Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives

Alari Paulus and Andreas Peichl

No 3721, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.

Keywords: microsimulation; work incentives; income distribution; flat tax reform (search for similar items in EconPapers)
JEL-codes: C81 D31 H24 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-09
New Economics Papers: this item is included in nep-acc, nep-cmp, nep-eec, nep-lab, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - revised version published as 'Effects of flat tax reforms in Western Europe' in: Journal of Policy Modelling, 2009, 31 (5), 620-636

Downloads: (external link)
https://docs.iza.org/dp3721.pdf (application/pdf)

Related works:
Journal Article: Effects of flat tax reforms in Western Europe (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp3721

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().