax rate

[Artist]

Do you agree that a single tax rate must be introduced in Malta?


The single tax rate con game
by LEO BRINCAT

http://217.145.4.56/ind/images/articleimages/leo.jpg Much play is being made in the international media about the feasibility and practicality of introducing a single tax rate, as is after all being done in a number of Eastern European countries.

I will not be surprised if lobbying in its favour will start gaining ground in Malta too.

The “rationale” behind such a proposal is that a single tax rate would boost economic growth and increase personal freedom. As well as improve tax receipts.

One has to admit that the New Right has a particular knack for sounding innovative even when coming up with and recycling old and hoary ideas.

This issue has come to the fore during the recent election campaign in Germany. Whether it proved to be a plus factor or a definite negative for the CDU will have been established by the time this article appears in print. It might not have been enough to cost it an election but it surely accounted for the erosion of its base of support in more recent weeks.

One thing certain about this proposal is that it will increase the social divide by taxing and attacking the poor and the less wealthy much more than they are being taxed today. If at all.

One does not need to be a seasoned economist to realise that a single flat rate would benefit the better off at the expense of low earners.

Any income tax system bereft of an element of progressiveness will defeat its own purpose.

A flat rate income tax level would be even more socially unjust than the consumer driven VAT – an issue which incidentally has been long dead and buried in Malta since Labour had always made it clear a priori that if reintroduced by the Nationalists it would not dream of removing it once again.

As a consequence of the single tax rate being proposed in various European capitals the poorest segment of society would definitely end up paying a larger chunk of its income in tax.

Some countries which are proposing this single tax rate con game are even compounding it with a proposed rise in national insurance contributions as well as a further increase in VAT which in some cases approximates two per cent.

The claim that a flat tax rate will lead to an increased incentivisation to work still has to be proved anywhere.

In some countries like Estonia, revenue from personal income tax actually went down, not up, with a flat tax rate.

What many might find intriguing and attractive about this proposal is its inherent simplicity.

Nick Pearce the director of the Institute for Public Policy Research described its net effect this way:

“Although a case can be made for tackling complexity in the tax system, a flat tax solution is not just using a sledgehammer to crack a nut, but putting the nut in an antique bowl before taking a swing…”

Need I say more?



The UN summit – a missed opportunity?



This is the question on most commentators’ and political analysts’ lips right now. When does an opportunity become a missed opportunity? Obviously when it gets diluted and watered down considerably.

The UN, whether reformed or not, will always represent the sum of its parts. In other words, the political will of its individual member states.

If one takes too much of a narrow view of UN reform, one cannot find any excuses for claiming that the much cherished and long aspired reform is no reform at all.

This no doubt applies to various areas of importance, including the whole question of security council reforms where the so-called G4 have been lobbying for months on end to achieve some form of enlargement of the council.

One interesting observation I came across is that one can understand a certain attitude when the majority of UN general assembly member states were non democratic states, but things have changed radically since then and the number of electoral democracies has increased considerably, as confirmed by human rights think tank Freedom House.

Let us sincerely hope that we are still in time for a true and proper reality check!



e-mail: leo.brincat@gov.mt



Leo Brincat is the main opposition spokesman on foreign affairs and IT

[strickland 10th district]

yes i agree.

[Artist]

We must analize in depth the pros and cons.
I believe that we must start a serious discussion about this matter as soon as possible for our national interest.

[Admin]

Well, no prizes for guessing that a socialist would not agree with a flat rate income tax! Duh!

One does not need to be a seasoned economist to realise that a single flat rate would benefit the better off at the expense of low earners.

And who generates the money in the economy? The wealthy entrapreneaur or the social reject bummer who lives off the social services? Duh!


A flat rate income tax level would be even more socially unjust than the consumer driven VAT

Not necessarily...I'd suggest that the tax exempt bracket of today be kept unchanged. Above that - flat rate. Besides what is so damn just about having the producers in society pay through the nose while the bummers have it free?

Socialists have had their turn and they fucked up. They concede that everything's going to the dogs due to their policies, yet the refuse to consider alternatives, other than more taxes. But, after all, socialism is nothing but a stepping stone to communism. Ever higher taxes until the state takes everything you own and hands you out the peanuts.

