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A European Flat Tax
Thread poster: Williamson

Williamson  Identity Verified
United Kingdom
Local time: 09:21
Flemish to English
+ ...
Jul 15, 2008

France, Italy, Spain, Belgium, the Netherlands and a number of other high-taxed countries oppose it. A number of former Eastern-European countries introduced it and created an economic boom and others are mulling about it.

Would this system favour freelance translators?

Flat tax is believed to:

* help reduce red tape and associated difficulties and confusion
* reduce inequity (same rate for all)
* counterbalance tax dodging and cheating
* provide incentives to work, save and invest
* generate increased tax revenue, and thus
* spark off a 'mini economic boom'

At the same time, a flat tax regime is understood to

* eliminate practically all forms of tax exemptions and allowances
* be non-progressive (at least as far as the 'marginal' rates are concerned)
* favour the wealthy at the expense of the poor
* favour share and dividend-holders since profits are taxed only once, at source (ie 'flat tax' is a consumption-based tax)

I am in favour of it and you....


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Heinrich Pesch  Identity Verified
Finland
Local time: 11:21
Member (2003)
Finnish to German
+ ...
Depends on the initial level Jul 15, 2008

From wikipedia:
"Flat taxes are uncommon in advanced economies, whose nationwide taxes typically include a graduated tax on household incomes and corporate profits, such that the marginal tax rate rises as the income or profit of the taxed entity rises. However, nomenclature regarding flat taxes has become increasingly lax, in that taxes that are described as flat sometimes have little to differentiate them from other tax regimes, e.g. progressive taxes."

If the flat tax would start at 10 thousand Euro it would not much difference to normal progressive taxation.

Regards
Heinrich


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Tomás Cano Binder, CT  Identity Verified
Spain
Local time: 10:21
Member (2005)
English to Spanish
+ ...
Every time I hear "tax"... Jul 15, 2008

...I instintively put my hand on the wallet!

A flat tax would not be very different from what we have today in most countries. Progressive income taxes are just a fraction of all the taxes we pay.

On the other hand, if taxes are there to pay for basic services and infrastructures, as we all use them the same way, why should some people pay more than others?

If I decide to serve my customers, which means working more hours than the average worker and making a little bit more money than the rest, why should I pay exponentially more? I am OK to contribute with 20% or 25% of all my gross income to the common well-being, but right now, considering income taxes, VAT, taxes on petrol, and tons of other little taxes around here in Spain, I think I pay about 55%-60% of all my income in taxes. Is that at all fair?

If I work more, why shouldn't my family enjoy the result of my work? With my taxes I am paying all the services enjoyed by people who think of work as a 9-3 thing and who could easily make more money but would not... because people like me pay the services they enjoy... Not fair at all!!


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Ivana Friis Wilson  Identity Verified
United Kingdom
Local time: 09:21
Member (2008)
English to Danish
+ ...
Flat tax - what is it? Jul 15, 2008

I don't really understand the concept - is it like a set fee, the same for everybody?

In DK we have an "interesting" way of taxing income. There is first a percentage varying slightly depending on the area you live in (like the British council tax), but roughly 40%. If you earn a good wage, there is more tax on any money you earn over a certain yearly amount. There is a personal allowance preceeding that, probably a third of annual minimum wage. The "interesting" bit is that all interest on debt is tax free! That means that house owners and people with bank loans pay less tax.

(this is my uneducated version of it, it may not be 100% correct, but it's the essence of it)

25% vat on everything except transport and teaching (don't know why).

I think a gradual, percentage based income tax would be best.


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Jim Tucker  Identity Verified
United States
Hungarian to English
+ ...
Diminishing marginal utility is what makes a flat tax unfair Jul 15, 2008

A tax of 20%, say, is far less of a burden to someone making 100,000 euros a year than to someone making 10,000, through the principle of diminishing marginal utility - the more money you make, the less each additional euro is crucial to your status. Hence to tax everyone at the same rate is essentially a tax cut for the people at the top of the spectrum.

A flat tax is therefore not an equitable solution; arguments in support of such a tax for this supposed reason are specious because they ignore the economic principle of diminishing marginal utility.

Furthermore, *within* a particular earning range, even progressive systems are "flat" - a wealthy person pays the same amount as anyone else on the first stages of his/her income, then progressively more on higher phases.


[Edited at 2008-07-15 21:44]

[Edited at 2008-07-15 21:45]


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Williamson  Identity Verified
United Kingdom
Local time: 09:21
Flemish to English
+ ...
TOPIC STARTER
My 2 cents Jul 15, 2008

Flat tax as it was introduced in Slovakia is making everybody pay the same rate of taxes: corporations 19%, income tax 19% and VAT is 19% thus cutting through red tape and boosting the economy. No more silly tax rates of say 40 or 50% (Belgium).

