Good News from Romania

Redistributionists hate the flat tax, and this sentiment is widely shared by other statists. These proponents of big government want the tax system to to punish success and generate loot that can be used to buy votes (though they don't seem to understand that if they punish success too much, they won't actually get any additional money to spend, but that's a separate issue). This is why it's been amusing to watch nations in Eastern Europe adopt flat tax systems and compete with each other to have the lowest tax rate. The people who actually lived under communism are the ones most anxious to jettison the notion that a tax system should be based on "from each according to ability, to each according to need."

But this doesn't mean the flat tax is a permanent feature of the fiscal landscape in Eastern Europe. The high-tax nations of Western Europe don't like the flat tax. The bureaucrats at the OECD and European Commission don't like the flat tax. The IMF and World Bank don't like the flat tax. And, of course, there are always redistributionists in every nation who resent success and politicians who want more power. So it is remarkable that flat tax systems have been so durable. But I've seen several stories in recent weeks that the flat tax in Romania might be repealed and replaced with a class-warfare system. This would be bad news, and could be even worse news if it was the beginning of a trend. The good news, though, is that the Prime Minister just announced that there are no plans to change the system (notwithstanding the misguided views of the nation's Financed Minister). Tax-news.com reports.

During a recent gathering of small- and medium-sized enterprises in Bucharest, Romania’s Prime Minister Emil Boc announced government plans to maintain the flat tax of 16% imposed on income and profits, while also confirming plans to abolish the minimum tax from the autumn. Emphasizing that maintaining the flat tax was a fundamental objective of the government, Prime Minister Boc confirmed that the existing system would not be replaced by a progressive system of taxation, as it would not serve to generate additional income for the state budget. The government therefore has no reason to abolish the flat tax, Boc reasoned, which is also a symbol of stability and coherence of economic activity. Romanian Finance Minister Sebastian Vladescu had urged the government to move from the flat tax system of income tax, representing a bygone era, to a system of progressive rates, vital to supporting the state.