Time to Go Estonian

by Andrew Stuttaford

Via Zero Hedge, a post from the Sovereign Man with a rather overheated headline, but these statistics, in particular, are worth noting:

For example, politicians like to talk about technology, efficiency and transparency. But just take a look at the tax code to see where they really stand. Estonia’s Taxation Act of 2002, which form the preponderance of that country’s tax code, is 43,370 words. In Canada, the tax code is close to 1 million words. And in the US, the tax code is so daunting that simply the INSTRUCTIONS for form 1040 shatter the record books at 178,096 words… over four times the entirety of Estonia’s tax code.

US tax code is so massive, in fact, that the Government Printing Office charges $1,028 just to print a copy of it!

Now Estonia is just a teeny bit smaller than the U.S., but the country’s approach is still worth observing. Flat rate income tax (21 percent), flat-rate corporate tax (21 percent on, basically, distributed income), and VAT of 20 percent (I suspect that VAT regulations put many thousands of words on top of the tally cited above, incidentally).

Tallinn has it right. Washington has it wrong. Make taxes as flat as possible, as simple as possible, and as low as possible.

Fiscal madness? Nope.

Estonia’s budget is (broadly) balanced, and the country’s debt-to-GDP ratio is around 6 percent (unfortunate contingent and indirect liabilities arising out of Estonia’s membership of the euro excluded). A critical part of the equation, of course, is that indirect taxation carries its share of the load.

As it should (in one way or another) here.

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