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(E) The Flat Tax May Spread to Poland Sooner than Expected
By Nenad N. Bach | Published  03/24/2005 | Business | Unrated
(E) The Flat Tax May Spread to Poland Sooner than Expected


The Flat Tax May Spread to Poland Sooner than Expected

Brief Comment from the Adriatic Institute for Public Policy:

"The Flat Tax May Spread to Poland Sooner than Expected", written by Dr. Alvin Rabushka, Senior Fellow at The Hoover Institution, Stanford University in California, describes the growing flat tax movement that is sweeping across Eastern Europe. (The flat tax article can be found below.)

Croatia and its political leaders can no longer afford to a turn deaf ear to the thundering economic reforms taking place in neighboring nations which is intensifying regional competition for investments. The recent negative EU decision on March 17 coupled with declining economic indicators should be a wake-up call for Croatia's political leaders.

Furthermore, on January 1, 2005, Romania's leaders boldly passed the flat tax of 16% and in fact, today, Bulgaria's major political parties are promoting the flat tax as part of their competitive economic reform-oriented platforms.

It is time for Croatia's leaders to act boldly and seriously work toward implementing necessary economic reforms. The discriminatory and distortive tax system in Croatia is encouraging Croatians to spend for unproductive purposes, and the heavy tax burden is making Croatian products uncompetitive in the global marketplace. Croatia's tax system and its high government expenditures as a percentage of GDP which is approx. 55% impedes real economic growth.

Free market reforms in Eastern Europe are transforming economies and moving these nations forward! On the other hand, individual Croatians should not be left behind.

The Adriatic Institute for Public Policy

March 17, 2005
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The Flat Tax May Spread to Poland Sooner than Expected
by Alvin Rabushka
For some time, the opposition Civic Platform party in Poland has proposed a 15% flat tax on individuals and corporations to replace the country's current income tax system. Personal income tax in Poland is assessed at three rates: after a tax-free threshold of about PLN 37,000 (zlotys), (about $12,200 at the current exchange rate of PLN 3.03 = $1), a rate of 19% is levied on taxable income up to PLN 37,027, 30% on the next PLN 37,024, and 40% on all income exceeding PLN 74,040. The current corporate tax rate is 19%. Elections are scheduled to be held later this year, which would permit the Civic Platform, if it emerges victorious, to implement a 15% flat tax beginning January 1, 2006.
Perhaps the country will not have to wait for a new election for the flat tax. The Telegraph of the United Kingdom reported on March 16, 2005, that the ruling center-left Polish government plans to enact a flat tax, joining the flat-tax revolution spreading throughout Central and Eastern Europe. Poland's minister of finance, Mirosaw Gronicki, is proposing an 18-18-18 solution: 18% flat rate on individuals, 18% on corporations, and 18% value-added tax (four percentage points less than the current standard 22% rate). The personal income tax will likely retain the current tax-free threshold.
The Civic Platform is likely to argue that its lower 15% rate would give Poland a competitive edge against Slovakia's 19% rate and newly-enacted Romania's 16% rate. Regardless of what rate is enacted, it's clear Poland feels the pressure of its neighbors in the quest for investment and jobs.
Poland is the largest of the new European Union countries. Its adoption of the flat tax will increase the pressure on the remaining holdouts in the region—Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Slovenia, Belarus, and Moldova—to respond quickly in kind, and Lithuania to get serious about slashing its high 33% rate on wages and salaries. It will certain get the attention of Germany and France, and, after that, who knows?

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