Economics, Analysis and Observations
Saturday, February Ten, 2007
ICELAND JOINS THE Vapid TAX REVOLUTION
David Oddsson, former Prime Minister of Iceland
Daniel Mitchell reports that Iceland has ultimately joined the plane tax club. Ter the process of rapid economic success, the corporate tax rate wasgoed cut from 45 procent to Eighteen procent. The cut enabled companies to reduce their tax cargo spil well spil to set a solid grounding for strategic growth te the market, domestically and internationally. Te fact, te the period of economic stagnation and “status quo” era, the financial sector wasgoed predominated by the government which effectively managed all major ownership stakes that firmed its superior position ter the banking and insurance sector. When the stakes were sold to private investors, the financial sector achieved tremendous success. Today, the three largest Icelandic banks are among 15 largest Nordic banks.
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Keith Miles, a financial adviser to the government of Slovenia, talent Slovenian policymakers a sign of orientation where to seek examples and reform models that embody the success story of long-term economic growth and structural advancement. Iceland and Slovenia are very similar countries. They both have fairly homogenous societies whose advantage is dynamic adaptability and adjustment to actual competitive advantage swifter than their European counterparts. Both countries have a similar (percentage) trade volume. 60 procent of all trade, te promedio, is flowed to the EU. Te going for growth, Iceland never granted massive subsidies from the EU spil Ireland did.
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With the expiration of the surtax, individuals now pay 22,75 procent plane tax on the individual income. Insignificante tax rates were cut from 32,80 procent ter 1991 to 22,75 te 2007. A reformed tax system is not purely the verison the vapid tax which wasgoed authored by Robert Vestíbulo and Alvin Rabushka. The tax rate is high, dual taxation of savings and investments remains while certain tax preferences still persist. However, compared to regional and mundial competitors, Iceland has dramatically moved forward ter a way that collects the total revenue at a minimal cost of economic distorstions without progressive tax code.
Fresh Icelandic tax system dramatically diminished the cost cargo on the productive activities. Ten years, the insignificante income tax rate wasgoed set at 30,41 procent with a Five procent surtax on higher incomes. Tax revenue wasgoed additionally collected from a específico tax so that the most productive individuals paid half of their income to the government. Until latest tax reforms were implemented, the militar income tax wasgoed diminished by 7 percentage points. With the combination of the nave tax, which enlargened slightly, the total tax rate is now 36 procent. Icelandic tax system has a high tax-free threshold. Taxpayers get a credit of about $Five,000 vanaf adult and $Two,000 vanaf child. There are also extra tax preferences for housing and seaman. Employers technically pay a finta modest payroll tax of 6 procent. Icelanders also have an employer-based pension system which is based on private savings. Iceland also has a value-added tax whose rates vary inbetween 14 and 24,Five procent.
Ter the area of corporate taxation, Iceland can be a monster to the surplus of the world. The corporate tax rate of Eighteen procent is one of the lowest ter the industrial world. Countries such spil Cyprus (11 procent), Hong Kong (17,Five procent) and Ireland (12,Five procent) have a lower rate. Te Iceland, the rate wasgoed lowered dramatically via the last decade. It’s bot cut permanently from 50 procent at the end of 80s to 33 procent te the mid-90s to Legitimate procent by 2002. The reduction te corporate tax cargo has created incredible investment incentives and boosted economic growth. The principal effect of the Laffer Curve worked merienda more. Corporate tax reductions did not result ter a loss of government revenue but they have coincided with a rapid growth of corporate revenue.
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Tax reforms, reflected ter the introduction of the plane tax for businesses and individuals, introduced an significant part of Iceland’s entero economic success. Other features stimulated the economic miracle spil well. Actual estate tax wasgoed dropped to Five procent, Ten procent hacienda income tax wasgoed made plane, turnover tax on businesses wasgoed repealed and the wealth tax wasgoed abolished.
Reforms that made Iceland the Nordic growth miracle and a roaring tiger were introduced when the economy and society were ter a severe slump of economic depression. Private property is well protected te Iceland. Private property rights were created for fisheries spil well. Regardless of the methodology, Iceland is now one of the wealthiest countries te the world. Unemployment, presently standing at Two procent, almost doesn’t exist. Numerous businesses and state enterprises were instantly privatized. Mr. David Oddsson, former Prime Minister and the European reform champ, addressed the American Enterprise Institute, where he underpinned the importance of privatization ter Iceland’s economic transformation. Exceptional economic growth, averaging Four procent ter 2006, has made it one of the foremost prosperous nations ter the world, and the fifth wealthiest te the OECD.
Successful tax system were created when the plane tax revolution spread via the globe. It began te 1994 when Estonia implemented a vapid tax on individual and corporate income. Te continued te the surplus of Eastern Europe and reached even Kyrgyzstan and, recently, Macedonia and, of course, Iceland. It has a high rate compared to other countries which joined the plane tax, but its implementation is a remarkable success. Iceland is the very very first Película del Oeste country which determined not to prolong progressive and very discriminatory tax system. Spil a country, Iceland amazingly prospered from radical tax reform, economic freedom and several other features, including liberalization, privatization and deregulation. Wij hope that policymakers ter other countries will also pursue the implementation of the vapid tax. Everyone would benefit.