Paper Example on Flat Tax: A System of Equality, Disadvantages, and Advantages

Equity The tax system operates based on equality among all taxpayers and completely disregards the level of income.

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Most countries that have adopted the system typically exclude citizens who are earning below the poverty line.

The same way that tax rates are uniform in property taxes, so is the flat tax.

Equality allows for the most ambitious to gain the tax advantage of increasing their revenue. The tax model has the disadvantage of punishing wealth creation and productive efforts through increasing levies for those earning more.

Thus, this tax system discourages productivity by placing the tax burden on entities that generate more wealth in favor of the low-income earners (Piatkowska et al., 2020).

As a consequence, the taxation style does not promote small and medium enterprises that require more capital relief to sustain operation and increase profitability.

Efficiency The proportional tax system is exceptionally efficient if compared to the progressive system, which is complicated as well as expensive to both the tax collector and taxpayer.

Moreover, the flat rate is easily understood by the public and their leaders as the rules governing the application of the concept are simple (Piatkowska et al., 2020).

Therefore, the system exceedingly efficient as its simplistic nature allows for high compliance that supports the reduced cost of collecting the taxes. This version of taxation is sophisticated for the ordinary taxpayer to have a good comprehension of its modality of functioning.

Due to its complexity, the system is expensive to both the tax collector as well as the taxpayer through delayed payments.

The delays in submitting tax returns are due to the process being tedious and time-consuming, which increases the cost of productivity for the nation.

Generally, the system does not offer a cost-effective means of collecting taxes.

Adequacy The flat rate is not as adequate as the progressive system because it fails to offer sufficient revenue to address the basic requirements of society.

The flat rate fails to meet the basic needs due to the omission of the current income tax to make the model more affordable to the taxpayer.

The model requires tweaking to make it adaptable and adequate to generate sufficient income to meet the cost of services offered to the citizen. The method of taxation is adequate as it factors in the current income tax to sustain the demand of the public needs.

Numerous nations use this model, which generates adequate annual growth of the revenue necessary for the development of public services.

The model boasts of supporting adequate economic tasks that are subject to taxation and, as a consequence, leads to relatively low tax rates for the taxpayers.

Transparency The tax is more transparent as compared to the progressive model as leaders, as well as a citizen, can easily access the data regarding the expenditure together with the tax system.

Piatkowska et al., (2020) note that the simplicity of the system permits transparency as from evaluation of the information anybody can verify the expenditure of the collected amount, the total amount paid by an individual at any given time, and those exempted from paying taxes. The progressive system of taxation is not as transparent as the flat taxation because of its complicated nature.

The system does not avail of information to the public smoothly, as only people who are proficient in the model can relate to the data.

Therefore, the model is not as transparent as the bulk of the taxpayers cannot easily access information about how much they owe.

Furthermore, it is difficult to determine the people who are exempted from taxation or even how the collected funds were spent, making it less transparent.

Simplicity This tax model Offers the advantage of more straightforward calculations that will increase efficiency in the collection process.

Because of the simplicity in computation, the system will take less time for taxpayers to determine how much they owe and subsequently complete their returns on a timely basis.

The economy will be able to recover the cost of productivity from time lost in solving disputes that arise from the complication of the progressive tax. The tax system has more complicated computations that are not easily understood by the ordinary taxpayer. The outcome of the complication is the increasing implementation costs.

Thus, for those who do their tax returns lose a lot of productivity time which Slemrod and Boning, (2018) approximate a mean of 28.5 working hours.

The two writers further postulate that the cost associated with lost productivity in the United States accounts for $200,000,000,000 annually.

Recommendation

The recommendation for the Saskatchewan would be the flat tax as it is simple, transparent, efficient, and equitable compared to the progressive tax. Through its simplicity and transparency, the system will save the taxpayer a lot of time and consequently increase the compliance issues. Nevertheless, the progressive system is adequate compared to the flat taxation model but has several legal loopholes that allow fraud and tax evasion (Piatkowska et al., 2020). Therefore, a government that employs the progressive model loses a lot of revenue through inefficiency and corruption, making it less desirable.

References

Slemrod, J., & Boning, W. C. (2018). Real Firms in Tax Systems. FinanzArchiv: Public Finance Analysis, 74(1), 131-143. https://www.ingentaconnect.com/contentone/mohr/fa/2018/00000074/00000001/art00008

Piatkowska, S. J., Messner, S. F., Gruner, C., & Baumer, E. P. (2020). The "New Fiscal Criminology": State-Level Changes in Crime Rates and the Structure of Tax Systems. Justice Quarterly, 1-23. https://doi.org/10.1080/07418825.2020.1731572.