Thursday, May 31, 2007
TAX RATE CONVERGING WITH THE GROWTH RATE
Here is an opinion why Sweden needs corporate and individual income tax cut to stay matched up with global and regional competitors such as Estonia where, as Johan Norberg pointed out, tax rate seems to be converging with the growth rate as Estonia recently announced a tax cut from current 22 percent to 18 percent. As in every country, punitive tax regime associated with generous welfare state undermines the capacity of the productive behavior to work, save and invest. Sweden is no exception to that rule. The most obvious side-effect is the loss of competitive angle as capital flight and tax evasion soar. In comparison, Estonia offers a competitive pro-business market environment and the GDP convergence accelerates the wealth and capital creations as economic growth is getting closely converged with the growth rate.