The document discusses replacing income tax with a consumption tax to promote economic growth. It summarizes that low taxes lead to high economic growth while high taxes result in low growth. Income tax is considered the most harmful tax. The document provides examples of how Thailand and Japan could replace income tax revenue by increasing their value added taxes (VAT) to modest levels of 10-12%. The World Taxpayers Associations advocates abolishing income tax in favor of a consumption tax system to boost economies and increase individual freedom.

1. The Flat Tax Reform and the Future:
Replace Income Tax by Consumption Tax
Björn Tarras-Wahlberg
Founder & Secretary General World Taxpayers
Associations Chairman Asia-Pacific Taxpayers Union
President Swedish Taxpayers Association 1985-2000
First Global Flat Tax Forum
Bratislava - Slovakia
4-5 October 2012

2. World Taxpayers Associations
63 members from 55 countries
A pressure group for
- lower taxes,
- less government waste,
- budget discipline
- accountable government, and
- taxpayers rights all over the world
Established 1988 at the Foreign Press Club in Washington DC

3. A few words about tax policy:
How to get a steady economic
growth?
• Private ownership
• Good general education
• Low taxes
• Rule of law

4. Taxes & Economic Growth
Low taxes = high economic growth
High taxes = low economic growth

5. All taxes disturb or damage
economic transactions.
Economist agree: Income tax is the
most harmful of all taxes.
Conclusion: Abolish the income tax

6. If you can not abolish the income tax - cut it!
Flat income tax is the second best:
Why flat income tax?
1.Simple and fair
2.Promotes economic growth
3.Promotes tax competition
4.Neutral to inflation (indexing not necessary)
5.Gives you more freedom
1993 only Hong Kong had a flat income tax. Today…

7. 27 countries have flat personal income tax 2012
- 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%*
Nepal (2008) 10%
Serbia (2008) 10%
Macau 12%
Belarus (2009) 12%*
Russia (2001) 13%*
Hong Kong (1947) 10%+15%
Lithuania (1994) 15%*

8. ) 1
Monteneg
Mauritius
Czech Re
005) 16%
2011) 16%
004) 15%
Slovakia (
Jersey an
994) 21%
Latvia (19
Jamaica (
Trinidad &

9. 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

10. Example 1: Thailand
VAT on 10% could replace all income
tax
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.

11. 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)

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