[Admin]

I don't like a single tax rate because as Leo said, the rich would benefit over the poor and it's immoral to tax the poor as much as you tax the rich (same in terms of percentages).
The rich would benefit over the poor because they contribute more to society and the economy. That is justice. If you want to prosper you work. Is penalising the producers and gifting the idlers just? How can you expect a healthy society with such an unnatural and unjust system of taxation as is in place today? By these words I may give the impression of being particularly wealthy or coming from a wealthy family. Nothing could be further from the truth. All I have I had to work for by tooth and claw and I never took a penny of social services. That is the way it should be! Any other way means degeneration and bankrupcy. Tough, but that's reality. And for Christ's sake, you who declare yourself an atheist, of all people, bring to the fore a moral argument for a financial and political problem?

[etoile noir]

How can someone tax someone who earns lm 200 a month and someone who earns Lm 2000 a month with the same percentage?

simple! that's why its called percentage! or are you suggesting that the person earning 200 pm would be paying as much tax as the one earning 2000 pm?

[etoile noir]

Of course not and I understand your point (percentages are better than a flat rate) but when keeping in mind that the basic survival costs are the same for both, is it fair to tax them with the same percentage? I don't think it's fair.

well this is where we disagree. the system as it is penalises those who work harder, who study harder .... who in general strive harder! the more you earn, and you earn through your capabilities, the more you are penalised. and this i disagree with.

If today I am earning Lm 3,500 a year, I expect to get taxes with a certain percentage but if tomorrow I will be earning Lm 6,500 I would expect to pay taxes at a higher percentages. It's a progressive system. You get more money from the rich and with that money you make social investments to help the poor become more productive, thus earn more and pay more and use that money to further social investment.

if today you earn 3500 pa, then you are spending according to your means, thereby contributing to the ecomony on a smaller scale. if you earn more, you spend more and you contribute further to the economy. furthermore, with all the hidden taxes known as VAT, etc, those who spend more automatically pay more and contribute more to the infamous kaxxa ta malta. so where is the unfairness?

The rich would enjoy that money paid by taxes indirectly by having less criminality for example and even by finding a more educated workforce. Social investment is just that, investment in social aspects for a future return (financial or not).

what we need is not more taxes, but taxes spent in a more sensible manner. i am not suggesting that state schools or state hospitals should be done away with. however we must admit that the social system is being abused big time, and that it is the worker who is paying for those who really know how to milk the system.

those who really want to educate themselves have all the means at their disposal, as do the parents of children who want to educate said children. teachers at state schools and private schools all come out of the same university and all have the same qualifications. the difference between a state and a church/private school is the mentality of the parents, who, in their majority cannot give a toss about whether their kids are receiving the attention they truly deserve. those parents who actually pay for their children's education care more probably because they want to know where their money is going! i know this sounds like a horrific case of generalising, but unfortunately it happens.

After all, if we love and care for our people (be them Maltese or Europeans) we cannot accept a system that ignores the poorer of them

who are the poor? those who receive dole payments and do work on the side whilst you and i work our asses off in valletta every day? no chris, it is you and i who are "poor" because every red cent we earn is declared and taxed to high heaven.

[Marco Polo]

i tend to lean towards our main means of taxation being a consumption tax (VAT). income tax should be flat to encourage thrift.

small government is needed most of all.

[Artist]

The present system of taxation is killing initiatives.
Could it be that with a flat rate tax new initiatives will take place?
Could it be that job opportunities will emerge?
A think these are some pros.

[Admin]

Atheists are not necessary immoral and I am an example. The atheist taboo in our society is boosted by your line of thought which implies that atheist do whatever they want to do and don't care about others. One of the advantages of religion is that it gives a set of common morals bound by some supernatural/afterlife reward.

