Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/34984
Authors: 
Paulus, Alari
Peichl, Andreas
Year of Publication: 
2008
Series/Report no.: 
IZA discussion papers 3721
Abstract: 
The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.
Subjects: 
Flat tax reform
income distribution
work incentives
microsimulation
JEL: 
C81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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