The effects of the flat tax on some major State indicators: An empirical analysis of East European countries

Details

Supervisors

Laurent Hélène

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

The objective of this thesis is to discuss the different effects expected from the introduction of a flat tax on some main economic variables based on an empirical analysis in European countries that adopted a flat tax. We will look at the effects from a theoretical and empirical point of view and observe if there are differences or if the effects in the countries analysed are the ones predicted by Hall and Rabushka. The structure is the following. In the first part, we start this thesis by briefly introducing the progressive system and its main disadvantages. We present then the flat tax with its advantages and disadvantages. In the second part, we will explain in more detail the Hall and Rabushka flat tax, which we consider as the reference and discuss the modifications made when the flat tax was implemented in reality. The third part will explain the data and the methodology used in the empirical analysis. The fourth part is the main argument. There, we will start to explain the effects of the flat tax from a theoretical point of view according to the literature and then from an empirical point of view thanks to our own regressions. We will specifically look at some main economic outlooks such as GDP change, employment or investment; at tax related aspects such as the tax revenues for the State, the shadow economy; and at inequality related questions. The fifth and last part will be dedicated to a concluding remark.