October 5, 2012 The 1st Global Flat Tax Forum
October 4-5, 2012
Summary of Conclusions
- On October 4-5, 2012 The 1st Global Flat Tax Forum was organised in Bratislava by The F. A. Hayek Foundation and The Slovak Taxpayers Association in co-operation with following partners: Friedrich Naumann Stiftung, World Taxpayers Associations, and Taxpayers Association of Europe.
- There were about 130 participants and representatives of 10 countries – Austria, Bulgaria, Czech Republic, Denmark, Germany, Hungary, Lithuania, Slovakia, Sweeden, and United States – present in Bratislava discussing all aspects of flat tax, including its history, theoretical foundations, major characteristics, flat tax reforms, experiences of flat tax countries and effects of flat tax on economy.
- Professor Alvin Rabushka as a keynote speaker, and father of the first flat tax proposal that laid down intellectual foundations for many flat tax reforms and proposals as well as other 16 speakers and moderators were in 4 major sessions debating success stories – flat tax countries, constraints faced by non-flat tax countries, as well as assessment of future developments when it comes to flat tax movement.
- While a term „flat tax“ covers many different approaches how to reform tax systems in various countries (eg. different treatment of exemptions, personal allowance, types of taxes were flat tax was applied), their minimum common denominator is a simplification of tax systems by flattening rate structure and broadening tax base by efforts to eliminate exemptions.
- The world witnessed a „tsunami“ of flat tax reforms after 1994 when Estonia introduced its flat tax, leading to more than 30 countries and autonomous regions adopting flat tax. Many of them being former communist countries wishing to get rid of socialistic high taxes, promote economic growth, reduce the black economy, and support liberal values with more individual freedom.
- In advanced countries there are 2 crucial common factors making it more difficult to introduce flat tax type of tax reforms: 1. a significant shift of political spectrum towards socialism (including liberal parties now favouring big government, high rate of redistribution, high spending, high taxes), 2. a long term trend of a shrinking of group of net contributors and increasing group of net beneficiaries.
- The flat tax countries are under a growing pressure to reverse their flat tax reforms and necessary fiscal consolidation is used as an excuse for such requests. While there can be seen some setbacks, like currently in Slovakia, the flat tax proposals are under consideration in many other countries, possibly leading to a further expansion of a list of flat tax countries in near future.
- In response to opponents of flat tax raising its criticism based on moral arguments (flat tax is not „fair“) as well as on economic arguments (flat tax has no positive impact on economic growth, on tax revenues), flat tax supporters must: 1. focus their efforts more on moral defense of flat tax as tax that is less intrusive, less restricting individual freedom, and less distorting economic behaviour, 2. significantly improve their economic arguments (more persuasively illustrating by data that flat tax is a pro-growth policy measure).
- It is desirable to initiate a comparative analysis of effects of flat tax in various countries. There is a long list of papers and analysis that are openly hostile towards the idea of flat tax. Participants of the forum agreed that it would be useful to conduct an international effort to gather evidence from flat tax countries supporting flat tax type of reform measures. They also agreed that in order to improve prospects of adopting flat tax in other countries there must be significant improvement of its PR and communication strategy as well as education.
- The idea of organising of an annual flat tax forum as a platform for a debate of flat tax type of reforms was very well received. A preparation, organization, and results of The 1st Global Flat Tax Forum can be considered as a success. It is desirable to start with preparations of The 2nd Global Flat Tax Forum as soon as possible in order to further increase its quality and allow to participate as many participants from around a globe as possible.
In Bratislava, October 5