1/3/2024 0 Comments What countries have a flat tax![]() ![]() 2005) and administrative costs of taxation ( Hall – Rabushka 2007). Evidence shows that a classical single-rate tax system may be beneficial in terms of social costs: it reduces the marginal tax rate on higher incomes, hence increasing the labour supply of higher income earners ( Adhikari – Alm 2016), reduces tax avoidance ( Ivanova et al. Tax policies and the parameters of tax systems have significant economic and social consequences through numerous channels.Ī tax system can be called optimal if it achieves the required fiscal revenue and the desired redistribution of income at the lowest possible social cost (that is, administrative costs and distortionary effects). In a flat (or single-rate) income tax system the tax rate does not depend on the level and source of income, as opposed to progressive tax systems, where higher incomes are taxed at higher percentage rates. The biggest winners of the scheme are the taxpayers in the top income decile with three or more children: these 22,000 taxpayers (that is, 2% of all recipients) receive 10% of the total amount of the family tax allowance, and almost a third of the credit allocated to families with three or more children. The family tax allowance scheme favours wealthy families with many children over low-income families with fewer or no children. While the share of family tax allowances is somewhat lower for the high-income deciles, this effect is in practice negligible, therefore the income tax system can still be considered flat. We find that the tax reform has favoured high-income earners and taxpayers with children, while the main losers were low-income and/or childless workers. Between 20, progressive taxation was abolished, and a flat income tax was introduced, along with a substantial widening of pre-existing family tax allowances. They were done on the basis of people's individual data for 2007, 20, which yields more accurate estimates than the previous studies based on aggregate or survey data. ![]() The study examines the income redistribution effects of the Hungarian flat-tax and the recently introduced family allowance scheme. ![]()
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