Flat Tax in the EU – 'Something of Craze'?: The Bulgarian Case

Abstract

Flat tax has become broadly popular in Central and Eastern Europe in recent years. Many of EU-newcomers have adopted flat tax regime. Even at first glance, however, it is evident, that there are large variations in its design, although flat tax is clearly defined in literature. The question is whether this relates to different applications of one and the same concept or to different concepts, called by the same name – flat tax. Perceived as standard the coherent tax structure of the flat tax, proposed by Hall and Rabushka, we assess the current income tax system in Bulgaria. We focus on the structure of the tax system and design of the tax bases, because even they reflect in greater extent the specificity of the flat tax. Cuts of tax rates are important; they have been not only broadly discussed, but also do not necessarily relate to the flat tax concept. After adoption of “flat tax” the income taxation in Bulgaria did not become more transparent and easier to administer. Moreover, it isn’t simple, neutral, and nondistortive. Despite the introduction of some elements of the flat tax, one cannot say that a theoretical flat tax system is implemented in Bulgaria