Flat Tax Fever

European tax revolution


A flat tax revolution is under way in the former communist bloc. In Bulgaria, reports the Sofia News Agency, "after years of rhetoric of 'protecting the poor' against the excesses of the 'capitalist right,' the Socialists have changed their course [and are] pushing for a flat tax." According to government officials, Bulgaria will become a flat tax nation in January 2008, enacting a rate of either 10 or 12 percent—negotiations are ongoing—for both individuals and businesses.

Albania, a country long famous as the impoverished fiefdom of Stalinist dictator Enver Hoxha, will also adopt the flat tax in 2008. Prime Minister Sali Berisha recently announced that the country would set its rate at 10 percent, the lowest in Europe, for both corporate and income taxes.

And it appears to be a near certainty that the Czech Republic will adopt a flat rate of 15 percent early next year. According to the English-language Prague Daily Monitor, the governing coalition has agreed to "lower the corporate tax rate from today's 24 percent to 21 percent next year, 20 percent in 2009, and 19 percent in 2010. The existing progressive taxation of personal income at 12 to 32 percent will be replaced by a flat tax of 15 percent in 2008 and 12.5 percent in 2009."

The new members of the ever-expanding flat tax club will join Romania (16 percent), Slovakia (19 percent), Estonia (22 percent, soon to be cut to 18 percent), Latvia (25 percent), Lithuania (27 percent), Russia (13 percent), Serbia (14 percent), Ukraine (13 percent), Georgia (12 percent), and Macedonia (12 percent, to be lowered to 10 percent next year), where the 2007 shift to the flat tax, Finance Minister Trajko Slaveski told The Economist, "did not just yield higher revenue—[it] yielded 20 percent more than we projected."

Similar proposals are pending in Hungary, Croatia, and Poland.