>Bulgaria: Flattened by flat tax?
Bulgaria’s new system of flat corporation and income tax – introduced at the start of this year by a government led by those unlikely free marketeers the Bulgarian Socialist Party – has, reports the Sofia Echo (citing Bulgaria’s office of national statistics) mainly clobbered those on low incomes and freelancing in liberal professions due to its abolition of many tax allowances. The logic, as with many weakly reforming post-communists states that have adopted flat taxation, seems to be to spur economic growth increasing the overall incomes of those at the bottom and then use the improved state of public finances to pay some targeted compensation to badly affected loser groups. These impacts seem to stem from its very low level in Bulgaria (10%), which makes it attractive to investors and business however, and the lack of a clear package of compensation for groups such as families with children, reports a subsequent SE. This is an interesting contrast with the proposed Czech flat tax trumpeted by the Civic Democrats in 2006, which carefully engineered things to offer some protection low income (or, at least lower earning) groups – mainly I think via some allowances and a proposal for a flat basic income type benefit payment to all citizens – and the much watered down proposal of the current Civic Democrat-led minority government for flatter taxes, which inadvertently clobbered middle income groups.