NCPA - National Center for Policy Analysis


July 23, 2007

For a lesson in pro-growth tax policy, see Albania. This small Balkan country is about to halve its personal income-tax rate.  This is the latest sally in the intramural tax competition fueling growth in the former communist bloc, says the Wall Street Journal.


  • Following the trend started by Estonia in 1994, Albania will soon drop its personal income-tax rate to a flat 10 percent, and is slated to drop it corporate rate to 10 percent in early 2008.
  • Following close on their heels is the Czech Republic, which has announced that it plans a flat rate of 15 percent next year, and Montenegro, which will lower its rate to 9 percent by 2010.

The Adriatic Institute for Public Policy has found that governments that adopt flat-tax regimes see either steady or increased revenues within the first year.  Western Europeans should be able to confirm this, as the success of their neighbors' low, flat taxes can be seen piled on their very own freight trains, says the Journal:

In the first quarter of this year, the Euro zone -- dominated by France, Germany and Italy -- for the first time sold more goods to the 11 new Central and Eastern European EU members than to the United States.  Old Europe has these new customers in large part because New Europe is getting its fiscal policy right.  Both would be richer if the West took a good look at the flat tax, too, says the Journal.

Source: Editorial, "Ask Albania," Wall Street Journal, July 23, 2007.

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