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No longer the ‘dumb little brother’?

Last week the Slovak Republic passed a tax reform law introducing a flat tax rate at 19 percent for income and value added tax (VAT) with effect from January 2004. The Finance Ministrer, Ivan Miklos, hopes that such a vast reform will spur further economic growth and attract more investments.

Tax reform, and tax rates at the lowest possible level for everyone is an important motivation to attract investors. It is a strong and positive signal for the inflow of foreign investments.

Flat tax, the abolishment of taxation on dividends, and profit shares that are included in the tax reform is the correct way of supporting those who want to invest. This is a fair, horizontal aid from the state that sets the same conditions for everyone.

It seems that the Slovaks have done their homework and the Finance Ministry proposes the reform arguing that the flat tax or a tax similar to this one has been introduced in 33 countries, GDP growth in these countries is two times higher than in others and quoting examples of effective unified tax in New Zealand, Estonia and Hong Kong.

Apart from changes in income taxes and VAT, the reform will abolish gift tax and inheritance tax by the end of 2003 and introduce a flat 3-percent real estate transfer tax in 2004 with a chance to abolish it later on. In my book these qualify as glimpses of common sense, as exhibited in the statement of Peter Papanek, the spokesman for the finance minister:

Those taxes represented multiple taxation of property that was already taxed once.

An article in the Slovak Spectator explains that for corporations this means a lower income tax compared to the current rate of 25 percent. Individuals, nowadays taxed progressively within the range of 10 – 38 percent (the percentage increases with higher incomes), will all pay the same tax rate. Two current rates of VAT, a reduced one at 14 percent and a standard one at 20 percent, will be unified from the beginning of next year at 19 percent.

This is all interesting and very good news for Slovakia indeed. Now if they only got their social security payments and national health contributions in order… Nevertheless, the country is certainly moving in the right direction and it is probably worth keeping on one’s radar.

via Teekay’s Coffeeshop

Bratislava babe

And Slovak babes are not bad either

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26 comments to No longer the ‘dumb little brother’?

  • WOW! This is truly enlightened stuff! This will make a huge difference and generate tremendous economic growth.

  • Very good news!

    A lot of people thought that Slovakia was basically commiting economic suicide when they opted out of Czechoslovakia. I’m glad to see that they were wrong.

  • Outstanding! Truly good news.

  • Sturm

    Great stuff!

    Now, while not wanting to seem like a nit-picker or anything I can assure you there has never been a unified tax rate in New Zealand, if by that you mean a flat tax rate, unless you go back 100 years or so.

    Income tax rates range from 19.5% to 39%, and there is the usual plethora of goods and service taxes, local rates, excise duties, etc, etc. It’s as bad as anywhere else (except clearly Estonia and the Slovak Republic).

  • Dave

    GDP growth in these countries is two times higher than in others and quoting examples of effective unified tax in New Zealand, Estonia and Hong Kong.

    Hard to say how good or not this is without knowing more about the relative economic sizes.

    There are reasons why some economies growth faster in percentage terms than others.

  • Katherine

    It took collapse of communism to introduce flat tax in (some) of the previously communist countries. It took military American intervention and getting rid of Saddam’s regime to introduce the same in Iraq.

    So, what has to happen to get the flat tax here in America? Invasion from Outer Space? Dissolution of the Union?

  • Slovak women are pretty nice, but there’s nothing like bouncing a Czech!

  • Jacob

    There is nothing flat about those women, thank G.

  • I am a great admirer of Slovakia’s natural assets

  • Damn, that was a cutie.

    now… what were you talking about?

  • Pedro

    The race to the bottom hits Europe!!!

    Only joking

  • Cobden Bright

    So former communist Slovakia now joins former communist Russia, communist-run Hong Kong, and former national socialist Iraq as having top rates of tax less than half that of the supposedly “free market” capitalist anglosphere countries of America, Great Britain, Australia, New Zealand, and Canada.

    Going by the evidence, the best hope of achieving meaningful economic freedom in the Anglosphere would be to install socialist police state regimes as soon as possible. Mind you, looking at the western political scene, that’s pretty much what’s happening.

  • I was in Slovakia for two weeks for an OBS course last year, and it was a great, great place. It was a real shame I couldn’t spend more time in Bratislava… Practically babe-ville… ^_^

    I remember one of the course instructors saying something about Slovakia joining the EU and gaining greater access to markets for its products(which he hinted to be mostly agricultural). Anybody got anything to comment on this?

  • “Anybody got anything to comment on this?”

    Yes, it probably means this flat-rate tax is going to be a short-lived phenomenon. As soon as their in the Fourth Reich’s clutches, they will be under pressure to re-introduce ‘progressive’ taxes.

    We all know that the thing ‘old Europe’ cannot tolerate is ‘unfair competition’.

  • Aaaagghhh…

    Above should read:

    “…as soon as they’re in….”

