The impact of the flat tax on budget revenues

Abstract

The flat tax, in the modern world, is a phenomenon that started in the US, but in just a few decades it spread around the world, especially in developing countries. It is characterized by a single rate of taxation, regardless of the amount of income. He has no tax-free income. There are also different rates - steps, of taxation. The flat tax is easier and cheaper to administer, both for taxpayers and for the countries that have introduced it. At the household level, the flat, lower rate incentivizes taxpayers to voluntarily declare all the tax they owe, leaving a larger portion of income at their disposal. This, in turn, is expected to lead to increased savings and economic growth. At the budget level, however, the flat tax appears, at first sight, to be a less favorable solution. The fact is that for states this type of taxation means more stable and predictable sources of revenue. It is these effects that lead to the clarification of which approach is better for countries - depriving countries of the budgetary advantage originally thought to bring the flat tax, or treating all tax subjects equally, regardless of the scale of the tax burden. Their labor and the risk they take will be explored in this article. The research should also answer the question of whether countries collect more taxes as a result of the implementation of the flat tax or whether their tax revenues decrease after the introduction of the same. CZU: 336.226.1:336.14. JEL: H24, H31, H61. DOI: https://doi.org/10.53486/icspm2023.30