NEITHER Slovakia nor other countries with a flat tax system should agree with the European Commission's efforts to push for tax harmonization, the Heritage Foundation's main tax expert Daniel J Mitchell said at a news conference in Bratislava on October 17.
According to Mitchell, tax competition is one of the important ways of helping Slovakia approximate the living standards of economically developed European states. Tax reforms in Slovakia, Estonia, Ireland and Russia used frequently by proponents of a flat tax system in the US, Mitchell pointed out.
Mitchell refuted arguments that increasing tax competition between countries could lead to fiscal instability. A more liberal tax regime and lower rate of redistribution by the state increases people's activity, and it also motivates them to pay taxes.
Mitchell thinks that tax competition is a contribution even to those states that refute it. "France and Germany suffer from a high unemployment rate, especially among young people. Therefore, liberalization of the market, along with reforms, are necessary for them," he said according to the TASR news agency.
In Mitchell's opinion, tax harmonization will bring higher taxes, more unemployment and economic stagnation. "That's why I hope that Slovakia, as well as other countries, say an unequivocal 'no' to the European Commission's efforts to implement tax harmonization not only today, but also tomorrow as well as in five or 10 years," Mitchell said.
Pushing for a flat tax is complicated not only in Europe, but also in the US. The reason, Mitchell said, is, among other things, the 90 years of a working tax system to which Americans have already become accustomed. Therefore, Mitchell does not expect momentum to gather for the introduction of a flat tax in the US.
However, he hopes that President George Bush will propose moves that will at least help the US to broach this flat-tax concept. In this respect, the US can learn from not only Ireland, Estonia, Russia and Hong Kong, but also Slovakia - "the country that is a leader in the field of reforms," according to Mitchell.
24. Oct 2005 at 0:00 | From press reports