So where do you get your moral structure if not from religion? It is useless to declare oneself an atheist while at the same time adpoting the worldview of a particular religion. You may have removed the outer embellishments from your previous beliefs, but if the basic core is still there, then your atheism is nothing but a sham. L-abito non fa il-monaco! For me a flat rate tax is the only moral system. Why should your morals take precedence over mine? I don't know you well enough to know whether the above is actually true of yourself, however this cursed Robin Hood outlook is the very essence of Christianity and is the same thing causing most of the problems afflicting society today, including the famous illegal immigration issue over which ANR itself is also opposed.


Issa regarding this topic. One has to understand that taxing the poor and the rich the same percentage is immoral because the cost of basic surviving is the same for both while the difference in the purchasing power of other stuff is enourmous. How can someone tax someone who earns lm 200 a month and someone who earns Lm 2000 a month with the same percentage?

This is a fallacious statement. The miniumum wage would be set so as to enable somebody to get buy with the basic necessities. If a flat tax for you is immoral, how can you justify VAT, which works on the same priciple - flat rate?


A liberal (economic) government that ignores the needs of the poor people will be "investing" into a lot of future problems. Social investment (transfer of wealth) must be done to keep society stable and to try to keep the poor out of desperate situations.

Ps. This is my personal opinion and NOT a position of ANR
But tell me - with all the obsession with social investment going on today, WHERE IS THE IMPROVEMENT? Do we see a significant reduction in the amount of social money having to be handed out by the government because the lot of the lower classes is improving? No. We see the opposite. Social spending perennially skyrocketing and making no appreciable difference. Social problems constantly growing with nobody, no matter how many funds are thrown at the problem, managing to make a dent in the dismal statistics. In the meantime debt grows, the deficit is always there - and please, don't tell me that the deficit is decreasing because we all know that it is only the appearance of doing so - and it is the producer who constantly has to shoulder the burden by having to pay more taxes.

You don't condone welfare fraud, however what you don't realise is that a welfare system without fraud is an impossible pipe dream except in a totalitarian communist society such as George Orwell's 1984. This is the big Error underlying all collectivist ideologies - a failure to acknowledge the basic fact of human nature.

[Admin]

Atheism (for me) means "no belief in good" and not "not having morals" be them Christian-inspired or not. An amoral society is self-destructive. Look at the US, a society on its way to amorality. Do we want to live in such a society? Law & order cannot be maintained without a sense of morality.

But a belief in good and evil is the foundation of a moral system! By definition an action that is deemed "moral", must also be deemed "good", otherwise your moral system is nothing but a random collection of rules of thumb with no internal consistency.


Or yours on mine? Who decides the morals/values of a society? Are they imposed or they come out naturally from the society itself?

That is precisely the reason the state cannot afford to govern basing its policies on moral arguments! The moral arguments are those forcing us to accept illegal immigration!


As I explained ultimately the rich will enjoy the benefits of having less criminality and a more educated workforce (amongst other things) so it's not a case of theft but a case of forced investment. Prevention is better than cure and having well-educated honest poor people is better than having policemen and prisons. It's an investment in society.

That's the same reasoning behind communism, and we all know where that went...


You won this point ;)

:p


Social Investment is mismanaged but there was some improvement (in Malta at least)

You think so? LOL.


Even a no-crime society and a fair-trade society are impossible to have in practice but that does not stop us from trying to get as nearer as possible to that ideal.
Striving for no crime and fair trade are not actions that engender the same problems as those caused by the welfare state (unless taken to extremes, of course). Besides, fair trade is only jeopardized by government tinkering anyway. The role of government should be minimised - that will allow society of regulate itself - the natural way.

[Admin]

The members of a society need to know what is bad and what is good otherwise you'll end up with anarchy! The right has always been in favour of law & order.

With your line of thought, in your ideal society X can be allowed to kill Y as long as no one comes to know. There must be a sense of what is good and what is not!

Never said anything to the contrary. I was pointing out that morality is, by nature, subjective, therefore, inasmuch as the act of governance can be said to follow a morality that morality should be carefully chosen so as to benefit that society in a holistic manner. Here I'm speaking on a higher level than morality. Within a moral system one can speak of good and evil within the framework of that particular system. However, one can also tailor the moral system so as to achieve a particular goal. In my view, this act of creation of morality is above good and evil, because good and evil can only be understood within the concept of a particular moral system.
Hence, to conclude, in my view, yes there must be a sense of good and evil, however it is the responsibility of the state to tailor that sense of good and evil in order to direct the development of the nation. I'm saying nothing new here. Organised religions have been doing that since the beginning of time and so have states.


