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Iraq
U.S. Administrator Imposes Flat Tax System on Iraq
2003-11-02
The flat tax, long a dream of economic conservatives, is finally getting its day — not in the United States, but in Iraq.
Shades of 1950 Hong Kong!
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.
There are certain advantages to rule by fiat, aren't there?
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. 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.
That has to change.
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.
You didn't hear about them from the Noo Yawk Times, though...
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.
"We, of course, prefer our old tax farming system, where members of the government deputized close relatives as tax collectors, allowing them to keep a moderate percentage — usually not more than 80 or 85 percent — to cover expenses. That way, the only administrative cost to the government was what it cost to buy them their masks and guns, and then the occasional check processing fee when they paid anything into the treasury. Hey! It worked for the Romans, didn't it?"
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."
"Reforming" the tax system implies that there's a tax system in existence...
"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."
Especially the ones who use the tax farming system, which doesn't have a set rate:
"Ummm... Pay my taxes? Yeah. I guess. Put down the gun. How much is it?"
"How much you got?"
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.
If they can make this work they’ll have predictability in taxation and enough revenue for the government. And the people will start demanding that the government work.
Posted by:Steve White

#5   How about a $10K USD fee for Press Credentials? LOL! Y'know, there might be something there!

At least it'd be out in the open and benefiting the people, instead of the clandestine payments and 'gifts' Saddam and his cronies were getting from the news organizations.
Posted by: Pappy   2003-11-2 9:37:03 PM  

#4  I love the idea of a $10,000 fee for press credentials. It should be an annual fee, applicable only to a single reporter, and non-transferable. Oh, and support staff each require their own set of credentials, so each sound man, each camera man, requires their own set. Oh, and charge $50,000 a month for any group that employs a guide or translator who worked for Saddam's government.

Oh, and exempt anyone who wants to take part in the embed system. Wave it off as their being attached to the military.
Posted by: Robert Crawford   2003-11-2 11:38:21 AM  

#3  I guess that rules out having them trained by the European Commission's statistical bureau - Eurostat, huh?

There is so much that we poor Merikens have to learn from our betters. Just think how valuable being a cellmate with one of these guys would be regards your future finances! A waiting list will need to be set up. Oh, wait, my bad. They won't be going to jail. Hell, they might not even lose their jobs. The wagons are circled and "mum's" the word. We have so much to learn!

This is just too sophisticated for us - and I'm sure we'll impose our crass and simplisme approach on the poor Iraqis. Oh well, we shouldn't lose hope -- they'll pick it up from the NGOs later.
Posted by: .com   2003-11-2 9:50:25 AM  

#2  The hardest part of the taxing will be keeping bribery out of the equation. Glad the UN has beat feet and isn't around to participate in the training for the Iraqi IRS.
Posted by: Super Hose   2003-11-2 9:09:20 AM  

#1  Geez, I'm soooo jealous.

"...excellent and first class hotel and restaurant tax."
LOL - I love the sound of the sour grapes at the end... I wonder if that came from the reporter or - more likely - the WaPo Editorial Staff. Pfuck 'em - they can help pay for Iraq's reconstruction, too, since it's providing them with employment. Hmmmm. Come to think of it... How about a $10K USD fee for Press Credentials? LOL! Y'know, there might be something there!
Posted by: .com   2003-11-2 6:26:22 AM  

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