Abstract
This paper conducts a comparative review of Bulgaria, Slovakia and
Poland’s taxation system performance in pursuit of the question whether
the flat tax system was able to meet the hopes reposed in it. The three
countries were selected because they nominally contain different taxation
systems: Poland has a progressive one; Slovakia has a flat tax while retaining
some elements of progressive taxation; whereas Bulgaria has the most radical
flat tax system in the region. Furthermore, after a quarter of a century their
economic and tax experience does not correspond with the expectations
of the flat tax dogma. The research argues that the question whether the
taxation system in the region is flat or not is of secondary importance,
despite the fact that all the tax systems in their essence aim to perform
in a very similar ‘flattened’ taxation pattern. Secondly, that the quest for
foreign direct investments cannot be pursued blindly and uncritically, since
the three countries’ experience reveals alternative and most importantly,
not only positive achievements. Finally, the paper argues that the current
performance of the three countries’ taxation systems does not correspond
with the expectations that the flat tax system will resolve the internal
operational difficulties such as high compliance gaps, tax evasion and weak
tax administration. Having in mind that after a quarter of a century the three
countries reached different levels of economic development, the question
remains whether the current taxation systems are still relevant or they have
lost their appropriateness. Poland and Slovakia are approaching the challenge
of a ‘middle income trap’, whereas Bulgaria still needs to ‘catch up’. Thus,
the former two should reconsider the current pressuring weaknesses of their
taxation systems, whereas the latter should reassess its approach towards
foreign direct investments and reconsider the direction of its tax policy.