Accepting illegal immigration is not a case of morality but a case of lack of common sense.

Not what our present government thinks.


This is like the difference between one investing and one being exploited. Also illegal immigration is pushed indirectly by various contractors to get cheap labour. Surely that's not done due to moral issues! ;)

It's a case of the weasels using morals to further their own ends, that's all.


Not really, I believe in inequality of ability but I also push equality of opportunity (within limits).
But don't you see that this view is fundamentally inconsistent? If you acknowledge that men are not all fundamentally capable of the same quality or quantity of output, then it makes no sense whatsoever to bend over backwards in order to make sure the gahan gets the same opportunities as the professor because you would be depriving the professor from valuble resources he would use productively and giving them to the gahan who would not be able to. If an individual proves that he has what it takes, yes. In that case the necessary resources would be available to him, but the impetus must come from the individual himself and not from the state.

[Admin]

But you have no guarantee that the son of a Gahan will not become a professor and that the son of a professor will not end up as a Gahan (I hate using the word Gahan) and that's why you should give equal opportunities to all, to be SURE that you will find the best people available.

An individual who has the will to make it WILL make it no matter the obstacles. Actually, the more obstacles, the stronger he will emerge. He will eventually overtake those who have had it easy. This is inevitable, of course in the right type of society. You mentioned America as a degenerate state, however remember that America is also the country where the son of a bankrupt alchoholic can become president and a college student starting out repairing pc's in his garage can become the richest man in the world.
It is the welfare/Robin Hood/childlike mentality that allows people to sit on their laurels and expect everything to be given free that results in the myth of the helpless poor. It is this mentality that must be eradicated from our children to be replaced by the mature outloook of self-responsibility. Privileges are taken not handed out.


Remember that being poor does not mean being stupid or ignorant. If you have a poor student with excellent potential, I am all for supporting him to get the qualification and contribute to society. That's the concept of meritocracy which we both agree on.

So my statement is not a contradiction. Yes to inequality of ability but please just give everyone equality of opportunity so that whoever is capable, will simply have the chance to make it
[/QUOTE]
You are focussing on only one aspect - education/intelligence, however intelligence is not the only factor that determines how successful an individual will or will not be. Not everybody can be equally successful in a society (whatever measure of success you choose to employ). All the welfare state ensures is that the resources DON'T go to the right places. In a Libertarian state, nobody would have it easy any more, granted, but everybody would be responsible for his own welfare, development and success - the way it was meant to be by nature, after all.

[Úlfheðinn]

Though I disagree with progressive tax rates and welfares, I strongly disagree with Crusader's posts. Progressive tax rates are just a way to mitigate the failures of the current economic system. While you disagree with the former, you support and want to preserve the latter.

And who generates the money in the economy? The wealthy entrapreneaur or the social reject bummer who lives off the social services? Duh!

Not necessarily...I'd suggest that the tax exempt bracket of today be kept unchanged. Above that - flat rate. Besides what is so damn just about having the producers in society pay through the nose while the bummers have it free?

First of all, you are simplifying the current economic system to those who own the means of productions and the "social reject bummer" (unemployed?) and claim that the progressive tax system disfavours the former to favour the latter. The labor society is more developed than that. You have the owners of the means of production; the laborers, which can be divided to high-waged (the specialized sectors) and low-waged (the manual sectors) and from the last two, a section of unemployed which in the majority of cases are in that situation because the labor market is highly saturated and is unable to offer more opportunities.
Welfares, which are made available through the present progressive tax system, are necessary not only for the unemployed but also for the low-earners. A low-waged family would not financially survive if it had to totally pay her social security, health care, education, etc.. The result: an American pie where social cohesion is totally worn away by crime and by the type of individually-minded society.
While I oppose welfares per se, I acknowledge that they are necessary for this type of degenerate capitalist system in which capital accumulation is the first priority as opposed to social harmony.

