Another surprising theme has been the amazing stability of tax revenue as a percentage of GDP. Among ten flat-tax countries for which data is available from the IMF, I took the revenue/GDP ratio of the last year of the former tax system and the first year of the flat-tax system. How much did the revenue/GDP ratio change? The average change was … minus 0.10%. Yes, a tenth of a percentage point. Hardly any change at all. Six countries (out of ten) had an increase in the ratio – they actually got more tax revenue, as a percentage of GDP, than with their old tax system. The largest decline was Slovakia, whose revenue/GDP ratio fell to 40.57% from 45.60%. Maybe that was a little high anyway.
However, when you combine the typically high growth in nominal GDP with these stable revenue/GDP ratios, nine out of ten countries experienced an increase in tax revenue in the first year of flat-tax implementation. The average increase in revenue was 17.7% (when excluding outlier Estonia, which had an 81% increase). Even Slovakia, with the biggest decline in revenue/GDP, had a revenue increase of 6.1%. Mongolia, with their 10% flat tax replacing a system with rates up to 40%, experienced a 33% increase in revenue! The only decliner was the Czech Republic, which had a 0.50% reduction in revenue. However, even that could be explained by the fact that the Czech Republic implemented its flat tax in 2008, a year of economic crisis worldwide.
So you see, most of the seemingly-impossible promises of the flat-taxers – higher growth, stable revenue/GDP ratio, rising government revenue – are in fact common and repeatable.
Russia, which implemented its flat tax in 2001, provides one of the best longer-term examples. Between 2000 and 2008, Russia’s GDP (in U.S. dollar terms) grew at an average compounded rate of 26% per annum. The end result was that GDP in 2008 was 546% higher than in 2000.
Russia’s tax revenue/GDP ratio was 31.4% in 2000, and 31.6% in 2008. With this ratio stable, you can see that the Russian government’s tax revenue also grew right alongside the growth in the economy as a whole, increasing to more than six times its 2000 amount in less than a decade.
The funny thing is, between 2000 and 2008, Russia’s population actually declined from 146.7 million to 141.4 million. Blaming economic stagnation on population, as is common regarding Japan today, is a waste of time.
And what about Albania? On January 1, 2008, Albania implemented a 10% flat tax on personal and corporate income, replacing a system with rates from 10-30% on personal income and 20% on corporate income. The result? Tax revenues went up 18.4%, even though 2008 was a crisis year worldwide.
Original Article on forbes.com
On the first day of his American visit, Prime Minister Sali Berisha attended the US-Albania Investment Forum in New York with participation of representatives of about 100 American companies and entrepreneurships.
Attending the Forum were also the Governor of the Bank of Albania Ardian Fullani, Minister for Foreign Affairs Edmond Haxhinasto, Minister of Tourism, Culture, Youth and Sports Aldo Bumçi, ambassadors and others.
Ms. Eneida Guria, AIDA’s CEO, i.e. the Albanian Investment Development Agency delivered the opening speech to the first session of the Forum. During the proceedings of the Forum it was displayed a video promoting Albania nature and its potentials.
PM Berisha made a special presentation of the economic development of the country and highlighted the economic-fiscal indicators, economic reforms, fiscal and digitalization of administrative procedures the government of Albania has undertaken in function of making the country attractive for the foreign investments, and this is confirmed even by the increase of the foreign direct investments in the country as well as the development potentials the country offers in all the fields, its great natural resources, infrastructure, energy and tourism.
The prime minister invited the American investors to invest in Albania and ensured they would be welcome and will find a very friendly environment for investments and that their projects will be success stories.
Investment Forum is the first of this kind held in the USA and the representatives of the American financial companies and groups attending took an interest in the proceedings.
A part of them do have concrete projects expected to be undertaken in Albania. Among the major companies and financial groups attending were Google, Coca Cola, mineral company Alcoa, American Express which offers financial services, Bechtel, the Chartis, the world leading property-casualty and general insurance organization, UBS, Patton Boggs, Marriot Group, Behre Dolbear, Morgan Stanly and others.
During the first session of the forum Congressman Eliot Engel, Michael D. Granoff, chairman of the Albanian-American Enterprise Fund, ambassador Frank Ëisner and Tony Podesta, President of Podesta Group delivered greeting speeches the meeting.
Following the first session of the US-Albania Investment Forum, PM Berisha answered to media interest.
Question: More than 100 American companies have shown an interest in Albania as already expressed even during the Forum. What has encouraged their interest in Albania?
PM Berisha: Firstly, I thank them for attending as an expression of their interest in the major potentials that Albania offers for the American investors and all the others. It also confirms their will to examine all these opportunities, to acquire more information and follow the example of those investors owing to which the foreign direct investments in Albania by 2010 were about 3 times more as compared to 2006 and that Albania by 2010 was the only country in Southeast Europe recording an increase of the foreign investments.
Question: Where would you like the American investment concentrates in Albania? What is Albania interest in American investors?
PM Berisha: Albania has its major fields like energy, tourism, mines, education, but I suggest they invest in the field they profit the most. PM Berisha is in New York to attend the sixty-sixth General Assembly meeting of the United Nations and is scheduled to address it in the plenary session. The agenda of PM Berisha carries also meetings with his counterparts as well as other international personalities on the sidelines of the proceedings of the General Assembly of the United Nations debate.
PM Berisha: I am set to improve business climate in Albania
As the US-Albania Investment Forum in New York came to an end, Prime Minister Sali Berisha attended dinner with representatives of the American companies and entrepreneurships who had taken part in the proceedings of the forum.
The guest of honor to the dinner was Mr. Muhtar Kent, the President and Chief Executive Officer of the Coca-Cola Company who shared with the participants his success story in Albania. Also attending was Congressman Eliot Engel.
PM Berisha thanked the American businessmen for participation in the Forum and took the opportunity to invite them to Albania, a country well-known for its hospitality, extraordinary potentials and the friendly climate for the business.
Speaking to the event, PM Berisha said:
“I would like to thank you for attending the first US-Albania Investment Forum. Also I am encouraged to work for improving the business climate in Albania. If you go deep into the spirit of my nation, there you can find the hospitality as the best part of it. This virtue has inspired me all the time. As my country had no tourism tradition and Albania was not on the map of tourist destinations, I believed Albania hospitality was a great asset. The number of tourists visiting my country got increased into 3.5 million by 2010 as compared to 300 thousand by 2004. And hospitality was the key word in all articles written on Albania. The hospitality might be a great support for the businessmen as well. Hence, we should eliminate the bureaucratic barriers. I would like to quote Ronald Reagan saying, "Government is not the solution to our problem government IS the problem". I believe everyone in governance should remember this postulate. Therefore, I am determined to make the utmost to ease the burden and remove the bureaucratic barriers on the business.
On the Global Competitiveness Report about two weeks ago I noticed Albania advantages and impediments. I was pleased at Albania being ranked among the first 10 countries of the world on government approach on economy. Albania was ranked in the 9-th place. I pledge to do my best to go further; the less the government intervenes, the better the performance of the economy and the business climate.”
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