Flat tax or flat tyre?
“Flat tax is like a flat tyre,” complained Professor Lord Richard Layard, founder of the LSE Centre for Economic Performance, at last week’s Westminster Fringe Debate, sponsored by the Stockholm Network and The Economist. “It won’t help Britain to move forward. It’s just a disguised tax cut for the rich.”
A total of nine European countries have already successfully switched to a flat-tax regime, pioneered by Estonia in 1994 and followed by Latvia, Lithuania, Russia, Serbia, Ukraine, Slovakia, Georgia and Romania.
Should the more mature economies of Western Europe now follow suit? Could a flat-tax system be introduced here in Britain or would it, as Lord Layard pointed out, exact a lot of pain on middle-earners and create a gaping hole in public finance? Does the flat-tax system only work in smaller, less developed or transitional economies? Or will there be huge competitive advantages to the first of the advanced European economies to follow this route?
We’re going to be debating this issue in the summer edition of European Business Forum. Comments, please.