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The End of the Flat Tax Experiment in Slovakia

Norbert Svarda ()
Authors registered in the RePEc Author Service: Matus Senaj (), Michal Horvath () and Zuzana Siebertova ()

No 33, Discussion Papers from Central European Labour Studies Institute (CELSI)

Abstract: The paper provides a quantitative assessment of the consequences of departing from a flat-tax system in the context of Slovakia. A behavioural microsimulation model of the labour supply is embedded into a general equilibrium framework with search and matching frictions. Some recently implemented changes in the tax system leave aggregate labour market indicators as well as inequality measures virtually unaffected. We also examine hypothetical revenue-neutral reforms that would significantly increase the progressivity of the system through graduated marginal tax rates. We find that there are narrow limits to what policy makers could accomplish through such reforms in terms of employment and equality of income. Hence, an income tax reform should at best be seen as a complementary tool to other initiatives promoting such objectives. Moreover, we highlight an important trade-off: income tax reforms that promote employment may harm growth.

Keywords: flat tax; microsimulation; general equilibrium; search and matching; labour supply elasticity (search for similar items in EconPapers)
JEL-codes: E24 H24 H31 J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-cmp, nep-dge, nep-mac, nep-pbe, nep-pub and nep-tra
Date: 2015-10-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

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https://celsi.sk/media/discussion_papers/CELSI_DP_33.pdf (application/pdf)

Related works:
Working Paper: The End of the Flat Tax Experiment in Slovakia (2015) Downloads
Working Paper: The End of the Flat Tax Experiment in Slovakia (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cel:dpaper:33

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