Bozur
Amicus
Posts: 5,515
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Post by Bozur on Apr 28, 2008 21:14:26 GMT -5
Bulgaria to Adopt a 10% Flat Tax Rate Since Estonia adopted a flat tax rate in 1994, enjoying very robust GDP growth ever since, Eastern European countries have been gradually warming to this system that promises to attract foreign direct investment, increase transparency, and drastically curb tax evasion. Slovakia, Romania, Albania and many former Soviet republics have all adopted a flat tax. Now it's Bulgaria's turn: Last August, the government declared it will introduce a flat tax rate on personal income. At 10 percent, Bulgaria's flat tax rate will be among the lowest in the world, down from a tax rate that currently ranges between 20 and 24 percent. Other countries with a flat tax regime are Macedonia, Ukraine, Mauritius, Mongolia and Russia. A full list can be found in the linke bellow. worldpoliticsreview.com/en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems
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Post by Ivanov on Apr 29, 2008 5:12:20 GMT -5
This flat rate was one of the few good ideas of our government. The flat rate of 10% for companies was introduced since 01.01.2007. As a result, the revenues from taxes increased by more than 30%, producing a budget surplus of more than 3% of GDP. The increase in Foreign direct investments is more than 100% - in 2007 they were approximately 6,5 billion euro, compared to 3,2 billion for 2006. The FDI for January 2008 are twice as much compared to January 2007.
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Post by stambolov2025 on Apr 29, 2008 15:44:49 GMT -5
This is a very poor choice on out government's part.
First of all a flat tax rate is unfair to the workers of our country who sit in what ever is left of our factories. How is it fair that someone who collects interest from investments, stocks, or other business deals should be taxed the same rate as someone who works in a factory for a flimsy wage trying to get by and feed a family.
Second off all this kind of rate slows down the growth of the economy. Under the basic principles of economics the right way to tax is a progressive tax rate which is used by the majority if not the entire Industrialized World.
If this was the United States this could work but knowing the rampant corruption in Eastern Europe such a tax policy would be a huge mistake because it can be easily abused by the wealthy and criminals in Bulgaria.
Just because we have high revenues it does not mean the country is improving. For our country to improve the quality of life there has to change and for that to happen people have to be able to afford goods. Once the people can afford goods, businesses will begin to take more risks and invest which will increase GDP and exports.
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Post by bb681 on Apr 29, 2008 18:03:53 GMT -5
"If this was the United States this could work but knowing the rampant corruption in Eastern Europe such a tax policy would be a huge mistake because it can be easily abused by the wealthy and criminals in Bulgaria."
Little it is known that US citizens do not like rich to be taxed (much) more because many of them believe that they(or their kids) may end up rich themselves one day. I fail to see though, what do u mean by being abused by wealthy and criminals? I havent yet heard of loopholes for it to be avoided.
I find it to be quite shameful that,while having the poorest economy in the EU, Bulgaria is not the cheapest place to invest in. Sure this doesnt wipe out the problems like with a magic wand but at least is a step in favour of potential investors.
This doesnt mean I support it whole-heartedly. I just see it as a better move.
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Post by stambolov2025 on Apr 30, 2008 11:22:49 GMT -5
Actually in the United States it depends on the party. Republicans support lower taxes and would love a flat tax rate because it favors the rich, I'm sorry but there is nothing you can say that makes it fair for a wealthy person to get taxed the same as a factory worker. Democrats in the united States are completely against high taxes for the workers and would not hear word of a flat tax rate because it is unfair.
How will it be abused, easily. This is not the United States, government is highly involved with corruption and if you know the right people you don't even have to pay the tax.
In Bulgaria there are enough wealthy people, money needs to be put in the hands of the workers and middle class so that they can afford goods which as I said before if you had read would cause business to invest more. Bulgaria's problems can only be fixed on a domestic level, having foreign investors will not help the country because all they would do is build factories here to enjoy the tax breaks and take advantage of the workers by paying them less.
A better move would be to begin addressing the issue of corruption in Eastern Europe before we can address the economy because as long as there is corruption the money earned from economic expansion will end up in the black hole of corruption.
