27.12.05

Flat tax

Nine nations from the old Soviet bloc have adopted the flat tax -- which taxes income at one rate -- and others are poised to. In an ironic twist, these countries are rejecting the class-warfare politics of yesteryear and building tax systems specifically designed to attract investment, fuel economic growth and treat all citizens fairly.(...)

The flat tax is not a silver bullet. But combined with other market reforms, it provides a significant economic boost.All three Baltic nations are enjoying strong growth, averaging over 5 percent per year. No wonder the "Baltic Tigers" became role models for the region. This growth is generating plenty of tax revenue, in part because tax evasion has been dramatically reduced. And the rich are paying the lion's share: In Estonia, for instance, the top 10 percent are paying 41 percent of the tax.(...)

Western European politicians have cast a wary eye on this tax revolution. Bureaucrats in the European Union and the Paris-based Organization for Economic Cooperation and Development object to "harmful" tax competition, and politicians from France and Sweden complain about "fiscal dumping." But such criticism is hard to take seriously coming from leaders who preside over economies saddled with high unemployment and anemic growth.(...)