The flat tax in Romania. A good economic strategy?

Socol, Cristian and Marinas, Marius and Socol, Aura Gabriela (2007): The flat tax in Romania. A good economic strategy?

Abstract

This paper evaluates the main effects of the implementation of tax flat system in Romanian economy. If accompanying measures are not going to be enforced, the introduction of the flat rate of 16% in Romania will lead to unsustainable budgetary deficits and inflationist pressures. The flat tax favors the workers with big salaries and also big and financially solid companies (which, mainly “export” the profit). It will attack the fragile macroeconomic stability. It is uncertain if it will lead to the increase of the degree of employment, having in view the fact that the contributions to the social insurances have a very high level. The alternative scenario is simple. Romania should have chosen to continue what it was confirmed to be a valid element of the economic evolution towards a European standard (progressive fiscal system).

• Item Type: MPRA Paper
• Institution: Academy of Economic Studies, Bucharest, Romania
• Language: English
• Keywords: flat tax; fiscal policy; inflation; AD-AS model
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation

References

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