  • John J. Coupal

    The US tries to adopt good ideas – like the flat tax – where-ever they originate. Lord knows we’ve adopted a lot of the Brits’ creations!

    Perhaps we can send a congressional delegation to Slovakia to learn the details about implementing a flat tax. Like the delegation the US government sent to Chile to learn about its successful privatized retirement system.

  • Johan

    It is interesting how former communist/socialist countries make moves toward capitalism. Maybe a communist/socialist rule for a couple of years is necessary so that peple will once and for all get sick of it and the elephant State has time to blow itself up.

  • Prefer Czech ones myself, however good on Slovakia adopting a flat tax as called for in Statism Sucks! Ver. 2.0 19% is a bit high, but a damn good start.

  • Verity

    Wobbly Guy made an interesting comment a couple of weeks ago. He said Singapore was contemplating cutting its income tax way back and applying user tax instead. This is the fairest form of taxation, to my mind. Have they made any announcements on this, Wobbly Guy?

  • Perry:

    how about Czech natural assets? Try walking in Prague during the summer with a digital camera, and you’re gonna make thousands of quality pictures to post.

    BTW, it’s possible to buy a Czech bride.

  • Nice hot Slovak babe, but I’ve already got one, you see. (In Slovakia for 12 years; I’ll tell her I told you I already got one)

    Agri from Slovakia? AGRI??? Puh-lease.

    Colin Powell just gave US Steel an award for it’s output from Kosice, the big Eastern Slovak city. It’s the most profitable factory USS has in the world. The EU identifies excessive export of steel as a problem. (Formerly VSZ). Kosice is the Westernmost terminal for wide Russian gauge railroad track.

    Volkswagen has had, for many years (10?), a big profitable car factory outside Bratislava, huge car exports. Pugeot-Citroen’s new car plant is under construction near Trnava (about 50 km in).

    And prolly the city of Martin could make some decent tanks, if there was any market; don’t think so, now. (Havel killing that market helped cause Slovaks to split: 12% to 3% unemployment)

    You’d be welcome at the Hayek in Slovakia blog (on blogspot, just starting), and can visit hayek.sk for the website. Our big push now is to have private pension reform.
    F.A. Hayek Foundation
    Hayek in Slovakia (At some point I’l like it to be bi-lingual, like Merde in France)

  • Dodge: You are talking through your other orifice… everyone knows Slovak babes are hotter than the Czech ones. And besides, how would you know? I am not aware of your expertise in matters Central European…

    Tomas: Not many hot babes in Prague, was very disappointed.

  • Amelia

    Am pleased that one of my ancestral lands is finally getting it together. On a side note my mom and grandmother visited before iron curtain came down and they warned my grandmother not to speak the language. Asking my grandmother, one of the mouths of the south, to shut up was like asking to hold back the tide. The whole tour got in trouble and were strip searched because she spoke to everyone she met. The concept of my very sweet grandmother as a potential spy always makes me laugh.

  • The Singapore ministry of finance made this website to explain the recent shift of taxation from income to consumption(we call it GST-Goods and Services Tax). They’re going through with it, and thankfully public backlash has been minor.

    I do not, however, believe that government expenditure cannot be cut further. Education is already taking some budget cuts, and I’m one of those affected in the future when I become a teacher(see? I’m a hypocrite!^_^), because they’re going to cut our pay. Oh well.

    Defense will never be cut, since we’re a secular nut in an Islamic nutcracker. Cutting defense expenditure would be suicide. Besides, the conscript soldiers are already paid peanuts. I should know; I was one of them!

    Public housing? It’s a bread-and-butter issue for many less well-off Singaporeans, and they’ll not be able to afford housing without government aid. Watch out for a popular revolt if the government ever takes this away.

    Transport? Ahh… that’s where I feel there could be a decrease in spending. The systems in place are good enough. More change is for the sake of change, not improvement.

    Healthcare? Our system is already minimalist enough. Very basic and fundamental healthcare for everybody, but if one demands frills or the best and latest, it comes out of the personal pocket. No non-essential or cosmetic, nor unproven services and drugs will be provided. I don’t see how one can cut the basic healthcare services without sparking another revolt.

    The very danger of cutting healthcare and/or housing subsidies will mean that an opposition party predisposed to catering to the population without care for future ramifications might come to power; and then it’s a looooong way to the bottom…

  • G-d Damn, look at those legs. Yowza!
    But in all seriousness Gabriel Syme, how come no story on Putins siezure of the majority share of Yukos and jailing of the owner of those shares who happens to be the CEO of that company?

  • Ian from Scottsdale:how come no story on Putins siezure of the majority share of Yukos and jailing of the owner of those shares who happens to be the CEO of that company The Russian affar

    That’s business as usual in Russia, as far as I am concerned. If I am wrong, please correct me but I expect no less of Putin and his lot.