They say that there’s no such thing as a temporary tax hike. If so, the corollary to this maxim should be that there’s no such thing as a permanent tax cut.
The reality is that life isn’t quite as simple as that, and governments aren’t always as mean to taxpayers as is often made out (including by this commentator!).
We’ve had two examples of countries not living up to this rule of thumb in recent days and weeks.
In one of potential significance, Germany’s Christian Democrat Union (CDU) has proposed phasing out the far-from-beloved solidarity tax, which was introduced as a fiscal buffer when the East Germany’s basket case of an economy began to merge with the West more than 25 years ago.
Looking in from the outside, it would be hard to disagree with those who say that the solidarity tax has served its purpose. … Read More »
India’s indirect tax reform promises to be a transformational, generational change that will unleash the full potential of this sleeping economic giant while modernizing the tax system and widening the tax base. And the Government deserves a great deal of credit for driving the reforms through in the face of hostility from state governments and with a political opposition which initially opposed the reforms for opposing’s sake (ironically, the same opposition that proposed GST in the first place when in government some years ago – that’s politics for you!).
Nevertheless, this is a reform made by committee i.e. it recognizes several competing interests and consequently is one big, far-from-perfect compromise. And this is reflected in the somewhat complex three-tier state/central/interstate regime, which effectively has two standard rates (one is the norm), in addition to a reduced rate and a “luxury” rate.
One suspects … Read More »
Flat taxes were all the rage in the not-too-distant past. But have they had their day? Latvia seems to have fallen out of love with them.
Flat taxes, normally defined as a single rate of tax on personal or corporate income, or in some cases both, are often associated with Eastern Europe, where countries embraced these supposed pro-growth tax policies as they emerged from the economic straight jacket of the Warsaw Pact. But they are found in all corners of the world, from Abkhazia to Tuvalu.
Nevertheless, it was Eastern Europe that many countries looked to when debating the merits of flat taxes versus progressive taxation, including the United States. Indeed, the region has been something of a massive laboratory performing a mass flat tax experiment.
So what can we glean from the results? To my mind, they are inconclusive. Undoubtedly, flat taxes … Read More »