Contemporary Flat-Tax Reforms in Eastern Europe. Causes of Diverse Approaches : A comparison of Slovakia, Czech Republic and Germany.

Abstract

The paper deals with the issue of contemporary flat-tax reforms in Eastern Europe and aims to account for the different approaches that various European countries adopted towards the idea of a flat-tax. Empirically, the work is based on detailed studies of Slovakia, the Czech Republic and Germany. The analysis considers three factors being decisive for the flat-tax feasibility: 1./ party system institutionalization, 2./ coalition/opposition cohesiveness, 3./ labor union institutionalization. First, the study is concerned with each of the factor's influence on the political decision-making process in the three country cases. Secondly, on country paired comparisons the findings for each of the countries are mutually contrasted. Although all identified factors seem to be at play with regard to flat-tax feasibility, I argue that it is either the strength or the weakness of labor unions' institutionalization and welfare identity that underlie the political decision-making in the East and the West and as a result determine the flat-tax (un-)feasibility. The absence of welfare identity in the East allows for higher coalition cohesion in favor and weaker opposition against the flattax adoption in contrast to the West.Series: Discussion Papers SFB International Tax Coordinatio