From progressive to zero tax rate:

Replace the personal income tax
with consumption tax

Björn Tarras-Wahlberg
Founder & Secretary General World Taxpayers Associations
Chairman Asia-Pacific Taxpayers Union
President Swedish Taxpayers Association 1985-2000
Fifth Kazakhstan Tax Forum

Modern challenges in drafting and implementation
of tax laws in Kazakhstan - Almaty 29 Oct. 2010

World Taxpayers Associations
66 members associations from 53 countries
A pressure group for
- lower taxes,
- less government waste,
- accountable government, and
- taxpayers rights all over the world

Established at the Foreign Press Club in Washington DC 1988

How to get a steady economic
growth?
• Private ownership
• Good general education
• Low taxes
• Rule of law

Low taxes = high economic growth
High taxes = low economic growth

All taxes disturb or damage
economic transactions.

Economist agree: Income tax is the
most harmful of all taxes.

Conclusion: Abolish the income tax

If you can not abolish the income tax - cut it!
Flat income tax is the second best.

Why flat income taxes?
1.Simple and fair
2.Promotes economic growth
3.Promotes tax competition
4.Neutral to inflation
5.Gives you more freedom

1993 only Hong Kong had a flat income tax. Today…

26 countries have flat personal income tax 2011

- from 1 to 27 countries in 17 years

*Mr Bjorn was there
Kyrgyzstan (since 2006) 10%*
Kazakhstan (2007) 10%*
Macedonia (2007) 10%*
Mongolia (2007) 10%
Albania (2008) 10%
Bulgaria (2008) 10%*
Serbia (2008) 10%
Georgia (2005) 12%*
- incl. social taxes 8% (2007) 20%
- (2012) 15%
Macau 12%
Belarus (2009) 10%*
Russia (2001) 13%*
Hong Kong (1947) 15%
Ukraine (2004) 15%*
Iraq (2004) 15%
Montenegro (2007) 15%
Mauritius (2007) 15%
Czech Republic (2008) 15%
Romani (2005) 16%
Hungary (2011) 16%
Estonia (1994) From 19% 2010 18%*
Slovak (2004) 19%*
Jersey and Guernsey (1940) 20%
Lithuania (1994) 24%
Latvia (1994) 25% *
Jamaica (1984) 25%
Trinidad & Tobago 25%

Kazakhstan versus radical Georgia

Number of taxes: K:13 G: 6
Personal income tax: 10% 12% > 7% 2012
Small Business <26 employees 3%
Social security tax: 11% 8%
Income + social tax: 21% 20% >15% 2012
Corporate profit tax: 20% 15%
VAT 12% 18%
Capital gains tax: 15% 0%
Tax on dividends: 15% 15% > 0% 2012
Tax on interest: 20% 5% > 0% 2012

Asia is unique with low levels of VAT

Japan 5%, Thailand 7%, Korea 10%

This makes it possible to swap
income taxes to consumption taxes

Example 1: Thailand
Revenue from the Thai income
tax is small. Or equal to 3,2%
VAT (or 3,7 times the beer tax).
Mr. Björn suggests the Thai
Government to replace income
tax with a low property tax or
taxes on spirit, tobacco and
petrol.

Example 2: Japan
VAT on 12% could replace all income tax
Japan has the lowest VAT of 5%
Japan income tax = 7% VAT
To swap income tax to VAT
would increase VAT to just 12%
To further swap corporate tax to
VAT would increase VAT by
12,9%, and the VAT would
reach 25% (= same level as
Sweden, Norway and Denmark)

Conclusions
Replace income tax by consumption tax
- Higher economic growth
- Easier life for individuals, companies,
tax administration & politics
- Reduced tax avasion & cheating
- More individual freedom
(World Taxpayers Associations resolution 2001)