According to economic modelling by the Institute for Fiscal Studies – examining four potential flat-tax structures for the UK, all of them intended to be revenue-neutral – some versions of a flat tax would in fact be progressive, in the sense of favouring lower earners. Thus the tax remains progressive at lower rates of income and tax, but becomes close to proportional at higher incomes (ie, as the exempt amount becomes a steadily smaller share of the total income). Most models do include an exempted amount of income and sometimes a significantly increased personal allowance. Others believe that not taxing the rich at rates higher than the poor will leave critical social institutions, such as schools and roads, underfunded.Not necessarily. Many in the United States favor imposing a flat tax, at least in part, to encourage the rich to spend their money domestically rather than to keep it in tax havens. Imposing high taxes on the rich can cause them to set up offshore accounts in tax havens, as happened with The Beetles when the UK government taxed them at 95% of their income. However, there are arguments in favor of a flat tax, one being that not taxing the rich at high rates incentivizes them to remain in the country and spend their money there. Many of the countries with flat fees have lower standards of living than the nations that surround them. Hungary and Romania have flat taxes of 16%, and Lithuania and Georgia have flat charges of 20%. Similarly, Mongolia and Kazakhstan have flat taxes of 10%, and Bolivia and Russia have flat taxes of 13%, yet these countries do not have well-developed social sectors. Nevertheless, Greenland has few of the social services that many developed countries have. Greenland, for example, has a flat tax, and at 45%, it is one of the world’s highest taxes.
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