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RNAtranslator  Identity Verified
Local time: 10:21
English to Spanish
+ ...
It's about equity Jul 15, 2008

Williamson wrote:

* reduce inequity (same rate for all)


If you were facing major surgery, ask for the same dose of anaesthetic as the one to be applied to a newborn baby or, if your newborn baby needs surgery, ask for the same dose of anaesthetic as the one to be applied to a 100 Kg man. Let's be equitable!!!

For the reason explained by Jim Tucker, the same rate, both for the one who clean the floor and for a high executive of a multinational, is one of the bigest inequities I've ever heard about.


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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 09:21
Swedish to English
+ ...
Yes Thomas, life's unfair Jul 15, 2008

Tomás Cano Binder wrote:
On the other hand, if taxes are there to pay for basic services and infrastructures, as we all use them the same way, why should some people pay more than others?


Even with a flat rate of, let's say 20%, a zillionaire earning £100,000,000/year would have to pay £20,000,000 in tax whereas a cleaner earning £10,000 would only have to pay £2,000. And still the cleaner has the right to use the same public services - schools, healthcare, fire service, police, etc. Really, really unfair.

Even more unfair considering the fact that the zillionaire is unlikely to use the first two - non-private schools and healthcare.

I close my eyes, armies of zillionaires are marching up the street in protest...


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Tomás Cano Binder, CT  Identity Verified
Spain
Local time: 10:21
Member (2005)
English to Spanish
+ ...
The very worn exaggeration Jul 16, 2008

Madeleine MacRae Klintebo wrote:
Even with a flat rate of, let's say 20%, a zillionaire earning £100,000,000/year would have to pay £20,000,000 in tax whereas a cleaner earning £10,000 would only have to pay £2,000. And still the cleaner has the right to use the same public services - schools, healthcare, fire service, police, etc. Really, really unfair.


This is the very old exaggeration used by so many people to avoid looking into the real world and finding a solution. There is not that many zillionaires our there, so they are not the matter of this post. Normal workers are. And by talking about zillionaires (who by the way will rarely use public services) you mark the matter as discussed.

Can't you see that we are not talking about the 500 zillionaires in every country, but about tens of millions of people?


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Tomás Cano Binder, CT  Identity Verified
Spain
Local time: 10:21
Member (2005)
English to Spanish
+ ...
Inequity Jul 16, 2008

RNAtranslator wrote:
For the reason explained by Jim Tucker, the same rate, both for the one who clean the floor and for a high executive of a multinational, is one of the bigest inequities I've ever heard about.


I think you are intentionally by-passing the big picture here. It is a very worn practice to avoid the matter by talking about millionaires. Let's talk about us!!

My point is that a person making Eur 10,000 a year will contribute Eur 2,000 to the well-being of the rest of the people and to pay for public services. A person making Eur 100,000 a year would contribute Eur 20,000. Isn't Eur 20,000 enough a contribution to the common well-being? Why should it be Eur 60,000?

Let's not forget that, if someone is making more money, it is the direct result of personal effort along life. Money does not fall from the trees for a vast majority of people.

Can't you see how progressive taxing is keeping most people from going the extra mile and producing more income and positive results for everyone? Why should someone try to have good marks in education, make an extra effort every day, be proactive and try to advance in his company, if in the end she/he will barely earn more than the employee working 9-5 with no rush at all?

A flat tax would bring back the concept of effort and comittment which is so missing in European societies these days.


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Williamson  Identity Verified
United Kingdom
Local time: 09:21
Flemish to English
+ ...
TOPIC STARTER
Flat tax=fair tax.... Jul 16, 2008

That high exec would not be a high exec if he had not invested time and money in a business education (=the price of a house in the US), worked hard, had gone the extra mile in the career battle killing his/her opponents with a smile....
*-*-*-*-
In high-taxes countries with taxes up to 50% (Belgium), it does not encourage people to take an official second job but to work in one of the colours of the Belgian flag, especially those working in construction.

High tax rate is the reason why I do not consider moving to Spain or Portugal although knowing Spanish I could integrate without too many problems in a country I like.
A flat tax would encourage me to live in Spain, and not consider Slovakia or Cyprus (EU-member-states).


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Kaiya J. Diannen  Identity Verified
Australia
Member (2008)
German to English
Equity or egocentrism? Jul 16, 2008

Tomás Cano Binder wrote:
It is a very worn practice to avoid the matter by talking about millionaires. Let's talk about us!!

My point is that a person making Eur 10,000 a year will contribute Eur 2,000...


