Romania adopts flat tax

From IWPR.net:

The cornerstone of the restructured tax system is a flat-rate of 16 per cent, replacing three income tax bands ranging between 18 and 40 per cent, and a corporate tax previously at 25 per cent.

Tax on share dividends has risen from five to ten per cent, while turnover tax on small businesses has doubled from 1.5 to three per cent.

The changes have two main aims: to simplify a currently Byzantine fiscal system, and to lower the overall tax level so that tax-dodgers have more of an incentive to pay up.

Since tax evasion is almost a national sport, with the underground economy estimated at close to 50 per cent of the whole, tackling it is a major issue for government.

The shake-up also sends a message to the world that Romania is serious about competing for foreign investment. It is taking place in the context of a general regional trend towards lower flat tax rates in Eastern Europe. Now Romania is joining the bandwagon, and at a very competitive level.