The rich would benefit over the poor because they contribute more to society and the economy. That is justice. If you want to prosper you work. Is penalising the producers and gifting the idlers just? How can you expect a healthy society with such an unnatural and unjust system of taxation as is in place today? By these words I may give the impression of being particularly wealthy or coming from a wealthy family. Nothing could be further from the truth. All I have I had to work for by tooth and claw and I never took a penny of social services. That is the way it should be! Any other way means degeneration and bankrupcy. Tough, but that's reality. And for Christ's sake, you who declare yourself an atheist, of all people, bring to the fore a moral argument for a financial and political problem?
This is totally erroneous. The rich do not contribute more than the poor for the well-being of a society. It would be more correct to say that they exist in a mutual symbiosis.

"If you want to prosper you work." - This is the kind of mentality liberalism instilled in most of our minds, to work harder to be able to consume more.

if today you earn 3500 pa, then you are spending according to your means, thereby contributing to the ecomony on a smaller scale. if you earn more, you spend more and you contribute further to the economy. furthermore, with all the hidden taxes known as VAT, etc, those who spend more automatically pay more and contribute more to the infamous kaxxa ta malta. so where is the unfairness?
This is not necessarily true. Studies show that low-earners consume more than high-earners (in relation with their earnings) and you are also excluding that high-earners and owners of production/land are favoured through interest rates, capital appreciation, rent, etc.. which are not taxed.

[Vulf]

well this is where we disagree. the system as it is penalises those who work harder, who study harder .... who in general strive harder! the more you earn, and you earn through your capabilities, the more you are penalised. and this i disagree with.

if today you earn 3500 pa, then you are spending according to your means, thereby contributing to the ecomony on a smaller scale. if you earn more, you spend more and you contribute further to the economy. furthermore, with all the hidden taxes known as VAT, etc, those who spend more automatically pay more and contribute more to the infamous kaxxa ta malta. so where is the unfairness?

what we need is not more taxes, but taxes spent in a more sensible manner. i am not suggesting that state schools or state hospitals should be done away with. however we must admit that the social system is being abused big time, and that it is the worker who is paying for those who really know how to milk the system.

- So far, so good.

those who really want to educate themselves have all the means at their disposal, as do the parents of children who want to educate said children. teachers at state schools and private schools all come out of the same university and all have the same qualifications. the difference between a state and a church/private school is the mentality of the parents, who, in their majority cannot give a toss about whether their kids are receiving the attention they truly deserve. those parents who actually pay for their children's education care more probably because they want to know where their money is going! i know this sounds like a horrific case of generalising, but unfortunately it happens.

Now here is where the Waltz begins...
I'm a University student myself, and the situation just swings from "not-bad" to "worse". Forget the whole issue of stipends. We could, perhaps do away with that, if there's a certain amount of investment inside Uni, and an amount of investment for graduate students outside Uni. I'm not about to generalize. I'll speak for my field alone.

The computing building, for example, is "equipped" with a Unix lab, and it's supposed to be at student disposal all the time, but, I've never really had any chance to use it yet. Major focus is being made on useless theories that are best covered in other courses, and specialisation in real-world corporate applications is far from loyal. Sometimes, no, the means are not at everyone's disposal. But that can be fixed very easily. So no worries.

Teachers who educate our children come out from the same university of course. And I'll agree to the fact that they carry the same qualifications. I also agree that most parents don't give a toss about what happens to their children from the school gates inwards.

But I myself have parents who did have an interest, and I've been in both types of schools. The attention from parents was always there, but I felt an inkling to work more when I was in a church school. And like me, many other friends. I'm not attacking state school teachers per se. Quite the contrary, I'd say state schools lack a harder discipline at administration levels. If the administration pushes hard, then the teachers are literally BACKED UP, and can push discipline themselves.

