MACEDONIA FOLLOWS THE FLAT TAX REVOLUTION

Allister Heath reports that Macedonia will become the 10th Eastern country to adopt the flat tax. In fact, courageous Macedonian step ahead of the Western tax policies highlights increasingly high levels of taxation and government spending. The corporate tax will be set at 12 percent in 2007 while then the government furtherly plans to slash it down to 10 percent in 2008. Lowering tax rates on both personal and corporate income is one of the foremost steps to attract more foreign direct investment as well as to let the tax evasion go down. The newest tax agenda will replace 17 percent corporate tax rate on profits and personal income tax ranging from 15 to 24 percent. Another highly relevant characteristics is that the tax on reinvested profits will be scrapped. There will also be a zero-taxed personal allowance. Now Macedonia will join the bandwagon of the flat tax tigers, among them are Estonia, Slovakia, Latvia, Lithuania, Russia, Serbia, Ukraine and Georgia. Until now, Georgia has had the lowest rated flat tax at 12 percent. In 2008, Macedonia will took the wheel of the leading tax reformist in the region due to furtherly enacted more competitive flat tax rate.

Flat tax boosts economic growth by improving incentives to live, work, save and invest. Lower and non-discriminatory tax rates embody no incentives and reasons for tax evasions. In fact, flat tax drops administrative costs since taxpayers fill their tax returns on a postcard-sized tax report. Flat tax, coupled with other sustainable and productive measures, improves the conditions on financial markets. Therefore, the market becomes more attractive and investors find it interestingly useful to invest and establish new financial centers in order to boost entrepreneurial efforts and ideas as well as to give them strong support in making their projects possible. On the other side, flat tax gives investors more incentives to turn their attention to increasing the human capital of the firm and of the economy as a whole. Since human capital is the main generator of the economic growth, only low taxes and more private universities and colleges can give very much needed incentives to attract more global human capital and let.

Despite being small, Macedonia showed how small tigers can roar loud.