The Income Tax Reform in Slovenia: Should the Flat Tax Have Prevailed?

In 2007, Slovenia launched a comprehensive tax reform. This paper analyzes several proposed tax reform scenarios, including the flat tax proposal, with a dynamic general equilibrium model of the Slovenian economy, linked to a microsimulation model. We focus on the macroeconomic and welfare aspects o...

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Bibliographic Details
Published in:Eastern European economics 2009-09, Vol.47 (5), p.5-24
Main Authors: Majcen, Boris, Verbič, Miroslav, Bayar, Ali, Čok, Mitja
Format: Article
Language:English
Subjects:
Contrafactuals
Economic development
Economic models
Economic theory
Employment
Flat rates
Income tax
Income taxes
Labor supply
Parliament
Payroll taxes
Proportional taxes
Public assistance programs
Simulation
Slovenia
Studies
Tax policy
Tax reform
Taxation economics
Value added taxes
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Summary:In 2007, Slovenia launched a comprehensive tax reform. This paper analyzes several proposed tax reform scenarios, including the flat tax proposal, with a dynamic general equilibrium model of the Slovenian economy, linked to a microsimulation model. We focus on the macroeconomic and welfare aspects of the proposed scenarios, capturing the effects on individual taxpayers and the government budget. The main characteristics of the model are presented along with the results of different reform scenarios, including that which finally passed the parliament and is now part of Slovenia's tax system. Our results suggest that choices other than the flat tax system are better suited to the country's longterm economic development.
ISSN:0012-8775
1557-9298
DOI:10.2753/EEE0012-8775470501