Up to now, this has not happend in a good number of state schools. It's not a question of quality. It's administration. We of IE and VM are of far better quality than Gonzi, yet, they are the administration...look at the result. The same results are mirror when some schools are compared to others in public exams.

who are the poor? those who receive dole payments and do work on the side whilst you and i work our asses off in valletta every day? no chris, it is you and i who are "poor" because every red cent we earn is declared and taxed to high heaven.

- Agreed :D

[Gladiator]

During the Reagan years this flat tax and tax cuts, were introduced and in the following years the US economy created 11 million jobs in the mid eighties!


More than the whole EU who were 15 countries at that time.

Cristoforo what has morality and economics got to do with flat tax and means of production.

Trust Leo brincat god damn expired socialist dinosaur. Now he is parading as the Maltese waiter to the Libyans! Typical Socialist. Spend and spend and then will tax everything in sight like what's Gonzi is doing.

Yeah, sure look at the growth in the Maltese economy 1.82%:eek:

Look at Russia, 5%, Look at India 8%, Look at China 11%, Look at the USA 4%, Canada 3.3% Look at Hong Kong which had a flat tax rate for a long time! All with streamlined tax system.


Fuck the welfare state and anyone who depends on it. The usless and the lazy are just mere fooder to the rubbish heap.

[PERICLES]

Reduce INCOME tax, increase VAT.

[Gladiator]

Reduce INCOME tax, increase VAT.

No, you will get nowhere if you do that. remember the VAT is a consumer tax. understood. The majority of the consumers are the working class. They spend and they generate wealth.

Remember the multiplier factor. I produce, someone ships it, someone else sells it, you purchase it.

Tax that product and it will start to be out of reach of the average joe blow? What will happen. I shall stop manufacturing it, no shipping and seller. Full stop.

What will we end up with? UNEMPLOYMENT? Sounds familiar? But look at the flat tax. More money left over in the hands of the purchaser. What happens, more spending more purchasing and so forth. More production, equals more jobs!
Why there are less jobs in Malta right now? How many taxes the Gonzi government introduced?

You have your answer.

[Mirko]

During the Reagan years this flat tax and tax cuts, were introduced and in the following years the US economy created 11 million jobs in the mid eighties!

Sa fejn naf jien during the Reagan years rich people bacame richer and the poor became poorer!

[Marco Polo]

not really no. the middle class and above became richer and the blacks stayed where they always stay.

[Úlfheðinn]

Wasn't Reagan the one who handed America to the corporations?

What will we end up with? UNEMPLOYMENT? Sounds familiar? But look at the flat tax. More money left over in the hands of the purchaser. What happens, more spending more purchasing and so forth. More production, equals more jobs!
Well it depends, if the purchaser would have to pay his social security, health care, education, etc.. on his own; the purchase power of the lower-half section of the population would be killed off.

[Gladiator]

Sa fejn naf jien during the Reagan years rich people bacame richer and the poor became poorer!

In the reagan years Mirko, everybody got a job. Whatever one was able. Ofcourse the Rich get richer. It is a matter of Maths. If I have more accumlated wealth than you and you earn a weekly pay. How is that going to working in the long term as I am able to invest more than you and save for my future.

The present poor in the US are poor now because they did not invest and save for their future.

Remember the fable of the ant and the crickit?:D

I am not rich. I earn a salary, but I have mutual Funds. Just one of them earned me more than a 1000 dollars in less than 8 months! It all takes choice and brains. lol.:p

[Gladiator]

Wasn't Reagan the one who handed America to the corporations?


Well it depends, if the purchaser would have to pay his social security, health care, education, etc.. on his own; the purchase power of the lower-half section of the population would be killed off.

Ok. Yes there is that danger. In every society, there are those who cannot help themselves.

What has happened in the US, as I live in North America so I can speak from experience, the Corporations were or are not accountable to the community or people where they are established. When they move out of a Town or community, they leave behind them, broken families, broken dreams and poverty. I can name you a few stories of towns and cities where the major employer moved out and went to China.

However, my belief is that the defects of Free Trade took advantage of the weakest due to short sightedness.
There was no mechanism placed to commit that Corporation to the needs of the people it employed or communities which it earned its profits!

