19/01/2005 11:28:47 am
Lower Tax Rate - Higher Revenue. The famous Laffer Curve shows that tax levels will get to a point when revenues actually start to fall. Mainly, this is due to the fact that (formal) economic activity decreases when taxes get too heavy. Here is a new piece of evidence: In 1990, corporate tax in Iceland was 48 % and the revenues were 0,97 % of GDP. Now, the corporate tax-rate is just 18 % and the revenue has risen to 1,25 % of GDP. There are more companies and more economic activity to tax - so vastly lower taxes bring in more money.