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Post by bb681 on Apr 30, 2008 12:30:59 GMT -5
"Actually in the United States it depends on the party. Republicans support lower taxes and would love a flat tax rate because it favors the rich, I'm sorry but there is nothing you can say that makes it fair for a wealthy person to get taxed the same as a factory worker. Democrats in the united States are completely against high taxes for the workers and would not hear word of a flat tax rate because it is unfair." These are generalised opinions of the manifestos of the two parties. It should be a good thing that they compete on that but I was talking about the mentality of the median US citizen who sees his country as a place of good social mobility where, with hard work, he/she can be much better off and would not wish to be taxed. Also for the US government, it is currently not the problem about how high/low taxes are, but rather to find a way of simplifying its tax code. This is in a sense starting to hinder the economy's competitiveness and should be a challenge for the new president to tackle. "How will it be abused, easily. This is not the United States, government is highly involved with corruption and if you know the right people you don't even have to pay the tax." More easily than the current tax system? Part of the reason why lots of countries adopt similar lower tax systems are to do with the skill of big businesses in finding loopholes and tax havens(Germany is a good example of suffering from that). If the tax however is generally lower, wasting resources in searching for such loopholes would make much less sense so,if anything, this is an argument in favour of the flat tax rate. Besides, the government does not a lot of money because it is steadily managing to lower the public debt while more and more of the services are becoming privately owned(hence not its responsibility to maintain). Unless I am missing something, this system should be making the whole tax procedure more simplified and this is considered to be a proxy for less corruption. Most people will eventually be better off in the world of free market and less government intervention. The other individuals that wont are no major deal since they would die of old age within the next 10-15 years.
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Post by stambolov2025 on Apr 30, 2008 15:17:00 GMT -5
You are making generalizations, as a person who lives in the United States I can tell you that it depends on the party, and democrats are largely against it because it is unfair to workers. What you are saying is absurd and wrong. Poor republicans support lower taxes for the wealthy not poor democrats.
You still have not addressed the issue of "This is not fair to the workers"
As I said before "its basic economic a progressive tax system is better for the economy".
Flat tax creates a tax heaven which means foreign companies will come to Eastern Europe, exploit the low tax and labor for less cost maximizing their profits which will not increase the quality of life in the country.
For the quality of life to increase in the country people need to be able to buy goods and how can they if they can't even feed their families.
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Post by bb681 on Apr 30, 2008 18:10:48 GMT -5
I dont need to live in the US in order to be aware that Americans are notorious for disliking high taxes. Generalising...most probably but its pretty vivid comparing it to the average European. As I mentioned above though, this is not to do with the parties and their manifestos. Of course there will be a party offering this and another that offers something else. Its never clear cut about whats right and wrong about a country's health but this debate is plain politics.
I did tell you about the fairness...10-15 years and things get slightly fairer. Besides, believe it or not, inequality(in its technical sense) is not Bulgaria's problem. I used to hear about it in the beginning of the 1990s how the gap will soon be tremendeous and the country will be competing with the Latin American on this but it turned out to be a doom-mongering.
"Flat tax creates a tax heaven which means foreign companies will come to Eastern Europe, exploit the low tax and labor for less cost maximizing their profits which will not increase the quality of life in the country."
Its "Tax Haven", by the way, and this is normally an extreme form of tax competition between governments. As far as I recal, this also implies that Bulgaria's tax policy would be sort of secretive which will not(and cannot) be the case. Bulgaria won't turn into such and draw companies into registering their HQ's there because some European countries have even more favourable tax systems already. If internationals want to avoid taxes, they have other places to go. Here, we are talking about making a system slightly closer to what other countries in Europe have already achieved. Its not as important that it will be 10% as it is that it will shake up and simplify the current system which has not been touched a lot for a while.
I dont quite understand why do you link lower taxes to internationals with exploitations? These are two different areas. Workers get exploited when the local government has not set a framework of how they should be treated but this can happen even with higher taxes. Besides, it is empirically known that even when internationals offer poor working conditions and wages, these are still generally better than what local businesses get to offer to their employees.
Even if it was true, one matter you fail to realise is that companies may go there and perhaps exploit but they bring capital and know-how with them. This is what Bulgaria needs! If the economy had efficient bureaucratic system, competitive factories and skilled workforce(relative to the other countries in the region), then this would have been enough for drawing more FDIs but alas, its not the case. In addition, bigger businesses tend to have smaller sub-contractors set-up working along them and these are (for practical reasons) mostly locals.
"For the quality of life to increase in the country people need to be able to buy goods and how can they if they can't even feed their families."
