As the name suggests, flat rate tax is a system of tax where a pre determined fix tax rate is levied on the income and profits.
Still, it is a controversial system that has its opponents.
An example of a tax rate includes a scenario where everyone pays a 25 percent tax on the profits irrespective of the amount of profit.
Those opposing a flat tax system argue that the flat rate doesn't differentiate between the rich and the poor.
It should be noticed that it is far easier for a rich person to pay the 25 percent of their income and maintain a healthy lifestyle in comparison to a poor who will be hard-hit by dispersing the quarter of his pay check.
Just for the same reasons many nations in the world have adopted a flat tax system but with certain restrictions.
Hong Kong - Case Study The prime example of such a nation is Hong Kong.
Hong Kong applied steeply progressive rates on the salaries which make sure that a person with a fat paycheck is paying more than a blue collar worker.
Various other economies in the world have taken measures to implement changes in their flat tax rate that will allow an even distribution of the profits.
There are four income tax brackets in the Hong Kong, namely 2%, 8%, 14% and 20%.
Due to a clearly marked tax rates, it is easier for a majority of population to understand their liabilities.
That's not it! Hong Kong also allows its citizens to keep a large portion of the income spent on charitable causes, adult care, child care and retirement savings plan.
The tax system has been so successful in Hong Kong that an average citizen is not even bothered about the taxes on salaries and income.
Also notice that the tax system is flexible in certain condition but is largely fixed when it comes to the corporate profits and related private spending.
The corporate tax is around 17.
5 percent and in some cases it is fixed at 18 percent.
Fixed Tax rate in the United States Policy makers in the United States and some other Western countries have pointed out the fixed tax rate system of Hong Kong as a premier example of a model tax system, to follow.
For example, the system allows corporations to pay the tax before paying the actual dividends.
If implemented in the United States, such a process will wipe out the need for paying double taxes, once on income and other on the dividend.
It is due to the long term implications of the system that few states in United States have already adopted a flat rate on household incomes.
The Hong Kong fix tax rate system is being considered by many nations including Poland and Greece.
The theory is already gaining approval from the newly formed nations in the World, particularly the ex-communist regimes.
It will be in the interest of nations around the world to study the Hong Kong tax system that has provided a solid foundation to the world's premier economy for decades.
Still, it is a controversial system that has its opponents.
An example of a tax rate includes a scenario where everyone pays a 25 percent tax on the profits irrespective of the amount of profit.
Those opposing a flat tax system argue that the flat rate doesn't differentiate between the rich and the poor.
It should be noticed that it is far easier for a rich person to pay the 25 percent of their income and maintain a healthy lifestyle in comparison to a poor who will be hard-hit by dispersing the quarter of his pay check.
Just for the same reasons many nations in the world have adopted a flat tax system but with certain restrictions.
Hong Kong - Case Study The prime example of such a nation is Hong Kong.
Hong Kong applied steeply progressive rates on the salaries which make sure that a person with a fat paycheck is paying more than a blue collar worker.
Various other economies in the world have taken measures to implement changes in their flat tax rate that will allow an even distribution of the profits.
There are four income tax brackets in the Hong Kong, namely 2%, 8%, 14% and 20%.
Due to a clearly marked tax rates, it is easier for a majority of population to understand their liabilities.
That's not it! Hong Kong also allows its citizens to keep a large portion of the income spent on charitable causes, adult care, child care and retirement savings plan.
The tax system has been so successful in Hong Kong that an average citizen is not even bothered about the taxes on salaries and income.
Also notice that the tax system is flexible in certain condition but is largely fixed when it comes to the corporate profits and related private spending.
The corporate tax is around 17.
5 percent and in some cases it is fixed at 18 percent.
Fixed Tax rate in the United States Policy makers in the United States and some other Western countries have pointed out the fixed tax rate system of Hong Kong as a premier example of a model tax system, to follow.
For example, the system allows corporations to pay the tax before paying the actual dividends.
If implemented in the United States, such a process will wipe out the need for paying double taxes, once on income and other on the dividend.
It is due to the long term implications of the system that few states in United States have already adopted a flat rate on household incomes.
The Hong Kong fix tax rate system is being considered by many nations including Poland and Greece.
The theory is already gaining approval from the newly formed nations in the World, particularly the ex-communist regimes.
It will be in the interest of nations around the world to study the Hong Kong tax system that has provided a solid foundation to the world's premier economy for decades.
SHARE