By commitment I mean that with regards to education the Corporation should at least pay or subsides the education of the local University, thus later the graduates will be the source of manpower where the same firm can recruit its employees! This also goes towards Health care, ect. ect.

It is a win win situation. Governments won't need to raise or have taxes if these social services are taken care of. But rasie taxes and see what will happen to that same company. Believe me in the eighties I had seen it happen in the city of Toronto. The city couldn't control their spending and they kept raising taxes and all the business from the city core flew to suburbia.:eek: Now people who live in the city have to commute and get stuck in traffic jams, because the city doesn't have the money for uban transportation!:eek:

[Marco Polo]

a few very good posts by gladiator

[strickland 10th district]

Do you know that the Vat department is still trying to collect CET tax which is not even legal.

They have no legal right to this money but still try.

The law is such a mess that no one knows what they are talking about.

Yes ,single tax is great.

[Artist]

Flat tax (2)

Does it pay off?

The Times of Malta

Joseph Muscat

Those who thought that talk of the flat tax was buried with the 1990s do not really feel at ease with the sudden surge in popularity of this subject. It might well be a surge but it might also prove to be a bubble that could burst pretty soon.

Undoubtedly, the main attraction of setting a single marginal rate of taxation is that is simplifies the whole tax system to a point where it becomes comprehendible to the public. Just look at the faces of people trying to sort out their "simplified" income tax return to see what it is all about. Just imagine reading the actual legislation! So, that is a point in favour of flat tax. No argument about that.

What is much less certain is the claim that a simpler system would lead to less evasion. Advocates of the flat tax state that a transparent system with an adequate threshold would encourage people to declare their full income because they would not be risking getting "caught" on a higher tax level. Of course, there would still be those who would try their best to be seen as falling under the 0 per cent tax threshold. But that is a common denominator of both, or rather all, systems. The backers of a flat tax regime state that switching to this system would lead to even higher income for the state coffers since tax simplification would lead to more compliance. This claim is highly debatable, to say the least. On the other hand, a claim that is more founded is that this alternative regime would likely pump more money into the economy, thus leading to a positive multiplier effect. Economic growth would bring about more jobs.

This latter claim has been somewhat proven in eastern Europe, where countries using a flat tax system have experienced a significant economic boom. On the other hand it can be argued that, given the years of economic inertia that preceded the fall of the Berlin Wall, any policy would have led to the same results. But then there is another argument, namely that related to corporate taxation. Those countries that have abandoned progressive corporate taxation in favour of a single rate have all experienced a positive return.

The flat tax also helped Vladimir Putin put his house in a better shape after the oligarchs left Russia's economy in shambles in the late 1990s.

If one goes on researching what the most vehement supporters of the flat tax say, one discovers that their final aim is not only a single income/corporate/value added tax rate, such as the one implemented in Slovakia. Their chimera is that the system would be so successful that there would be no need of any other form of taxation, be it withholding, capital gains or inheritance tax.

Dream on!

The fact is that despite its attractiveness, the advantages of adopting a flat tax cannot really be totally quantified or unequivocally proved. The success stories mentioned are many times attributable to a series of important factors and not only to a single policy decision, such as a shift in fiscal policy.

Next week: Flat Tax(3): A Flat Idea For A Round World.

Mr Muscat is a Labour member of the European Parliament.

www.josephmuscat.com (http://www.josephmuscat.com/)

[Marco Polo]

how many plagerisers there are lately!!!

ANR still retain the crown though

[D.P.R.K.]

North Korea is a tax-free country.

[Lancelot]

Greetings,

Mr. D.P.R.K, thank you for your kind information. Are you suggesting that we adopt the North korean democracy, or shall we all immigrate there. I guess that your body is situated in Malta while your heart is situated in north Korea. What about your spirit? Is it situated somewhere in between?

We are all victims of the local MLPNAD ignorance and leaders. This is a statment of fact - we are living it - Welcome to reality! We are in paradise, but guarded by mischievious evil. We are being punished for being good.

Welcome to Malta - The sacred island of Melita.

Lancelot

[Admin]

North Korea is a tax-free country.
North Korea is a communist country. You could say that the tax rate there is100%.