The flat-tax club grows

On New Year's Day two more countries hopped on the flat-tax bandwagon – Romania and Georgia. That brings to eight the number of nations in Old Europe that believe a flat tax is the way to a new economy.

Romania's new rate of 16 percent applies to both personal and corporate income; it replaces five personal tax brackets ranging between 18 percent and 40 percent and a corporate rate of 25 percent.

Georgia's flat tax is even lower: 12 percent on corporate and personal income; it trumps Russia's 13 percent flat tax by a hair – President Mikhail Saakashvili wanted to boast the lowest tax rate in Europe.

The Continent's flat-tax club also includes flat-tax pioneer Estonia (25 percent and heading down to 20 percent in 2007), Latvia (25 percent), Serbia (14 percent), Ukraine (13 percent) and Slovakia (19 percent). The largest opposition parties in the Czech Republic and Poland are also agitating for a flat tax and have promised to implement one if victorious at the polls.

In the rest of the world, countries that want to stay competitive could do worse than to take a page from the Romanian and Georgian playbooks, says the Wall Street Journal. A clean sweep of all forms of tax favouritism would wipe out a huge industry of consultants and lawyers. But eliminating all this tax-generated make-work would be a boon to economic efficiency and give most taxpayers a fairer and better deal.

Source: Editorial, Flat-Tax Club, Wall Street Journal, January 6, 2004.

For WSJ text (subscription required) http://online.wsj.com/article/0,,SB110496441617217964,00.html

For more on Flat Tax http://www.ncpa.org/iss/tax/

FMF Policy Bulletin/ 11 January 2005