Where deductions are allowed, a 'flat tax' is a progressive tax with the special characteristic that, above the maximum deduction, the marginal rate on all further income is constant. The defining characteristic is the existence of only one tax rate other than zero, as opposed to multiple non-zero rates that vary depending on the amount subject to taxation.Ī flat tax system is usually discussed in the context of an income tax, where progressivity is common, but it may also apply to taxes on consumption, property or transfers.įlat tax proposals differ in how the subject of the tax is defined.Ī true flat-rate tax is a system of taxation where one tax rate is applied to all personal income with no deductions. There are various tax systems that are labeled 'flat tax' even though they are significantly different.

Implementations are often progressive due to exemptions, or regressive in case of a maximum taxable amount. It is not necessarily a fully proportional tax. A flat tax (short for flat-rate tax) is a tax with a single rate on the taxable amount, after accounting for any deductions or exemptions from the tax base.

Flat rate tax