“Sofia Goes Flat” no WSJ

I recently interviewed the instigator of the world’s lowest flat tax, Svetla Kostidinova, director of the Institute for Market Economics located in Sofia, Bulgaria. Ms. Kostidinova insists that the most amazing part of her story is that the Bulgarian government is still overtly socialist. Nonetheless, she and her colleagues managed to persuade politicians that replacing the existing tax system with a 10% flat tax would increase revenues and give the government extra money to finance social programs and unfunded pensions. If only Nancy Pelosi were as amenable to economic logic and the lessons of the real world.

Ms. Kostidinova, who speaks English with a thick Eastern European accent, tells me: “The situation was getting desperate in Bulgaria. We were losing our population and our best workers. They were leaving for Western Europe to find jobs and the No.1 form of foreign capital came from remittances.” All that began to change when the corporate tax was cut to 10% in 2007 and the personal income tax to 10% in January of this year. “We told the politicians that it was symbolically important for Bulgaria to have the lowest flat tax. We were surrounded by flat tax countries, we wanted to be the nation most friendly to capital and business.”

Result: A country that ten years ago had a 12% unemployment rate now has a 6% jobless rate. Instead of people leaving Bulgaria to find jobs, “now it is the reverse. Western Europeans now come to Bulgaria for jobs. We’re gaining population now,” she says.

(por indicação do Fernando Gabriel)