ISSN 2736-1721
Global Journal of Business Management ISSN 6731-4538 Vol. 4 (5), pp. 001-005, May, 2010. © International Scholars Journals
Full Length Research Paper
Traps of the flat tax in emerging countries
Cristian Socol1, Aura Socol2* and Marinas Marius1
1Academy of Economic Studies, Bucharest.
2Expert, Macroeconomic Analysis and Financial Policy Department, Ministry of Finance, Romania.
Accepted 13 March, 2010
Abstract
Adopting a flat tax regime continues to be of interest for the policy makers in the emerging countries. The decreasing of the fiscal administration costs and the potential increase of the FDIs (Foreign Direct Investments) are the main attractions of this system. This paper states that adopting the flat tax cannot be but a “hit and run” type strategy, because this measure can be applied on a short term only. We will prove, with theoretical and practical arguments, that the emerging countries will face severe economic and social disequilibriums in the absence of a measures-mix accompanying the implementation of the flat tax. We propose solutions in order to avoid the traps of the flat tax set for the emerging countries.
Key words: Flat tax, tax reform, twin deficits, finance sustainability.