Flat Tax Update, October 2009

After a relatively quiet year, the flat tax is showing new life.

Prime Minister Najib Razak of Malaysia introduced his government’s 2010 budget on October 27, 2009. The budget contained modest reductions in public expenditure and taxation, but also included a special provision to promote selected important industries for Malaysia’s economic development. Both foreign and Malaysian employees will be taxed at a flat rate of 15 percent if they work in the fields of green technology, biotechnology, educational and healthcare services, financial advisory and consultancy, logistics, and tourism. The idea is to provide a more attractive workplace for these activities in Malaysia than Singapore, which taxes personal income up to a higher 20 percent rate.

In November, Zimbabwe’s finance minister will announce his country’s new budget for 2010. The Zimbabwe Telegraph reported that his budget is likely to include a flat tax regime.

International aid agencies have been pressuring the Baltic countries to abandon their flat taxes as the price of financial assistance to assist them through the global financial crisis. Latvia and Lithuania have been the two principal targets of these efforts. Thus far, both have successfully resisted abandoning their flat taxes in exchange for financial aid. They have agreed to cut spending and adopt other austerity measures, but not to replace the flat tax with graduated tax rates.

The Saskatchewan office of the Frontier Center for Public Policy (with offices also in Manitoba and Alberta) released Policy Studies No. 68 in September 2009 by David Seymour entitled "Five Single Rate Tax Thoughts." This study is likely to influence tax policy after the next Saskatchewan provincial election

Interest in the flat tax has begun to appear in the media in Moldova, Uganda, and Aruba.