I think the point some of our colleagues are trying to make is that just because *you* want to pay a smaller percentage of *your* income in taxes, doesn't mean it's fair to the person much closer to poverty level to pay the same percentage of their income.

After all, they still have to pay for housing, food, clothing, possibly medical attention and other survival basics, while the actual amount of "hard cash" that remains for these basics after paying a flat tax would definitely be much smaller than yours, and in many cases they would simply not be at subsistence level, especially with a family.

What is the answer? Well, you could eliminate taxes on everyone who falls under a certain income level. But then that hardly seems fair to the people just above the threshold and certainly doesn't provide any incentive to work harder just to lose income to taxes.

So you could then set up something of an "in-between category" or two, gradually working your way up to the "flat tax rate".. but wait, isn't that called a progressive tax system?

Hmmmmm


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Damian Harrison
Germany
Local time: 10:21
German to English
So where do our present execs come from... Jul 16, 2008

"Let's not forget that, if someone is making more money, it is the direct result of personal effort along life. Money does not fall from the trees for a vast majority of people."
- Karl Marx says otherwise and the progressive tax systems of most EU states suggest that he was not entirely wrong.


If progressive taxation is such a drag on personal drive and overall economic performance - where do our current €100,000+ per annum execs come from? Indeed, after seven years washing and cutting other people's hair, why did I bother taking a university degree at the age of 27? Surely I should have found the labyrinthine German tax system so demeaning that I would have been satisfied to while away the rest of my life as a hairstylist? The argument that progressive tax systems hinder personal and economic development is reductive in its suggestion that all human activity is driven solely by the desire to maximize monetary earnings - as opposed to job satisfaction, emotional and social needs, family values, philanthropic interests or the 'base' desire to be the topdog in the corporate tribe. There are many reasons for going the extra mile and many valid reasons for not doing so.

And as far as the question of tax residency is concerned - I'm sure Spain can do without another influx of high income tax refugees...

[Edited at 2008-07-16 08:02]


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Tomás Cano Binder, CT  Identity Verified
Spain
Local time: 10:21
Member (2005)
English to Spanish
+ ...
Yes, it's about income taxes of people Jul 16, 2008

Janet Rubin wrote:

Tomás Cano Binder wrote:
It is a very worn practice to avoid the matter by talking about millionaires. Let's talk about us!!

My point is that a person making Eur 10,000 a year will contribute Eur 2,000...


I think the point some of our colleagues are trying to make is that just because *you* want to pay a smaller percentage of *your* income in taxes, doesn't mean it's fair to the person much closer to poverty level to pay the same percentage of their income.


Good. Let me ask you this: with today's indirect tax system (like VAT, taxes on petrol, taxes on property, taxes on inherited properties....), which accounts for the majority of taxes, don't you think that "persons much closer to poverty level" are paying far more taxes than you think?

I can give you a good example: My wife's grandparents had a flat in Madrid. They had four children. When the grandfather died, inheritance tax was paid on the value of the flat by the grandmother and each of the children. One of the children died early, and the grandmother and the other three siblings paid inheritance tax again. The grandmother dies, and tax was paid again. Then the older sister died, and the two remaining siblings paid again. We calculated that the transmission of the flat (a very modest one in an unimportant part of the city) has generated some Eur 60.000 in taxes already. When my mother-in-law or her sister die, some Eur 20.000 more would be paid in taxes, and when finally the last of the siblings dies, it would be some Eur 20.000 more!!! Thank God the party in power in the Madrid region has recently abolished these taxes. But all in all, transmission taxes for the flat have already been about nine to ten times the purchase value of the flat. And I insist: they are far from being the millonaires you talk about. Is this the kind of taxing you support?

Isn't it enough if we pay income taxes? Why all the rest of taxing????

[Edited at 2008-07-16 14:01]


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Tomás Cano Binder, CT  Identity Verified
Spain
Local time: 10:21
Member (2005)
English to Spanish
+ ...
Money falling from the trees? Where? Jul 16, 2008

Damian Harrison wrote:

"Let's not forget that, if someone is making more money, it is the direct result of personal effort along life. Money does not fall from the trees for a vast majority of people."
- Karl Marx says otherwise and the progressive tax systems of most EU states suggest that he was not entirely wrong.


Hm... Did Karl Marx say that money falls from the trees for a majority of people? Where? Please!

Now, seriously. Look: how productive for the rest of society is someone in Germany who receives Eur 1,000, and housing, and tax reductions, and free courses, etc. etc. for several years and complains because his washing machine is broken and the State will not pay for a new one??

Cut taxes, cut the far too generous subsidies given to people who are perfectly able to work for others (well, maybe at the unbearable cost of having to commute 30 km every day) or try to start a business, and society as a whole will be a lot richer.


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