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The Flat Tax - A Comparative Study Of The Existing Models


  • Tulai Ioan Constantin

    () (Universitatea Babes Bolyai, Facultatea de Stiinte Economice si Gestiunea Afacerilor)

  • Schiau (Macavei) Laura - Liana

    () (Universitatea Babes Bolyai, Facultatea de Stiinte Economice si Gestiunea Afacerilor)


In the two last decades the flat tax systems have spread all around the globe from East and Central Europe to Asia and Central America. Many specialists consider this phenomenon a real fiscal revolution, but others see it as a mistake as long as the new systems are just a feint of the true flat tax designed by the famous Stanford University professors Robert Hall and Alvin Rabushka. In this context this paper tries to determine which of the existing flat tax systems resemble the true flat tax model by comparing and contrasting their main characteristics with the features of the model proposed by Hall and Rabushka. The research also underlines the common features and the differences between the existing models. The idea of this kind of study is not really new, others have done it but the comparison was limited to one country. For example Emil Kalchev from New Bulgarian University has asses the Bulgarian income system, by comparing it with the flat tax and concluding that taxation in Bulgaria is not simple, neutral and non-distortive. Our research is based on several case studies and on compare and contrast qualitative and quantitative methods. The study starts form the fiscal design drawn by the two American professors in the book "The Flat Tax". Four main characteristics of the flat tax system were chosen in order to build the comparison: fiscal design, simplicity, avoidance of double taxation and uniformity of the tax rates. The jurisdictions chosen for the case study are countries all around the globe with fiscal systems which are considered flat tax systems. The results obtained show that the fiscal design of Hong Kong is the only flat tax model which is built following an economic logic and not a legal sense, being in the same time a simple and transparent system. Others countries as Slovakia, Albania, Macedonia in Central and Eastern Europe fulfill the requirement regarding the uniformity of taxation. Other jurisdictions avoid the double taxation but they have several tax rates for different types of income. Analyzing the flat tax jurisdiction we concluded that none of the existing models is a true flat tax as designed by Hall and Rabushka. The study is important given the fact that it can provide useful information for future studies in connecting the effects generated by the adoption of flat tax with the design of the system. This can give intelligence for the exiting models in correcting and improving their features in order to become more efficient. This can also provide precious design information for the jurisdictions desirous of implementing flat tax systems. The added value of this paperwork consists in the determination of the main features of the existing flat tax systems in relation with the theoretical system designed by Hall and Rabushka and in the fact that it provides precious structured information for future studies allowing to connect the effects of the flat fiscal model with its characteristics.

Suggested Citation

  • Tulai Ioan Constantin & Schiau (Macavei) Laura - Liana, 2011. "The Flat Tax - A Comparative Study Of The Existing Models," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 446-452, July.
  • Handle: RePEc:ora:journl:v:1:y:2011:i:1:p:446-452

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    References listed on IDEAS

    1. Ardic, Oya Pinar & Mylenko, Nataliya & Saltane, Valentina, 2011. "Small and medium enterprises : a cross-country analysis with a new data set," Policy Research Working Paper Series 5538, The World Bank.
    2. Meghana Ayyagari & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2008. "How Important Are Financing Constraints? The Role of Finance in the Business Environment," World Bank Economic Review, World Bank Group, vol. 22(3), pages 483-516, November.
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    More about this item


    flat tax; simplicity; uniformity; rates;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies


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