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Flat-Rate versus Progressive Taxation? An Impact Evaluation Study for the Case of Romania

Author

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  • Madalina Ecaterina Popescu

    (National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
    The Faculty of Economic Cybernetics, Statistics and Informatics, The Bucharest University of Economic Studies, 010552 Bucharest, Romania)

  • Eva Militaru

    (National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania)

  • Larisa Stanila

    (National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania)

  • Maria Denisa Vasilescu

    (National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
    The Faculty of Economic Cybernetics, Statistics and Informatics, The Bucharest University of Economic Studies, 010552 Bucharest, Romania)

  • Amalia Cristescu

    (National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
    The Faculty of Theoretical and Applied Economics, The Bucharest University of Economic Studies, 010552 Bucharest, Romania)

Abstract

Taking into consideration the recent debates on adopting a progressive tax system over the flat-rate taxation, our paper aims to investigate the impact of a change in the current Romanian personal income tax policy system from the 10% flat-rate tax system to some alternative progressive taxation scenarios. The methodological approach consisted in using the European Union Survey on Income and Living Conditions (EU-SILC) database to micro-simulate the impact upon poverty and income inequality. Through our ex-ante tax policy analysis we bring empirical evidence of a modest, but positive effect upon poverty rate and income inequalities in favor of a progressive taxation system. However, when looking at the government financial implications through the personal income tax budget revenues, we discuss upon the possible trade-off between the benefits on poverty and income inequalities and the possible budgetary drawbacks. Despite the data limitations, this study has the benefit of being among the first attempts to evaluate the impact of a personal income tax policy reform for the case of Romania.

Suggested Citation

  • Madalina Ecaterina Popescu & Eva Militaru & Larisa Stanila & Maria Denisa Vasilescu & Amalia Cristescu, 2019. "Flat-Rate versus Progressive Taxation? An Impact Evaluation Study for the Case of Romania," Sustainability, MDPI, vol. 11(22), pages 1-16, November.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:22:p:6405-:d:286914
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    References listed on IDEAS

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    Cited by:

    1. Enriqueta Mancilla-Rendón & Marcela Astudillo-Moya & Carmen Lozano, 2021. "Tax Rate of Management Control: The Mexican Income Tax Rates System for Resident and Non-Residents," Sustainability, MDPI, vol. 13(16), pages 1-14, August.
    2. Andrei Gheorghiță, 2023. "Understanding Public Support for the Flat-Rate Personal Income Tax in a Post-Communist Context: The Case of Romania," Sustainability, MDPI, vol. 15(9), pages 1-14, May.
    3. D.E. Lapov & I.A. Mayburov, 2020. "Possibilities of Accounting for the Real Tax Burden When Modeling the Scale of Income Taxation," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(2), pages 129-148.
    4. repec:fst:rfsisf:v:13:y:2022:i:13:p:132-145 is not listed on IDEAS
    5. Marcus-Radu Man & Sorana Vatavu, 2022. "Can progressive taxation contribute to human development?," Journal of Financial Studies, Institute of Financial Studies, vol. 13(7), pages 132-145, November.
    6. repec:fst:rfsisf:v:7:y:2022:i:13:p:132-145 is not listed on IDEAS
    7. Byambasuren Dorjnyambuu, 2025. "A Systematic Literature Review of Income Inequality in Central–Eastern European Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 67(1), pages 1-49, March.

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