ECONOMIC PERFORMANCE IN EUROPE

By introducing the flat tax, Macedonia stepped ahead of its regional and global competitors and thus increased its astonishing potentials of creating a value of economic boom exercised through low tax rates on personal and corporate income and greater trade and investment openness.

OECD has published an Economic Survey of the Euro Area 2007. Detailed findings of the survey clearly reflect the reality of economic policy in many high-tax countries in Western Europe. Politicians in this part of the world often blame Euro for the lack of economic performance though this is far beyond the real truth. The most obvious reason why the competitiveness of European economies is slightly falling is an enormous amount of tax wedge coupled with a growing regulation burden, poor investment conditions and rigid labor markets. Labor market reforms seem to be unpopular since governments in Western and Central Europe are tolerating the monopoly position of trade unions which is exercised through a devastating process of collective bargaining.

Switzerland continues to benefit from astute tax policy based upon tax competition among Swiss cantons. Low corporate tax rates and high value of business environment promote the creation of new jobs. Switzerland has both, advantageous tax regime and smooth infrastructure. Companies that draw away from business places with high-tax pressures, are finding it easier to pursue lower costs of labor, management and transportation as well. In Zurich, the normal range of corporation tax is between 15 per cent and 24 per cent but foreign holding companies using Zurich as an administrative base are exempt from tax on their non-Swiss earnings. Vigrously supported tax competition enables cantons to compete in a similar way in which global economies do. The cantons have the greatest spending burden and the biggest scope to compete for international dollars and tax rates vary. Some of the lowest rates found in mountain regions, such as Zug and Schwyz, which have attracted a number of large and tax-shy corporations, such as Xstrata, the mining group

There is still a bulk of economic lunacy in France. When Johnny Hallday left France, after being fed up with high taxes, the supporters of a socialist presidential candidate Segolene Royal accused Hallday of treachery. They also called for a European action against "banditry" of Swiss tax competition. But Jacques Chirac surprised everyone when he said that France must reduce its corporate tax rate from 33 to 20 percent within five years, if it wants to retain a decent level of competitiveness in global economy.