It is estimated that 60 million Russian employees receive salaries or wages subject to personal income tax. Since economic growth in 2001 of 5.2% was lower than the record 8.3% growth in 2000, the substantial rise in personal income tax revenue cannot be attributed solely, or even largely, to last year's growth, but rather to the tax reform itself. Personal income tax, which contributed 12.1% to consolidated budget revenues in 2000, amounted to 12.7% in 2001. ($1 = R30.8) Adjusting for ruble inflation of about 18% during 2001, real ruble revenues increased about 28%. Preliminary data for 2001 reveal that the flat tax generated R254.7 billion, an increase of R80.2 billion over 2000, up 46%. Bush praised Russia's flat tax in each of his meetings with President Vladimir Putin, most recently during their November 15, 2001, press conference held at Crawford High School.Ī year has passed since its implementation, which provides an opportunity to evaluate its success.įrom a revenue standpoint, the 13% flat tax has exceeded all expectations. It took effect on January 1, 2001, replacing the previous three-bracket system, which imposed a top rate of 30% on taxable income exceeding $5,000. To help resolve this problem and improve incentives, the Russian government enacted in July 2000 a 13% flat-rate tax on personal income. Since the emergence of the Russian Federation a decade ago, taxpayer compliance has been a problem. Hall and I set forth the mechanics of a specific flat tax proposal in an article entitled "A Proposal to Simplify Our Tax System." Twenty years later, the flat tax has become a reality in, of all places, the Russian Federation. On March 25, 1981, I first proposed the idea of a flat tax on the editorial page of The Wall Street Journal in an article entitled "The Attractions of a Flat-Rate Tax System." Later that year, on December 10, 1981, Robert E.
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