‘Flat tax’ only works in the absence of corruption

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The Sofia Echo (one of my regular reads these days) reported yesterday that:

Mart Laar, former prime minister of Estonia, said the flat tax model was used by countries wanting to achieve speedy economic development, but the model was not without consequences and special requirements.

Speaking on October 3 at a conference in Sofia entitled Second Decade of Growth: Risks and Opportunities...he said the Estonian model consisted of radical reforms, in all spheres at once, he said, meaning radical tax reform, accompanied by health care and education reforms. These radical reforms did not lead to shocks, Laar said, they would just lead to speedier development.

However, he said, the model does cause a certain amount of public discontent because of the speed of changes.

A requirement for the Estonian model to function was a country's ability to absorb European structural funds, something which could only be done by a government which was not corrupt. This requirement was, under current circumstances, a problem for Bulgaria, Laar said.

As many will know, I don't think Estonia has a flat tax, but I think this comment is fascinating. Corruption kills all chance of reform, wherever you are going.

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