Applications of flat rate income taxes and its perceived fairness: An empirical study

As a result of globalisation a new approached emerged in income tax which is more broad tax base with lower rates. Flat income tax system is getting more popular in Europe. Flat tax indicates that even though taxable income increases tax rate stay same. The system first introduced by Robert E. Hall and Alvin Rabushka, taxpayers can declare their taxable income with a postcard sized tax declaration form. The most important aspect of flat tax rate is it does not tax savings (such as capital gains and dividends) but consumption. In this system all the exemptions are withdrawn but only minimum living standards are applied. Minimum living standard cause hidden progressivity in the tax system. The countries which apply flat tax rates are more competitive globally.At the moment total of 30 countries applies flat tax rates ranging from minimum 9% in Montenegro to maximum of 25% in Jamaica, Latvia, Trinidad, Tobago and Belize. In general when we analyse economic situation in the countries that applied flat tax rate we can conclude that flat tax reforms together with other reforms have affected their economy positively. On the other hand, because these reforms are applied recently it may be still too early to conclude.The subject studied in this thesis is important in some aspects; It seems application of flat tax rate is increasing in Europe. Since there some significant problem associated with Turkish Income tax system, we think it is important to investigate this subject.The aim of this study is give detailed information about the application of flat tax rate in different countries, and measure how taxpayer perceive flat tax system in Turkey in respect to fairness and other matters.We have carried a survey study with 1003 individuals in order to measure the perceived fairness of flat tax. The result show the acceptability application of acceptability of flat tax is low in Turkey