Re: Iraq's new tax system

["Max B. Sawicky" <sawicky@xxxxxxxxxxxxxxxx>]

That's swell.  Now all they need is some income to tax.

Business income is not easy to measure, flat rate or no.
A sales tax would make more sense.  In neither case is there any
government to administer the tax.  It's obviously a gesture.

If I was pro-consul, I'd have just two taxes:  severance (on
oil, natch), and a sales tax exempting any merchant who
does business sitting on the ground.

mbs

----- Original Message -----
From: "Eubulides" <paraconsistent@xxxxxxxxxxx>
To: <PEN-L@xxxxxxxxxxxxxxxx>
Sent: Sunday, November 02, 2003 5:55 PM
Subject: Iraq's new tax system


> U.S. Administrator Imposes Flat Tax System on Iraq
> By Dana Milbank and Walter Pincus
> Washington Post Staff Writers
> Sunday, November 2, 2003; Page A09
>
>
> The flat tax, long a dream of economic conservatives, is finally getting
> its day -- not in the United States, but in Iraq.
>
> It took L. Paul Bremer, the U.S. administrator in Baghdad, no more than a
> stroke of the pen Sept. 15 to accomplish what eluded the likes of
> publisher Steve Forbes, Reps. Jack Kemp (R-N.Y.) and Richard K. Armey
> (R-Tex.), and Sen. Phil Gramm (R-Tex.) over the course of a decade and two
> presidential campaigns.
>
> "The highest individual and corporate income tax rates for 2004 and
> subsequent years shall not exceed 15 percent," Bremer wrote in Coalition
> Provisional Authority Order Number 37, "Tax Strategy for 2003," issued
> last month.
>
> Voilà! Iraq has a flat tax, and the 15 percent rate is even lower than
> Forbes (17 percent) and Gramm (16 percent) favored for the United States.
> And, unless a future Iraqi government rescinds it, the flat tax will
> remain long after the Americans have left.
>
> "It's extremely good news," said Grover Norquist, head of Americans for
> Tax Reform and a Bush administration ally. Bremer's vaguely worded edict
> leaves open the possibility that Iraqis could face different levels of
> taxation below 15 percent, but "they told me it's a flat rate and it
> appears as though it's a flat rate," Norquist said. The tax fighter added:
> "It might be a hint to the rest of us."
>
> Bremer's new economic policy for Iraq will slash Saddam Hussein's top tax
> rate for individuals and businesses from 45 to 15 percent. Of course,
> since Hussein's government, like others in the Middle East, almost never
> enforced tax collection, there is no real history of paying taxes in the
> country.
>
> During the more than three decades of Baath Party rule, Hussein ran a
> centrally controlled economy with most large businesses owned or operated
> by the state. The government also managed the import of most goods.
>
> John B. Taylor, undersecretary of the Treasury for international affairs,
> said the Iraq flat tax was discussed before the war as preliminary
> planning was done with the help of some Iraqi exiles.
>
> After major combat ended, the discussions continued with Iraqis in
> Baghdad, with emphasis on tax policies adopted by other countries making
> the transition from controlled economies. "One was Russia and subsequently
> Ukraine, where we heard good things after flat taxes were adopted," Taylor
> said.
>
> On Sept. 22, Bremer told the Senate Appropriations Committee: "Iraq's new
> tax system is admirably straightforward. The highest marginal tax rate on
> personal and corporate income is 15 percent."
>
> Iraq's new finance minister, Kamil Mubdir Gailani, is considered a
> follower of Ahmed Chalabi, the Western-oriented banker who has closely
> adhered to the Bush administration's economic policies, according to one
> expert on the Iraqi economy. Gailani presented the new Iraq finance
> program, including the flat tax, at a recent international meeting.
>
> "A piece of social engineering is being done on Iraq, but it has almost no
> support from other members of the U.S.-appointed Iraqi Governing Council,"
> said a Middle East expert who heard Gailani's presentation.
>
> Proponents of the flat tax have long favored this kind of tax system for
> Iraq. Without much of a framework to start with, Iraq "need not worry
> about all the political and transition problems that have made adoption of
> fundamental tax reform here so difficult," Bruce Bartlett, an economist in
> the Reagan and first Bush administrations, wrote this spring. "It is
> gratifying, therefore, that leaders of the new Iraq are said to be looking
> at a flat rate tax system for their country."
>
> Bartlett, once an aide to Kemp and now with the National Center for Policy
> Analysis, said the model for Iraq should be Russia, which in 2001 set a 13
> percent flat tax on individual income. The Bush administration, still
> disturbed by much higher tax rates here, has said it admires Russia's flat
> tax. Russia "understands the importance of getting the tax structure right
> in your economy," Commerce Secretary Donald L. Evans told the conservative
> Heritage Foundation last year.
>
> President Bush, in Russia last year to see President Vladimir Putin, said:
> "The good news is that the flat tax in Russia is a good, fair tax -- much
> more fair, by the way, than many Western countries, I might add."
>
> One economist familiar with the area said: "At the previous 40 percent to
> 50 percent, Russian people were evading. Now at a lower rate, they are
> paying because the penalties are so heavy."
>
> Conservatives have similarly celebrated Bremer's move in Iraq. "Such low
> rates will put Iraq on a par with Hong Kong and flat-tax-land Russia,"
> editorialist Amity Shlaes wrote in the Financial Times. "They contrast
> favorably with the onerous regimes of some neighbors."
>
> American flat-tax advocates have made little headway at home, in part
> because Democrats say it would disproportionately hurt lower-income
> Americans and because expensive tax breaks such as the deductions for
> mortgage interest and charitable donations are beloved in both parties.
> But in places such as Russia, the Baltic states and Iraq, there was no
> well-established tax code defended by an army of lobbyists. "Somehow, it's
> easier when you start from scratch," Norquist said.
>
> The 15 percent rate does not take effect until January. In the meantime,
> Bremer has abolished all taxes except for real estate, car sales, gasoline
> and the pleasantly named "excellent and first class hotel and restaurant
> tax." Even while leaving these Hussein-era levies in place, Bremer
> exempted his coalition authority, the armed forces, their contractors and
> humanitarian organizations. Exempting occupation personnel leaves only the
> Iraqis to pay taxes, as well as journalists, business people and other
> foreigners.
>
> Looking back at the failed attempt by presidential candidate Forbes to
> rally U.S. public support behind the flat tax, Gene Sperling, a senior
> Clinton economic adviser who is with the Council on Foreign Relations,
> said wryly, "If Steve Forbes does a bus tour [of Iraq] to promote it, I
> hope they have adequate security."