Since Russia adopted a flat tax three years ago, the nations real tax revenue has nearly doubled and the gospel of its success has spread across Eastern Europe. Even China has taken steps to consider the flat tax as a policy alternative.
On January 1, 2001, a 13 percent flat-rate tax on personal income took effect in Russia, replacing a 3-bracket system that imposed a top rate of 30 percent on taxable income exceeding $5,000. According to a new report by the Hoover Institution, the flat tax has been an unqualified success:
In addition to the higher rate paid on dividends, Russians who reside in Russia less than 183 days during the tax year are taxed at a rate of 30 percent on their taxable income. Other sources of income (e.g., lotteries) are taxed at 35 percent.
The higher rates on dividends and other sources of income reflect a Russian distinction between so-called “unearned income” and “earned income,” even though capital gains on homes and securities are exempt.
Source: Alvin Rabushka, The Flat Tax at Work in Russia: Year Three, Hoover Institution, April 2004.
For text http://www.russiaeconomy.org/comments/021803.html
For more on Russian flat tax http://www.russianeconomy.org/comments/022102.html
For more on Flat Tax http://www.ncpa.org/iss/tax/
FMF Policy Bulletin\1 June 2004 & 26 January 2010
