Russia’s tax code of 2001 replaced the conventional progressive tax with a flat tax of 13 per cent.
Over the next year after the refix the Russian economy grew at almost 5 per cent.
In real terms, revenue from personal income increased by more than 25 per cent. The Russian experiment proved so successful that many other countries followed suit.
It is also believed that Russia’s previous ubiquitous tax evasion, which was running riot, was significantly reduced by the flat tax via the increased voluntary compliance.
People are willing to produce more and pay their taxes when the system is fair and the tax rates are low. In New Zealand’s case, the increased disposable income the poor would receive from the low tax rate would lift many from the barely-subsistent living they are currently experiencing.
Hong Kong has had a flat tax rate for decades and, as a result, has had the world’s fastest-growing economy for more than 50 years.
Gary Hollis
Mellons Bay