The domestic demand in BG has been growing at pretty high rates per year since the end of the hyperinflation period(I think last year was about 9%). This is already pretty high relative to other countries(western countries tend to have modest or even negative changes on this). I dont know if this is improving the quality of peoples' life but Im sure as hell that it doesnt worsen it.
Having said all that though, I dont really care whether this is good or bad for Bulgaria since it doesnt affect me. I just look at it as a case study where if that reform happens to be a bust - it will only affect a few million people but, anyway, I dont believe it's a bad policy decision.
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Post by stambolov2025 on Apr 30, 2008 21:59:12 GMT -5
You are right, compared to Europeans, Americans don't like taxes but we are talking about who is getting taxed not the amount of taxes. Of course democrats don't like taxes, when they are on the middle class and workers. You are stereotyping all Americans due to the recent domination by republicans of the country's government.
In all fairness a flat tax rate has potential but we should not simply jump on the band wagon just because all of Eastern Europe is doing it. In any case much of the supposed positive results due to the flat taxe rate have been proven not to have been caused by it and that the flat tax rate does not correlate with economic expansion.
Flat tax rate is a fairly recent idea and should be observed carefully before being implemented. Flat tax has been in use in Eastern Europe for about 20 years and that is simply not enough time to ascertain its effectiveness or potential harm.
The way I look at it if we want to be as successful as the rest of the Industrial World we should emulate their actions and not the actions of the former Eastern Block, it's like a retard coping from another retard.
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Post by bb681 on May 1, 2008 9:00:35 GMT -5
"The way I look at it if we want to be as successful as the rest of the Industrial World we should emulate their actions and not the actions of the former Eastern Block, it's like a retard coping from another retard."
The problem is that in the industrialised world, each country has its advantages or selling points for foreign investors so they do not need to draw them via simplified and (flat) tax code (not yet anyway). Some of these advantages include large domestic market, good R&D, well educated labour force, relatively more efficient bureaucratic system, good infrastructure and so on. Bulgaria does not have these. Moreover, the tax codes of the industrialised economies are an over-complicated mess on their own so they are not very good role models on that matter.
The biggest successes with the flat tax have so far been with small economies(e.g. the Baltic states). This is why I believe that the experiment is more likely to work there. If you are worried about rising inequality, the tax system is only one of the factors behind causing it and countries that have a tax code, benefiting the wealthy, do not necessarily mean that they gonna suffer from inequality if from the government get their social policies right.
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Post by stambolov2025 on May 1, 2008 15:58:23 GMT -5
Too many ifs, if Levski wore boots or Botev had helmet maybe Bulgaria would not be where it is now, but the fact is that we are in this situation.
As I said these so called success have been debunked and there is yet to be a correlation found between the successes in the Baltic states and the flat tax.
You are completely right, Bulgaria does not have what the industrial world has but this flat tax wont give it to us. And as far as the complacency of the Industrial countries' tax codes it has nothing to do with the fact that they are progressive. It has to do with how they are implemented and the governments could change them if they wanted to, and we will surely see a move in that direction but I highly doubt the Western World is going to move in to a flat tax rate due to the fact that its simply not in their culture to have such blatantly unequal policies. Maybe the flat tax is not unequal but to the average person of the Western World it looks unequal and to the average Eastern European it's just another way for their government to stick it to them.
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Post by bb681 on May 1, 2008 19:13:15 GMT -5
There is no correlation for the opposite either. But then again, we shall see..not working out? Oh well, tough luck. People can also, like the companies, move elsewhere nowadays anyway. If they arent happy in Bulgaria,they can leave it. There will always be someone displeased about any change but thats life.
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Post by stambolov2025 on May 1, 2008 20:18:54 GMT -5
and thats the problem with Bulgaria, everyone leaves, no one stays to try and fix things, but I can't really talk seeing as I'm not in Bulgaria either.
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Rhezus
Moderator
DERZA STURIA TRAUS
Posts: 1,674
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Post by Rhezus on May 2, 2008 5:54:48 GMT -5
Very well said. There must be welthier worker- and middle class society. Bulgaria has few rich amd most poor ppl. A better move would be to begin addressing the issue of corruption in Eastern Europe before we can address the economy because as long as there is corruption the money earned from economic expansion will end up in the black hole of corruption. The huge corruption problem yet not solved, those ruling want ppl to stay poor.. Even if as member of EU, Bulgaria still remains a strange place.
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